‘Robust honesty' vital as broker/insurer relationship evolves

By Claire Churchard – The original article on Intelligent Insurer can be found here.

As the role of brokers in the insurer/broker relationship has evolved and diversified in recent years, the case for ensuring strong relationships with “an enhanced degree of robust honesty”, has never been clearer, even if that means navigating a few bumps along the way.

This was the view of Dan Martin, managing director of Distribution Strategy and Business Development at Markel International, as he discussed how the role of brokers has shifted and why a strong relationship remains vital to insurers’ success.

In recent years, Martin has seen brokers evolve beyond client advisory and advocacy services to include risk management, risk engineering, managing general agent capacity placement services and client consulting to carriers.

“Brokers have diversified and built revenue streams for themselves. At the same time, the risk needs and demands of their clients have changed, so they’ve had to shift focus and become more sophisticated in terms of the emerging trends and challenges that the market and the macroeconomics create,” he said.

Martin characterises the current relationship between brokers and insurers as “extremely complex”. And, he said, Markel’s position in the market means the company interacts with brokers in a huge number of ways. This ranges from product and claim offerings to the risk management that brokers and insurers sometimes work on together, as well as identifying future trends.

He emphasised the importance of the broker as a representative of the primary interests of the client. “We understand the law of agency and we don’t mistake or misunderstand it. We value it and the advocacy they bring on behalf of those clients,” he said.

Not just fit and forget

When it comes to how well brokers currently bridge the gap between insurers and insureds, while supporting the optimum risk to capital alignment, Martin points to seriously complex risks as an example that shows where it works as well as where it sometimes doesn’t.

“Such risks need to be solved in the tripartite relationship between the client, the broker and the carrier community,” he said.

“Brokers come into their own particularly where they’ve helped to solve these risks in a sustainable and long-term manner, rather than just a ‘fast fit and forget’, when tomorrow insurers have to re-engineer solutions and start again,” he explained.

“Brokers who listen well and bring the client’s demands to carriers so that we can be educated by those clients on their risk needs, is a great start to that proposition.

“The brokers also need to be diligent in working with us on those solutions.”

Martin highlighted the work Markel and its brokers have done to continue providing coverage on hull war programmes during the Ukraine/Russia conflict. Such efforts have enabled Markel to provide genuine coverage capacity and capability through very troubling times for clients, he noted.

Insight into large and complex risk

Martin stressed that a strong bond with your brokers is key for insurance carriers to survive and thrive.

“Brokers dominate those income distribution channels—they are the eyes and ears of the clients, they understand their risk needs, particularly within the large and complex risk placement situation that occurs across the wider market; they own the client relationships.”

He acknowledged the “great insight” brokers can offer on emerging risk trends, as well as the work insurers can do with brokers to discuss and solve those problems.

“They give us the opportunity to engage in open dialogue. At Markel we’re super-keen to develop and sustain those close relationships. We want to understand the opportunities, to be educated by the clients and their needs. We want to build the right solutions for them,” he said.

Martin is candid when he says that such close, robust relationships, while working on challenging solutions, are not always easy.

“Strong relationships need an enhanced degree of what is, frankly, robust honesty, and possibly even a degree of dynamic tension.

“We can’t solve every problem, and we need clear honesty about what the risk needs and demands are so that we can bring the best parts of our business to bear.

“Without these robust, strong relationships, insurers won’t have the foundation on which to build those solutions. In a scenario where relationships are weaker, insurers are more likely to continue to work on solutions for yesterday’s problems, rather than tomorrow’s,” he warned.

Healthy tension requires effort

Constructive discussions are where fresh solutions are thrashed out. And for Martin, the indicators that show a strong, healthy relationship go to what he calls a “healthy tension”.

“If you have a good honest relationship with a broker, it needs to impact across a number of different levels, for example, placing broker to underwriter, placement leader to underwriting director, chief broking officer into platform director, etc,” he explained.

“Sometimes a broker can upset an underwriter and an underwriter can upset a broker, and we need to de-escalate that and have a conversation about it, so we can come together and maintain the relationship. If you have a good strong relationship, you’re going to have a few little bumps in the road. It’s your ability to resolve those bumps that is the evidence that the relationship works.”

Martin added: “This is not a great analogy, but if I don’t fall over when I go skiing, I’m probably not trying hard enough. So if we’re not occasionally upsetting someone with something that we think is the right solution, maybe we’re not working hard enough. I think that works both ways.”

Within the boundaries of this dynamic tension, he stressed, there is still a responsibility for brokers and insurers to continue to trade. The key to making this work is respecting the boundaries of that idea and acknowledging that they will continue to trade tomorrow and next year, and will do that in a robust way with honest dialogue.

Looking to the future, he added: “The other thing I look to is ‘how do we build our relationship on lead indicators rather than lagging indicators?’.”

He explained that a lot of the history is based on what market players did in the last quarter or last six months, and what insurers are doing so far versus last year.

These are the known indicators, but Martin wants to see more development around insight on lead indicators.

“To get to the root of this the important questions in relationship discussions will include: What does our future pipeline submission look like? How does that align to our appetite? What parts of your portfolio can we pivot around? How do we create the environments for dialogue that give us real honesty on the subject?”

Brokers will continue to evolve but, Martin noted, the market is at a bit of an inflection point. “We have the promise of artificial intelligence and the use of structured data coming into the market in a different way, which is making all sorts of ambitious promises around efficiency and savings. In a marketplace that, frankly, runs too hot from an expense perspective we need to take that very seriously.

“The market needs to come together and at Markel, we’re absolutely determined to be a vibrant part of that, and to be among the leading protagonists in that space.”

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About Markel International:

Markel International is a division of Markel Group Inc, a US-based holding company trading on the New York Stock Exchange (NYSE: MKL). Markel International writes insurance and reinsurance business through six divisions and through offices across the UK, Europe, Canada, Latin America and Asia Pacific. Markel International’s insuring entities include Syndicate 3000, Markel International Insurance Company Limited, Markel Insurance SE., and Markel Resseguradora do Brasil S.A. Its UK national markets business also provides legal and professional fees insurance cover as well as legal and tax consultancy services.