Why Insurance Brokers Must Prioritise Coverage Over Cost Savings
Understandably, many clients prioritise saving money on insurance premiums. However, in the quest to cut costs, they often overlook the importance of the quality of the Broker’s advice and their own risk tolerance levels. As insurance brokers, your professional duty is to ensure that the coverage meets the clients’ risk transfer needs and tolerance levels. Protecting their balance sheets and livelihoods should be paramount, even when clients are fixated on saving money.
This should be a non-negotiable standard by which you want to be judged as a professional.
The Pitfall of Prioritising Cost Over Coverage
Insurance is fundamentally about managing risk as a risk transfer solution. It provides a safety net that protects individuals and businesses from unforeseen events that could lead to significant financial losses. However, when clients focus solely on minimising premiums, they may inadvertently expose themselves to risks that could have catastrophic consequences.
Remember, they are not the experts; you are.
Cheap insurance policies often come with restricted cover limits, higher deductibles, and exclusions that may not be immediately apparent. In the event of a claim, the financial impact of these gaps can far outweigh the savings achieved on the premiums. It’s a classic case of being “penny-wise and pound-foolish.”
Protecting Clients from Themselves
When was the last time a client accepted responsibility for an uninsured loss that either was previously covered or could have been covered with a superior product but chose to save money on insurance premiums instead?
Clients often assume that cheaper insurance products are of equal quality, which is rarely the case. They may focus on cost savings, overlooking the potential risks of inadequate coverage. As brokers, you need to protect clients from this mindset by educating them on the actual value of comprehensive insurance. You must ensure they understand that the cheapest option isn’t always the best option for protecting their assets and livelihood.
Avoid putting forward inferior products that do not meet the client’s risk tolerance thresholds; this just opens up unnecessary discussions on price reductions when there shouldn’t be one.
The Role of Insurance Brokers
Insurance brokers play a critical role in guiding clients through the complexities of insurance products. Your job is to assess the client’s risk profile, understand their unique needs, asses the risk tolerance thresholds and recommend the most suitable coverage. While cost is undoubtedly a factor, it should never be the sole determinant.
Professional Standards and Ethical Responsibility
As professionals, you are ethically responsible for prioritising your clients’ long-term financial health over short-term cost savings. This involves educating clients about the potential risks of inadequate coverage and the importance of a comprehensive insurance strategy.
Brokers must take the time to explain the fine print, highlight potential exclusions, and ensure that clients are fully aware of what their policies do and do not cover. This level of transparency and diligence helps build trust and reinforces your role as advisors who have your clients’ best interests at heart.
Ensuring Adequate Coverage
It’s also important to regularly review and update coverage to reflect changes in the client’s circumstances, business operations, or regulatory environment. Regular check-ins and policy reviews can help identify gaps or adjustments to maintain optimal protection.
Conclusion
While saving money on insurance premiums may be appealing, it should never come at the expense of adequate coverage.
Avoid winning or retaining the business at all costs. Selling inferior products is not what being a professional insurance broker is all about, and it is far from it. Find other ways to differentiate your service as a Broker; if there aren’t any, you’re probably wasting your time anyway.
Ultimately, your professional standing depends on your ability to put coverage over price, even when trying to win new clients.
