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ADVANCED BROKING

This training course by Fenchurch Training Limited provides comprehensive knowledge on the competitive environment, regulation, compliance, and operational challenges faced by insurance brokers. Learn about distribution, dealing with insurers, new business development, and more.

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ADVANCED BROKING

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  1. ADVANCED BROKING ED GOODA FCII SIRM Fenchurch Training Limited Fenchurch Training Limited

  2. ADVANCED BROKING • Understand the competitive environment for insurance brokers • Understand the management, implementation and control of regulation, compliance and the law as this applies to insurance brokers • Understand the operational and management challenges faced by insurance brokers Fenchurch Training Limited

  3. ADVANCED BROKING • Welcome • Introductions Fenchurch Training Limited

  4. ADVANCED BROKING • What are we going to cover today? #1: • The Insurance broking environment • Distribution • How brokers deal with Insurers • New business development • Regulation and compliance • Business strategy Fenchurch Training Limited

  5. ADVANCED BROKING • What are we going to cover today? #2: • Key aspects of insurance broking operation and management • Financial security of insurance organisations • Client services • Broker remuneration and transparency Fenchurch Training Limited

  6. ADVANCED BROKING • The insurance broking environment • Market cycles • Hard market increases prices but attracts competition leading to… • …Soft market with decreasing prices deters new entrants and sees players leave leading to… • Hard market… Fenchurch Training Limited

  7. ADVANCED BROKING • The insurance broking environment • A broker’s job is to look after the interests of his / her client through out the market cycle, to obtain the widest cover at the best price… • …whist maintaining profits for the organisation Fenchurch Training Limited

  8. ADVANCED BROKING • The role of the broker • Q: Can a broker act as an agent either • On an implied basis? • Under written agreement? Fenchurch Training Limited

  9. ADVANCED BROKING • The role of the broker • A: A broker can act as an agent either • On an implied basis; and / or • Under written agreement Fenchurch Training Limited

  10. ADVANCED BROKING • The role of the broker • Q: How should a broker act if he / she find themselves in a position of conflict of interest? Fenchurch Training Limited

  11. ADVANCED BROKING • The role of the broker • A: Agents must always act in the best interests of their principal’s and must put these interests first. Any potential conflict must be disclosed to and agreed by the principal Fenchurch Training Limited

  12. ADVANCED BROKING • The role of the broker • Q: Are brokers more influential in a hard or soft market? Fenchurch Training Limited

  13. ADVANCED BROKING • The role of the broker • A: In a soft market there are more insurer players so the broker can use their influence to drive down prices and widen cover for their clients. Fenchurch Training Limited

  14. ADVANCED BROKING • Distribution • The distribution landscape • How many routes to the customer are there? Fenchurch Training Limited

  15. ADVANCED BROKING • Distribution • The distribution landscape #1 • Direct to insurer • Traditional Brokers • Internet brokers • Affinity schemes (Porsche owners club) • Social media • Call centres cold calling Fenchurch Training Limited

  16. ADVANCED BROKING • Distribution • The distribution landscape #2 • Broker networks • Branch networks • MGAs • Aggregator websites • Banks and building societies • Retailers Fenchurch Training Limited

  17. ADVANCED BROKING • Distribution • The distribution landscape #3 • Motor manufacturers (free insurance for the first year…) • TV advertising • Outdoor advertising • Workplace marketing Fenchurch Training Limited

  18. ADVANCED BROKING • What are the broker distribution costs? Fenchurch Training Limited

  19. ADVANCED BROKING • What are the broker distribution costs #1? • Branch operations • New business staff • Client staff • Management expense • Travel and entertainment • Marketing and promotional materials • Website development and maintenance Fenchurch Training Limited

  20. ADVANCED BROKING • What are the broker distribution costs #2? • Research and development • Incentives for retention and new business • Payment to networks or additional revenue streams Fenchurch Training Limited

  21. ADVANCED BROKING • How brokers deal with insurers • Brokers are regulated by the Financial Conduct Authority (FCA): • The FCA’s Principles for Businesses require brokers to ‘conduct their business with integrity…with due care, skill and diligence…take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgement…pay due regard to the information needs of its clients and communicate information to them in a way which is clear, fair and not misleading.’ Fenchurch Training Limited

  22. ADVANCED BROKING • The Insurance Distribution Directive 2016/97/EC (IDD) came into force in 2016 • Key provisions: • Professionalism • Commission disclosure (nature, not amount) • Harmonisation (member states may set stricter requirements if they deem necessary) • New product governance requirements (IE key features documentation) Fenchurch Training Limited

  23. ADVANCED BROKING • What are the criteria that should be adopted by brokers when selecting the suitable insurer for a client? Fenchurch Training Limited

  24. ADVANCED BROKING • What are the criteria that should be adopted by brokers when selecting the suitable insurer for a client #1? • Services to clients • Service to the broker • Underwriting appetite and specialist areas • Breadth of cover • Innovation • Credit facilities Fenchurch Training Limited

  25. ADVANCED BROKING • What are the criteria that should be adopted by brokers when selecting the suitable insurer for a client #2? • Geographical spread and quality of global organisation and administration • Technical advice and specialist expertise • Competitiveness • Survey and risk control • Reputation • Financial security • Continuity Fenchurch Training Limited

  26. ADVANCED BROKING • What are the criteria that should be adopted by brokers when selecting the suitable insurer for a client #3? • Financial security • Continuity • Brokerage and other payments • Access to decision makers • Relationship management – the attitude of the insurer to the broker Fenchurch Training Limited

  27. ADVANCED BROKING • Transacting business in Lloyd’s • Most business placed via a ‘slip’ • Subscription market • Leading underwriters are usually skilful and knowledgeable • Regulation within Lloyd’s • Market Reform Contracts (MRC) – contracts now presented in a standard way • Broker usually issues the policy • Xchanging facilitates premium received, checks policies and facilitates claim payments Fenchurch Training Limited

  28. ADVANCED BROKING • New business development • How do we generate prospects? Fenchurch Training Limited

  29. ADVANCED BROKING • New business development • How do we generate prospects? • Networking • Relationship building • Marketing Fenchurch Training Limited

  30. ADVANCED BROKING • New business development • Structured selling • Miller Heiman’s Blue Sheet planning tool? • 1. Identify the best opportunities which yield the best returns • 2. Match the needs and personality of the client in a structured way • Identify the individuals at the prospect and the decision maker(s) Fenchurch Training Limited

  31. ADVANCED BROKING • Regulation and compliance • What are the FCA objectives? Fenchurch Training Limited

  32. ADVANCED BROKING • Regulation and compliance • What are the FCA objectives? • Consumer protection • Integrity • Competition Fenchurch Training Limited

  33. ADVANCED BROKING • Regulation and compliance • The FCA has an approach to supervision: • Governance and culture • Sales processes • Product design • Post sales / services and transaction handling Fenchurch Training Limited

  34. ADVANCED BROKING • Regulation and compliance • The FCA has teeth! Powers to: • Intervene early • Withdraw misleading financial promotions • Publicise enforcement action • Invest in market intelligence and research • Authorise and approve firms and individuals Fenchurch Training Limited

  35. ADVANCED BROKING • Regulation and compliance • PRA is interested in solvency of insurers and protection of consumers by maintaining a healthy operational environment • However, PRA is also interested in the fair treatment of customers: • Firms must have sufficient controls to minimise excessive risk taking • Insurers and individuals must behave in an open and co-operative manner • The board of an authorised firm must take responsibility for establishing, embedding and maintaining this type of culture Fenchurch Training Limited

  36. ADVANCED BROKING • Regulation and compliance • FCA Handbook and PRA Rulebook contain detailed rules as to how to behave! Fenchurch Training Limited

  37. ADVANCED BROKING • Regulation and compliance • FCA annual business plan 2019 highlights these areas of concern: • Firms culture and governance • High cost credit • Tackling financial crime • Data security, resilience and outsourcing • Innovation, big data, technology and competition • The treatment of existing customers • Long term savings, pension and intergenerational differences Fenchurch Training Limited

  38. ADVANCED BROKING • Regulation and compliance • FCA Principles for Businesses (PRIN) are at the heart of FCA regulation and cover 11 principles. Can you name them? Fenchurch Training Limited

  39. ADVANCED BROKING • Regulation and compliance • FCA Principles for Businesses (PRIN) are at the heart of FCA regulation and cover 11 principles: • 1. Integrity • 2. Skill, care and diligence • 3. Management and control • 4. Financial prudence • 5. Market conduct Fenchurch Training Limited

  40. ADVANCED BROKING • Regulation and compliance • FCA Principles for Businesses (PRIN) are at the heart of FCA regulation and cover 11 principles: • 6. Customers’ interests • 7. Communication with clients • 8. Conflicts of interest • 9. Customers: Relationships of trust • 10. Client assets • 11. Relationship with regulators Fenchurch Training Limited

  41. ADVANCED BROKING • Regulation and compliance • FCA Statements of Principle for Approved Persons. • What are the 7 Principles? Fenchurch Training Limited

  42. ADVANCED BROKING • Regulation and compliance • FCA Statements of Principle for Approved Persons: • 1. Integrity • 2. Skill, care and diligence • 3. Market conduct • 4. Open and co-operative • 5. Organisation and control • 6. Skill, care and diligence in managing • 7. Compliance Fenchurch Training Limited

  43. ADVANCED BROKING • Regulation and compliance • FCA expects all brokers to: • Manage compliance • Identify and report financial crime • Manage conflicts of interest • Offer training to keep staff competent • Ensure fair treatment of customers • Manage complaints • Manage third parties Fenchurch Training Limited

  44. ADVANCED BROKING • Regulation and compliance • FCA expects all brokers to: • Comply with the Bribery Act 2010 (paying and receiving of bribes) • Comply with Sanctions legislation • Comply with Money laundering legislation • Comply with Record keeping rules • Abide by Competition law • Encourage whistleblowing where appropriate Fenchurch Training Limited

  45. ADVANCED BROKING • Regulation and compliance • Business Strategy • How to develop a corporate strategy • SWOT analysis: Strengths, Weaknesses, Opportunities, Threats • PEST(EL) analysis: Political, Economic, Social, Technological (Environmental, Legal) • Outsourcing (Including offshoring) Fenchurch Training Limited

  46. ADVANCED BROKING • Key aspects of broking operation and management • Local broker organisations • Global business • Retail broking • Wholesale broking • Terms of Business Agreements with Insurers Fenchurch Training Limited

  47. ADVANCED BROKING • Key aspects of broking operation and management • Why would brokers choose to place business with MGAs rather than direct with insurers? • What are the disadvantages? Fenchurch Training Limited

  48. ADVANCED BROKING • Key aspects of broking operation and management • Why would brokers choose to place business with MGAs rather than direct with insurers? • Access to markets • Traditional, reinsurance and ILS markets • Volumes of business • Easier for the broker to access many markets Fenchurch Training Limited

  49. ADVANCED BROKING • Key aspects of broking operation and management • Why would brokers choose to place business with MGAs rather than direct with insurers? Disadvantages. • Supporting competing brokers • Service standard dilution • More chains for data loss • Conflicts of interest • Clash with insurers and relationship damage Fenchurch Training Limited

  50. ADVANCED BROKING • Financial security of insurance organisations • What is this and why is this important? Fenchurch Training Limited

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