By Craig Watson, Underwriter
Within the UK, we have seen an ongoing commoditisation of SME and private limited company Directors and Officers (D&O). We would expect such commoditisation to lead to a high percentage of purchasing aligned with a deep understanding of the product. While understanding the need for cover has improved vastly, we still see swathes of clients who should be purchasing the cover failing to take the leap.
Furthermore, we have seen a business environment where we have witnessed the aftermath of Covid, supply chain issues, changes in working patterns, increased costs in fuel and raw materials, interest rates at a 20-year high, and the broader geo-political issues. All are putting an increased focus on the difficult boardroom decisions required to navigate these problematic times.
This implies that the savvy business owner and their executives will demand that D&O cover is in place. One would have thought so, but we can’t overstate how challenging financial patterns not only place pressure on daily decision-making but also result in rising insurance costs, impacting a client’s ability to introduce new coverage purchases into their insurance programmes.
The opportunity for the broking community is to find the time to introduce this product into the mix. And we can’t ignore the conflicts where other products are now deemed de rigueur and cannot be ignored. Private limited company not purchasing D&O or Cyber? How does the professional broker square off which is more important where an Insured has a modest budget to expand their risk transfer programme?
In the context of D&O, it’s worth asking whether commoditisation has impacted the necessity to understand and sell the product. But bear with me; this is not a critique, it’s merely an observation. Has impersonal trading reduced the potential for brokers to develop working relationships with technical D&O experts? And can they readily access experts when they want to discuss a technical issue?
- Is part of the issue the journey to obtain a quote?
- How many brokers understand their client’s financials and can answer questions regarding net worth and profitability?
- Do online systems properly highlight and recognise the need for more targeted representations, particularly on known situations that may gestate into a deeper issue where legal support will be a necessity?
And, of course, we see occasional ‘black holes’ as the impersonal trading of online leads to delays and obfuscation in resolving what should be a simple and swift response.
It may be worth reconsidering the customer journey at this point. An Insurer could enhance proposer support by integrating external financial resources with underwriting expertise to optimise outcomes. Add to this a dynamic statement of fact that reflects the risk presented rather than a formulaic set of questions bearing no relation to the income, asset or sector in which the proposer operates.
Would you want to work with an Insurer who is keen to support you with additional insights specifically designed to help the proposer fully understand the need for cover and, crucially, the risks of not purchasing a D&O contract?
At Kayzen, we’re determined to provide our brokers and customers with an opportunity to place their D&O and Management Liability covers (D&O) utilising a simple operational approach. We’re passionate about a deeper client relationship where ongoing support recognises any issues that may impact the client and where they will require bespoke professional advice from their broker.
So, with that in mind, we have built a proposition that will help you understand and sell the product. Furthermore, Kayzen will also create a client portfolio to promptly identify and flag any changes to the client’s business set-up that may affect their coverage. We will alert you to these changes to ensure you can provide timely and appropriate advice to your clients. Such critical details are often only discovered when a claim arises, sometimes months or years later, leaving the client-facing adverse consequences due to their failure to disclose material events.
A notable example is when a business changes hands, such as a family business where the founders depart and initiate a management buy-in. This is not disclosed to the Insurer or their broker (it’s retained the trading name and it’s a management buy in initiated by other directors). But a majority shareholding has been sold. The best advice at this point is for the original owners to purchase, or at least consider, run off. Meantime, the new owners purchase their own go-forward cover. But if this isn’t disclosed, and there is a claim 18 months later, how will the Insurer’s react to the fact that the business has changed hands? Is cover in place or not? It simply becomes a difficult conversation for the Insurer, broker and client. What’s the impact on the Policy and the claim? And of course we also have Insurance Act considerations sitting in amongst the debris.
It's vital to consider a proposition that will reflect the foregoing challenges and help all commercial customers to consider D&O. There are 3 key issues of reflection:
1. As a broker what is your % ‘hit rate’ of limited, LLPs, non-profits and EoT’s buying D&O?
i. If it’s less than 50% - why? Can we help you increase this?
2. Do you have the time to carry out this exercise?
i. How long does it take to send our underwriters the name of your client? Yes, you got that right, all we need is the name!
3. Are you interested in protecting your client’s position by understanding any ongoing events?
i. Kayzen will highlight when their financial metrics show an event requiring deeper consideration
Our lens is firmly focussed on ensuring our broker partners can swiftly obtain quotes, receive immediate answers to their queries and to help their efforts in introducing this cover. Furthermore, on risks bound, we will support our brokers when we are alerted to any fundamental changes within the business as flagged by our portfolio monitoring.
All of the above will empower our partners to improve their client penetration, improve the advice offered, and ultimately ensure the best possible customer outcomes. With little or no operational friction. A win for all parties.
