NZ Insurance Market Sees Rising Broker Roles and Challenges

"The market has shifted to clients that want advice."

New Zealand's commercial insurance market is notable for the dominance of two major insurance companies, which appears to favor direct business. According to one industry veteran, the concentrated market has helped to create broker opportunities.

Paul Munton (shown right) of Rothbury Insurance Brokers has charted this trend during a 45-year career. Munton just retired as his company's executive general manager of broking branches. He discussed how the roles of brokers have grown in importance over his nearly five decades in the local market.

Munton stated that when he started as an 18-year-old renewals clerk in 1979, insurers, primarily American or British corporations, maintained offices in various towns across the country. "We had a lot of insurance players in the market," he told reporters. "Then, with the consolidation within that market, we saw a lot of them disappear."

New laws were enacted, and insurers changed the way they did business, centralizing operations and migrating to large city hubs, he explained, resulting in the broker opportunity. "This allowed brokers to come into the market and fill the void," says Munton.

Insurer consolidation.

Much of this consolidation occurred throughout the 1980s and persisted into the 1990s. By that time, he added, a local broker could be filling in for the four or five insurers who used to maintain offices in town, giving a localized presence that would otherwise be lacking.

"The market has shifted to clients that want advice and brokers are giving advice," says Munton. "I think there's been more acceptance of the broker, the role of the broker and where the broker can be the client advocate."

Big brokerage firms like Aon and Marsh may advise the country's corporations, but "now we're finding Joe Average might want to use a broker because he wants advice as the market has become more complex," Munton said. "It's the complexity of risks that's shifted, and there's a push for greater operational efficiency that is also driving more demand for brokers."

What are the most significant insurance challenges?

There have also been changes in the risks and difficulties facing the insurance business.

He stated that the current "headline insurance challenge" is climate change risks.

"The insurance companies have got to tailor their solutions around the environment," Mr. Munton added. "I think it's going to take more parameters around the qualification of where you are going to mature and on what basis."

As insurance difficulties evolve, he expects brokers to play a critical role in maintaining coverage as low as feasible. Brokers can assist some customers who are struggling financially by removing as many coverings as possible to come down to "fundamental needs." "What are the biggest needs that you can protect?" Munton spoke. "First of all, because if you can't afford to pay a premium, how are you going to be able to afford to rebuild your house or your business?"

Brokers will also play an increasingly crucial role, he added, assisting consumers in mitigating risks and eventually changing the structure of insurance programs so that they bear more risk themselves in order to better control and minimize costs.