The onslaught on the insurance brokerage industry continues as several insurers are set to reduce their commissions to brokers on binder arrangements or all commissions that these brokers have received for many many years.
Brokers are a major source of expertise and knowledge. They save their clients large sums of money and they provide extensive services to their clients. They provide professional advice and search the market for the best prices with the best coverage possible. They also provide claims support, basically fighting for their clients to ensure that the insurance companies settle claims fairly, quickly and accurately, without allowing insurers to dig out the customer's eyes by low balling them for their damaged property.
For over a hundred years brokers have provided trusted superior negotiations for clients in Trinidad and Tobago by securing the best cost, ensuring policy conditions are adequate for the clients needs and most importantly processing, reviewing and negotiating claims with insurers. Many Insurance companies are known to try to take advantage of clients if they are left to deal with them directly especially in the settlement of claims directly with insurers. Some insurers believe in collecting premiums without settling claims fairly for their clients and many insurers often try to settle claims with their customers as cheaply as possible. Without Brokers many insurers would take advantage of clients that they deal with directly. Brokers work for their clients and do all of this with no cost to the client, as the premium charged by the insurance companies already has a built in commission in it, whether a client opts to have a broker or not.
So the attack on brokers with reduced commissions from insurers will have an impact on the industry as insurers must realize that this is a broker’s market where Brokers control about 75% of major insurance business locally. They have been in the industry for over a hundred years providing insurance services to the public and now with this new stance by some insurers, cutting their commissions for no logical reason, as insurers have already increased rates across the board. It seems the insurance companies only care about their own benefits and their own profitability, and this is concerning to say the least. Many brokers believe these insurers are being unfair to brokers who make up a significant amount of their business.
The Insurance Brokers Association of Trinidad and Tobago ( IBATT) is not taking this way of thinking very well also and believes if Insurance companies have to reduce commissions of their most valuable main producer, the brokers, which is basically their extended sales representatives, the fraternity that DRIVES insurance sales and business up, then it’s a sad day for the industry. The Brokers carry a lot of the costs on their shoulders such as the documentary costs of the placement, the attention to detail, the constant customer touch and service to their clients as well as the claims negotiations, to name just a few and have done this for years although commissions on some lines of insurances were not sufficient. However, many focused on homeowners and motor accounts to grow their portfolios. Nevertheless, Brokers think the move is uncalled for at this time and do not believe that the insurers are in such a dire state to do something like this. If this is the case, and insurers are suffering so much, then the Brokers must look at only strong financial insurance companies that can afford to pay a claim reasonably and they must consider their responsibilities as Financial Intermediaries to ensure that the client’s risk is covered properly. Basically that these insurers can settle a claim sufficiently. Therefore they can not recommend placement of their client’s business through such financially weak insurance companies. Given what the insurance companies are purporting, and what they are doing, so it’s obvious that these insurers can not settle a claim adequately for their clients and the brokers should not be placing their clients' business with such insurers.
Clearly the Central Bank of Trinidad and Tobago (CBTT) must realize what is going on here as well and this type of fall out is not good for business in this industry. This causes adverse effects throughout our industry and CBTT as the regulatory body for insurers, agencies and brokers must stop hiding their head in the sand and address this situation directly. Further, the Brokers want to send a clear message to the Insurers who are trying to adopt this “Adverse-Broker” approach to business, and want them to know that they most likely we will be moving their business from insurance companies that have been reducing their commissions below the acceptable standards that would affect the caliber of Brokerage services they provide to their clients. They will be moving their business away from the insurance companies they believe are unable to settle claims adequately and sufficiently for their clients.
By Dr Neil Gosine