5 February 2015 Insurance

Brokers should not be needed, says RSA CEO

Insurers have given away an important part of their value chain by allowing brokers to play a role in the market. And this happened because their service to customers was not good enough.

This was the opinion of Stephen Hester, the group chief executive of RSA, speaking at an annual lecture held by Airmic, the body that represents UK corporate insurance buyers and risk managers, in London this week.

“It is sad that insurance carriers allowed space for brokers and they have paid the price by ceding an important part of the value chain,” he said.

He did add, however, that the top brokers are leading the way in modern standards and thereby have justified their role in the value chain. He added that RSA hires brokers to do sophisticated jobs, giving the example of cat modelling.

Hester explained why he believes the insurance industry is essential to the modern world. But he also noted that the intermediation model used, with brokers bridging a gap, is now unusual in the modern world and is relatively old fashioned.

“It is clear that in this vast industry we participate in, we will need to keep catering for a very diverse range of needs and different customers will continue to require something different. First of all, does it do what it says on the tin?”

He added that the industry is moving with the times but will need to continue to do so.

“The industry needs to move from paying out when risks go wrong to helping risks to be understood,” he said. “In terms of service, we need to continue improving, before, during and after the need. We need to think about service in terms of where, how and the manner of support.”

On the London market, which he believes is one of the UK’s most important business assets, Hester believes it needs to get better to open up opportunities.

“Increasingly, geography means less and less in the modern world. The question is, if the market didn’t exist, would we invent it? This challenge can’t be taken for granted and has to be answered every day,” he said.

Based on the theme of the above story, we want your opinion. Will there always be a place for brokers in the industry or could carriers learn to live without them? Click  here to answer.

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