Face reputational risks head on, brokers warned

Insurance brokers must face up to the reputational risks confronting them if they are to engender confidence and trust in the profession once more.

This is the warning from the Society of Insurance Broking, which is urging action on a range of reputational risk areas, from commission-based remuneration to diversity.

Liz Foster, non-executive director of the Society of Insurance Broking, said: “Every day, I see examples of brokers going above and beyond for their customers and clients, but we must always strive to do more. Improving the reputation of the insurance sector is a key priority for insurers, brokers, and all those working within the profession.

“I believe that there are changes which need to be implemented to ensure that the insurance broking profession flourishes in the long-term, and the predominant factor here is consumer trust.”

Reputational risks for brokers (Source: SIB)

The latest SIB report identifies four areas of reputational risk:

1. Diversity and inclusion

The profession’s historic lack of diversity and inclusion has impacted the perception of its ability to address the needs of society. The report states improving the diversity of the profession will directly benefit the reputation of insurance brokers and drive better outcomes for customers and clients.

2. Qualification requirements

The lack of mandatory qualification requirements in the insurance broking sector is identified as a reputational risk. The report suggests a consensus on qualification requirements and professional standards would benefit the understanding of insurance as a skilled profession, which would incur improvements on public trust.

3. Recommending unrated insurers

Brokers should be reticent to recommend an insurer without a financial strength rating from a recognised agency. The report states ratings benefit consumer trust as they provide an assessment of the stability of an insurer and their ability to pay claims to policyholders. To remedy this, the report suggests making it a legal requirement to use ‘rated’ insurers or implementing an increased levy on brokers that use unrated insurers.

4. Commission-based renumeration

The way insurance brokers get paid may be a source of distrust for consumers who view commission-based work as a possible conflict of interests. The report recommends that increased transparency would increase consumer trust, pointing towards the impact the Retail Distribution Review had on the public perception of financial advisers.

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