Following my article on ‘A Fresh Take on Fair Analysis’ in last week’s Insight, I have to report that I have been swamped by people writing to me about the potential detriment that this holds for clients.
As I said in my article, it is my experience of 45 years that a good insurance broker will have such a knowledge of the commercial market that in most cases they will know the one or two insurers who will be best for their clients by the time the ink dries on their Fact Finds.
I well remember the hours I spent studying the market through trade press, inspector visits and insurer presentations.
No, I am not talking about a panel. I reckon that I supported perhaps 20 insurers in any given year and if I needed to go outside that I would go to Lloyds.
All quality brokers worked in the same way so that if there were 100,000 commercial cases being renewed in a week (or changing hands from broker to broker) then there might be 200 to 300,000 quote requests out there.
The comment made to me is that under the personal and fair analysis regime, there is a need to approach a greater number of insurers leading to a greater number of quotations, the need for more insurance staff to deal with a greater number of unnecessary quotes where they are not likely to win the business and in turn higher premiums for clients generally.
I am not convinced that needs to be the case:
Under the IDD the situation is as follows:
It is perfectly acceptable for a broker to make a recommendation based on a ‘fair and personal analysis’. This works for SME risks whereby most quotes are based on automated decision-making techniques, so the broker simply makes his or her judgement based on those markets that quote and his or her experience. In other words, the fair analysis is generally satisfied by the automated quotation system.
This ‘fair and personal analysis’ approach doesn’t really work for larger risks. However, it is also perfectly acceptable under IDD for a broker to simply state the markets approached (selected approach) and give its recommendation.
A quality insurance broker knows the market and if they know the client then recommending a suitable policy should be down to comparing at most three policies for any given client, looking at the advantages and disadvantages of each and reporting to the client but making sure the client is aware of the insurers which have been approached.
Unless the client specifically wants the absolute cheapest in the market then the fair analysis process can be achieved through diligent study of the market on an ongoing basis not by swamping the market with requests for quotations on every case.