Media - FLAXMANS – Customers are being “romanced” by internet and TV Advertising…
So says Roger Flaxman, Chairman of Flaxmans the Claims Advocacy Service. The topic of why are insurance brokers so vulnerable to being sued? was the question posed by an invited audience at DAC Beachcroft's recent Financial Lines Forum in Manchester.
Chaired by the newly elected chairman of BIBA Lord Hunt of the Wirral guest speakers Roger Flaxman and Carl Evans Chairman of specialist PI brokers Griffiths & Armour exposed valuable insights to the fragile status of the modern insurance broker.
Flaxman went on to say "Gradually, over a period of some twenty years, insurance broking has been transformed from a skilled inter-personal service to a de-skilled impersonal commodity,- that is not the fault of anyone in particular but one of the unintended consequences of the relentless march of technological progress.
The ubiquitous adoption of the combination of the quote engine and the internet has caused the customer to measure an insurance policy's attributes by just its price, its sums insured and its brand name. The technology has made the indiscriminate selling of a grudge purchase commodity so easy that it no longer requires mankind to intervene.”
Flaxmans view is that technology has also encouraged outsourcing and distribution to proliferate creating a complex web of contractual obligations and duties of care between the several undisclosed parties between insurer and customer. In his view this ironically adds to the risk of a broker being found liable in law for an error or omission.
“In the days of the simple customer- broker - insurer chain the broker was in control of its advice, recommendations and delivery of documents. Today it is less so and the broker is increasingly more exposed to sharing liability with others in the insurance-sales food chain – without appreciating those additional risks and how they come about, both in contract and in common law.”
Flaxman points out that conflicts of interest between the duties of the broker to its customer and to the insurer are becoming more common as insurers encourage brokers to be their preferred partner distribution arms and so creating contractually enforceable commercial and financial pressures to prefer supporting the insurer before supporting the customer.
The financial benefits to brokers of this remote "tick and click" business model are self-evident but all the time it is eroding the potential for a valuable relationship between the customer and a trusted adviser.
Flaxman went on to say “The insurance buying public of UK plc has largely lost trust in the financial services industry in general and has no reason to believe the insurance industry is any better than banking. Increased overheads and regulatory costs ( mostly regulating the wrong things) together with reduced commissions means Brokers can no longer always afford to give the time and commitment to customers that meet the legal obligations and standards of care by which they will be judged when things go wrong. They are nevertheless obliged to observe those obligations and standards and the courts will continue to require brokers to uphold them.
Ergo: the modern insurance broker is an increasingly easy target for the disaffected policyholder when things go wrong with a claim.”
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