New Zealand’s commercial insurance market stands out for the dominance of two big insurance firms – something that would seem to play into the hands of direct business. However, this concentrated market has actually helped create broker opportunities, according to one industry veteran.
The 45-year career of Rothbury Insurance Broker’s Paul Munton (pictured right) charts this change. Munton recently retired as his firm’s executive general manager of broking branches. He explained
how the role of brokers has become more important during his nearly five decades in the local industry.
In 1979, when Munton started as an 18-year-old renewals clerk, he said, insurers, typically American or British firms, had offices in many towns across the country. “We had a lot of insurance players in the market,” he said. “Then, with the consolidation within that market, we saw a lot of them disappear.”
New regulations were coming into play and insurers changed the way they did business, centralising operations, he said, and moving to hubs in the major cities – and here the broker opportunity was born. “This allowed brokers to come into the market and fill the void,” said Munton.
Much of that consolidation process happened during the 1980s and continued into the 1990s. By that time, he said, a local broker might be covering for the four or five insurers that used to have offices in a town – providing a localised presence that would otherwise have been missing.
“The market has shifted to clients that want advice and brokers are giving advice,” said Munton. “I think there's been more acceptance of the broker, the role of the broker and where the broker can be the client advocate.”
Another change since he started, he said, is how brokers are giving advice to a much wider range of businesses, including smaller SMEs. Big broking houses like Aon and Marsh may advise the country’s corporate businesses but “now we're finding Joe Average might want to use a broker because he wants advice as the market has become complex,” said Munton. “It’s the complexity of risks that’s shifted and there’s a push for greater operational efficiency that is also driving more demand for brokers.”
There have been changes too in the risks and issues facing the insurance industry.
He said climate change risks are the current “headline insurance challenge”.
“The insurance companies have got to tailor their solutions around the environment,” said Munton. “I think it's going to take more parameters around the qualification of where are you going to mature and on what basis.”
As insurance challenges change, he expects brokers to play an important role keeping cover as affordable as possible. For some customers that are struggling financially, he said, brokers can help strip down covers as much as is viable to get down to “fundamental needs.” “What are the biggest needs that you can protect?” Munton said. “First of all, because if you can't afford to pay a premium, how are you going to be able to afford to rebuild your house or your business?”
Brokers will also play an increasingly important role, he said, helping customers to mitigate risks and ultimately change the structure of insurance programs so they carry more risk themselves to better manage and mitigate costs.
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