Insurance Explained: Big vs Boutique
It is a common myth that, in the insurance world, bigger is better. Clients often feel more comfortable using a bigger broker, because, after all, insurance is a financial product. Therefore, surely, a big broker has more financial stability in case anything goes wrong. The fact is all insurance brokers are protected by their Professional Indemnity Insurance. So, regardless of the size, if a broker gives a client incorrect advice and a claim isn’t paid, then the safety net is there to step in.
However, before we move into the details of the premiums the heavyweights can negotiate, let's discuss the differences for the client on a personal level.
Big brokers have large teams. Large teams come and go. The staff are ambitious and tend to hop around the large broker market chasing the improved salary, which comes with all sorts of restrictive covenants where they cannot simply move and start dealing with their old clients. That can take over 12 months, so client relationships fizzle out.
Smaller brokers attract a different breed of staff, those in it for the long game, that are ambitious, but share the vision of their employer creating unity and partnerships with the owner and the team. We simply call this loyalty. Loyalty to their employer means loyalty to the clients they look after, which equals long-standing relationships often merging in to friendships.
Having worked for a number of the world's largest insurance brokers, our Director, Samuel Cise, recognises the major differences between large and smaller brokers. A 9-to-5 attitude is easy to adopt when working for a large insurance broker, not that he did. However, many staff do, meaning even if you do have a company mobile phone, the likelihood is at 5pm it is turned off! Customer Care from 9am to 5pm doesn’t make much sense to us! After all, insurance is bought for emergencies and who says what time an emergency occurs?!
Smaller brokers = Smaller teams = Higher care levels. It is that simple, no matter who may argue the case. Smaller, boutique brokers know how to look after their clients and just being contactable in an emergency is the bare minimum. What if the client prefers to tell you using WhatsApp that they’ve bought a new car? As long as its logged correctly, then this medium is perfectly acceptable to us and now becoming the most common way to communicate even with the wealthiest of wealthy. The point here is, there are no restrictions with our communication flow between all our clients and our team.
Well, the bigger the broker, the more buying power they have, meaning the lower my premium, right? No. Firstly, insurance companies always make sure they play fair. This means if you present a risk to an insurance company, which has also been presented by another broker, the insurance company provides the same premium to both. There are no advantages. But the large broker will have lots of business with the insurance companies, meaning they get better premiums? No. Insurance companies rate a policy exactly how they see fit. There may be some negotiation, if the broker tries to play one insurer off against another, but that’s it.
The boutique broker works for his money! You will always find a smaller broker works harder. Caring for their clients usually comes with much higher levels of care, due to the fact they want to and they have to. Insurance can be competitive, so the harder the broker works, the higher chance they retain the business. Does a big broker care if they lose a client? They are not financially driven, our guess is no. Here we see the reverse of what people think, the boutique broker works harder, negotiates harder, does the very best for the client, because they want and need to. Who wins? The client! And of course the broker, as his retention and new business levels are at the maximum.
Large brokers often have in-house claims teams, who work with loss adjusters to assess a loss. These claims staff do not know the client, they have never met them and are simply tasked with helping the insurer resolve the claim. General consensus is insurers don’t like paying claims. However, in the Private Client Insurance world its usually the opposite, but there must be a client representative on hand to help, one that knows the client intimately. Account Handlers for larger brokers tend to push away the claim taking little responsibility and hoping it gets sorted without it interfering with their day job.
We love claims! That sounds strange, doesn’t it, but claims are when your skills as a broker are really tested. Forget negotiating for a premium, think about negotiating a claim for your client. This is where we thrive.
Imagine the situation: 10pm Sunday night the mobile phone rings, it's an important client, ‘I’ve just arrived back from the Caribbean and there’s water gushing out of my front door of my 5-storey London home! What do I do?’
First off, it is our job and the client's to stop all further damage. This means turning the mains water off, which he can do, but the whole house is destroyed by water. Between us we make plans to remove any items that are of significant value. This involves drafting in people to help. We both have contacts, so they both get instructed to help.
Next up, we alert the insurer, that is our job. Further emergency staff are instructed to help, but now it is getting late. We organise a hotel for the client to stay in for now, while we continue work in the home. The next morning the assessors arrive to step in and take control of the disaster, meeting us there, at the client's home to discuss the plan. Further items are removed to stop more damage. They go to storage or to the right person to help immediately.
Investigations happen that detect a burst pipe in the roof, causing the pipe to split and water to flood the whole house.
The claim continues and is successfully resolved……
This is a brief insight in to why you buy insurance. You buy the support of the person at the end of the phone out of hours and when you need it the most. Bigger is not always better. Boutique is where you should be.