Upon reaching the one-year mark of my transition to active reserve (retirement), I have wanted to share my thoughts on various aspects of the insurance sector. Having stepped back from the front lines after 45 years in this field, I find it worthwhile to offer my humble opinion on these matters.
These are purely personal comments, which some might consider populist, especially now that the term has become so fashionable. It suggests that there are no simple solutions to complex problems. In this case, I’ll embrace being labeled a populist, much like Alexander the Great did with the Gordian Knot, which he unraveled with a single stroke of his sword, proclaiming that “it made no difference whether to untie or cut“, as the outcome was the same: the problem was solved.
Defense of the insured
When the freedom to choose one’s lawyer was implemented a few years ago, it marked a significant step forward in consumer protection. I believe that it would be necessary for the legislator to once again consider enhancing the protection of insurance consumers by promoting another significant change in the management of claims, such as the free choice by policyholders of the valuation and appraisal services in claims. Although this practice can be agreed upon by the parties, I think it would be very beneficial for policyholders to have the legal right to freely choose experts for the claims that affect them.
It is a widespread practice among companies to consider the expert report as an internal document, and therefore inaccessible, which harms the defense of the insured and the work of the Broker.
It is unacceptable that the professional who has to determine the veracity of the circumstances of the claim and assess the damages with absolute freedom and professionalism, is in practice, and especially in certain branches, almost an employee of the company, following its rules with absolute partiality.
I believe that it would be an important step forward in the defense of the interests of the insured and, along the way, we would improve the image of the expert profession.
Formation
I believe that in terms of training, we need to start from scratch. We won’t achieve professionalism as long as our training depends on the wrong ministry. We need to work towards a medium-level university education that allows future brokers to achieve both technical and commercial knowledge, combined with business training, culminating in an internship period. This will introduce professionals into the market who are prepared in all the fundamental subjects necessary to practice the profession.
The current system of specific courses with a certain number of hours (which are decreasing by the day) only serves to introduce into the market individuals with insufficient training, a consequence of the lack of time to properly address subjects that need to be more extensive in both content and learning time.
As of now, this initial deficiency is only supplemented and improved by the experience accumulated over time.
Despite the poor training of new brokers, the level of the second generation in brokerages has increased in recent years due to the education of these generations in other subjects, such as economics, law, or business studies. While not specific to the insurance activity, this ensures a certain level of educational background for the second or third generation leading the brokerages.
Associations
I have always heard about the “Unity in Mediation“, but allow me to say that I do not believe in it; it is a chimera. Unity in mediation cannot exist because there is no unity in society, just as there is not only one political party or a single political ideology in parliament. I believe the goal should not be unification but rather collaboration and consensus. Therefore, I think that the leading organizations in this country (such as the Council, Fecor, and Adecose) should take the initiative to promote collaborative actions among all mediation organizations.
And when I speak of collaboration, I’m not referring to organizing a magnificent congress where we end up navel-gazing and discussing how well or poorly we are doing without contributing solutions to the REAL problems of the profession.
I believe these collaborations need to be effective and specific, involving an analysis of our issues and producing concrete results to reach a consensus and provide solutions collectively to the issues we may raise, and to convey unified positions of the entire mediation sector to the market.
In other words, a working meeting where a plan is developed on specific topics, discussed, and worked on to provide solutions, without the intervention of third parties or unnecessary recreational activities.
Banking Action
What the banking sector does in this country regarding the insurance sector is unspeakable, and you likely already know what I’m talking about. But the worst part is that no one does anything to fix it, and meanwhile, banks place (I said place, not sell) insurance shamelessly using methods of dubious morality without any restraint.
But this is not a problem; problems have solutions, this does not.
Especially because one would have to consider who has the capacity to solve it:
The administration? (Consumer Affairs or DGS) They could do it, but do they want to?
The employers’ association? I doubt they could do it, but I think they are more interested in taking advantage of the circumstances to do more business, without paying much attention to where it comes from or the methods used to obtain it.
The mediation? I don’t believe in miracles, especially not of this kind.
So, we are left to fend for ourselves and defend ourselves as best we can; that’s the way it is.
Size and future
Today, there is much talk about linking the future of brokers to their size. I believe it’s not a matter of size. I’ve heard small, medium, and even large-sized brokers complain about the lack of viability in their businesses as a result of their size. Therefore, one must conclude that a small broker will continue to face the same problems even if they grow in size; hence, size is not the decisive factor for the continuity of the business as we know it.
Profitability is also a necessary factor for the continuity of any business. I am aware that there are small and medium-sized brokers who have profitability ratios in their companies that some large brokerages would envy.
I believe the key to the continuity of brokerages as we know them, with the freedom to choose the best products and represent their clients before companies, is more threatened by the inability to freely decide how to manage their own business.
The current trend is for companies to impose their management models on brokerages, forcing them to work in a certain way, assuming tasks that are not their own, and forcing them to modify their way of working, giving up personal and direct treatment with their clients in favor of the company’s systems.
If this trend consolidates in a few years, the type of broker we know today will transform into something different from what its very nature requires.
Premiums and competence
Since the 2008 crisis, a phenomenon has emerged that significantly affects our daily work. In those years, as a consequence of the economic crisis, there was a sharp increase in the reviews and renewals of existing portfolios, a practice that was previously reserved for large accounts became widespread. As a result, what used to be a portfolio that was renewed each year without many incidents turned into a laborious task of reviewing and renewing the majority of expired policies.
This has led to a decrease in the premiums of those portfolios, and what we believed to be a temporary phenomenon has become the norm at portfolio maturities.
The strategy of some entities that persistently bombard the consumer with significant campaigns based on systematically reducing premiums “no matter what” is a massive “self-inflicted wound” for the sector every time an advertisement reaches the consumer.
This trend has become a custom, and today the insurance consumer systematically requests a reduction in cost. If this request is not met, there is a risk of losing both the premium and the client, and this is becoming increasingly common.
This is leading to a significant “premium deficiency,” causing other sectors such as workshops and medical professionals to protest loudly against the continuous attempts by companies to reduce or freeze their revenues based on reducing their claim costs.
Digitization and non-mediation works
In recent years, particularly with the multiplying effect of the Pandemic, there has been a significant increase in the digitalization of all productive processes in the economy in general and in the insurance sector in particular. Everything that was previously done in person has been shifted to digital management, leading to a phenomenon that is significantly affecting the mediation sector.
This phenomenon is the offloading of tasks onto brokers, which, under the guise of improving our activities, forces us to undertake tasks that do not pertain to us as mediators and that inevitably consume resources and time that we cannot devote to our natural mediation activities.
Digitalization should not mean that the resources provided to us by companies are in turn used to have us perform tasks that were previously done by the companies’ employees.
Fraud
No one doubts that there are pockets of fraud in the insurance sector, just as there are in other business activities across various industries. In this context, companies keep their claims employees vigilant against the possibility of an insured individual attempting to commit fraud in the management of a claim or policy. They even run significant campaigns to reward this anti-fraud attitude among their employees. However, they are so dedicated to this cause that it turns the claims departments into veritable inquisitors in the search for potential frauds, thereby adopting a mindset of “guilty until proven innocent.”
Yet, once a fraud is detected and proven, a counterproductive attitude emerges, which I believe to be the cause of the high number of fraud attempts in the sector. This attitude from the companies is to “forgive” the fraudster, settling for a moral reprimand and, above all, not paying out the claim.
If companies truly wanted to eliminate fraud, they would only need to pursue it legally once discovered and proven. If there were a few legal sanctions against fraudsters, it would end the sentiment that if the fraud succeeds, great, but if it fails, there’s no harm done.
Company Service
The deterioration in the service provided by insurance companies to mediators in general, and brokers in particular, is noticeable. The role of the insurance technician is becoming extinct, and there is a significant lack of knowledge among the few accessible company employees, who are unaware of the basic principles of insurance legislation and the most fundamental insurance concepts.
Today, everything is reduced to using platforms for pricing and email inboxes to which risk information must be sent, without the possibility of directly conveying the specifics of certain more complex risks to the company’s technicians. This greatly complicates the broker’s work and slows down their management.
As for the ability to make decisions locally or manage issues with a commercial approach, these concepts are now history in our profession.
