Insurance brokers don’t price products, but they play a crucial role in ensuring carriers have the data needed to set appropriate premiums.
For brokerages, providing accurate and comprehensive data about clients and their risk levels is essential. If brokers fail to present a clear picture, insurers can’t properly price coverages.
Without a full understanding of the risks they’re covering, it’s challenging for insurance companies to model loss ratios accurately — and they’re left guessing as to what might tip the scale.
To address this, insurers are strengthening their audit teams and processes. And they’re conducting more in-depth examinations of brokerages to better check the accuracy and veracity of submissions.
Insurers are also beginning to benchmark the data they receive. For example, they might compare the percentage of Class 01 drivers (pleasure use only, no commute to work) that brokerage A has, versus brokerages B, C and D. It’ll be interesting to see how they eventually benchmark this data against other categories to predict if they’re facing adverse selection or receiving inaccurate information from brokers.
I believe the future will see sharper insurer focus on how seriously brokerages take data accuracy. I wouldn’t be surprised if brokerage compensation is one day tied not only to the volume of clients and data you provide, but also to the accuracy of that data.
How can brokers strengthen the data they’re giving their insurers? Implementing different checks and balances in your workflow is a good starting point.
For us, that’s meant a change to our binding process. We’ve built a dedicated underwriting team to thoroughly review files from our sales and service brokers. It ensures everything is correct and properly completed before being submitted.
Specialized tasks
Five years ago, we also established a quality assurance role to oversee internal audits – because the first audit your organization goes through shouldn’t be a surprise one from an insurance company. Having in-house auditing capacity and conducting spot checks on our work has led to stronger audit results from our carriers.
As we began scaling our business, we found these internal audits also helped identify coaching opportunities, reduced our E&O exposure, and improved our client experience.
Since our team regularly reviews calls and checks all our files, we can quickly identify areas for additional training. Managers and trainers can then provide targeted coaching and work with our quality assurance department to ensure things are improving.
When brokers make mistakes, it creates extra work for other teammates, who must then go back to clients to gather missing information and correct the policy application. This costs a brokerage time and resources. It also inconveniences clients, potentially leading to premium changes and a negative impact on customer experience.
Enhancing your processes to make data accuracy a priority will benefit your brokerage by strengthening relationships and building trust with insurers, clients and your team. That’s a win on all fronts, wouldn’t you agree?
Adam Mitchell is CEO of Mitch Insurance, a Whitby, Ont.-based insurance brokerage. This article is excerpted from one appearing in the October-November 2024 print edition of Canadian Underwriter. Feature image courtesy of iStock.com/onurdongel
