Source: asiainsurancereview.com

The National Insurance Brokers Association of Australia (NIBA) – engaged Deloitte Access Economics to produce a report on the economic value of the insurance broking industry. The report described and quantified the elements that comprise the industry’s value: To customers, insurers, the economy, governments and broader society.

“The report is designed to inform discussions with policy makers, improve understanding of the profession in the community and assist NIBA members with their strategic planning” said the report.

Value to clients

In 2019, intermediated insurance (by brokers and agents) represented almost half (47%) of gross written premium. This was facilitated by 1,662 intermediary licensees who employ multiple brokers. The five largest broker firms employed almost 7,700 full time broker employees. Brokers support clients in accessing a greater number of policies and insurers – in 2019, the average NIBA broker member placed business with more than 10 different insurers.

On average, 40% of businesses are underinsured or not insured at all before engaging a broker. When asked about their newest client who had not previously used a broker, 90% of brokers said that their client previously had an inappropriate level of insurance for their level of risk. There is only 1% of brokers’ new clients were over insured prior to engaging a broker, 33% of clients were previously paying more for their insurance policy before they engaged broker.

On average, brokers estimate that they save clients 2.5 hours during the claims process, with 41% of SME clients agreeing that their claims process would have been ‘much harder’ without the support of a broker.

The risk-management education brokers bring to the table can also help avoid incidents in the first place. An estimated 62% of clients had partial or very limited understanding of the risks they face before engaging them, said brokers surveyed for the report.

Brokers can support client reach on behalf of insurers, and reduce the costs of product distribution and administration. Local brokers can be more efficient in capturing information from, and distributing product knowledge to, local communities. On average, brokers estimated that it would take insurers an additional 3.3 hours to accurately assess and process a potential customer.

Furthermore, brokers can support insurers by helping to identify new and emerging risks and insurance needs, and support insurer innovation and adaptation to changing market conditions. For example, ‘cyber risk’ was identified by 63% of brokers as an example of an emerging risk policy they facilitated in 2019.

Value to the economy

Insurance broking is a significant industry in and of itself. They are businesses that collectively contributed nearly $2.6bn in gross value added (GVA) to the Australian economy in 2018-19 and directly employed almost 15,000 full-time equivalent (FTE) workers. Further support for other industries (through purchases from suppliers) amounted to nearly $900m in indirect GVA and supported over 5,000 FTE workers in other businesses. As a point of reference, these direct economic contributions are roughly equivalent to the economic activity in each of the gas supply and creative arts industries in Australia.

“Insurance broking is not as simple or transactional as walking into a store and buying a good,” he said. “It is a relationship-based business that involves up to 10 pre-sales and post-sales services and creates many sources of value,” said Deloitte Access Economics partner John O’Mahony, author of the report.