Warning for insurance brokers

By PAULA OLIVER in Fiji

Insurance brokers have received a warning from a 46-year industry veteran - look after your clients or risk losing out as the market softens and insurers continue to consolidate.

The warning came from Robert Harrison, of Aon Risk Services, at a conference of New Zealand insurance brokers in Fiji yesterday.

Harrison said the insurance industry was heading into a soft market cycle and after a lot of mergers it was possible some clients would be asking if they needed a broker at all.

"Why do they need a broker when there are only five underwriters?" Harrison asked the 500 brokers. "It's a question they're entitled to ask."

Brokers needed to differentiate themselves, understand their clients' businesses, and specialise in one area, he said.

Two distinct industry bodies, the Independent Insurance Brokers Association (IIBA) and the Corporation of Insurance Brokers (CIBNZ), have been brought together at the Fiji conference.

Under the umbrella title of Insurance Brokers Association of New Zealand (Ibanz), the two hope to present a united front for the industry for purposes such as lobbying the Government over regulation.

The conference is heavily focused on charting a direction for large and small brokers through times of significant industry change.

Harrison, who has worked in insurance in London, Australia, South Africa and Zimbabwe, said it was likely that there would be further consolidation among big insurance companies.

The sector had faced big losses from the September 11 terrorist attacks, large storms, fires, toxic mould and weak stock markets.

The credit ratings of major global reinsurers had fallen, many companies had restructured and a few, such as Australia's HIH, had fallen over.

In the meantime, it had become harder for brokers to keep clients happy because it was costing more to get the same cover.

"Brokers will have to work harder and smarter for the profits," Harrison said. "They will always remain important, but they must add value for their clients and not just see themselves as part of the foodchain."

The conference is also looking at how to attract young talent into the insurance industry and what Government regulation may lie ahead.

One of the industry's bugbears is the underestimation of its economic importance to New Zealand.

Chris Ryan, chief executive of the Insurance Council, yesterday showed delegates the results of an economic investigation into what the industry contributed to the country.

The study, by consultants Berl, showed that insurance employed between 7500 and 8200 full-time equivalent employees, and a further 14,200 indirect staff.

It contributed $960 million to the gross domestic product, but Ryan argued that there was a much greater contribution in the form of social and entrepreneurial contributions. Insurance allowed risk taking and enhanced the creditworthiness of borrowers, he said.

The Insurance Council plans to commission another report that will delve into those areas. The conference finishes tomorrow.

* Paula Oliver travelled to Fiji courtesy of Ibanz.