Should Brokers subscribe to the subscription model?
Paul Thompson, CEO Cavere Group, writes a regular column in Mortgage Introducer Magazine.
I’ll admit I was sceptical when the first subscription insurance product launched last year. If I’m honest I struggled to see how it genuinely offered something new. I also had concerns around lack of no provision for no claims discount, the fact that premiums could go up at any time, and most importantly that if a policyholder missed a payment they could potentially be left instantly uninsured.
However, in light of recent events such as a rise in the practice of fees being added to GI sales by brokers, and a worrying return to the bad old days of brokers seeing a reduction in trail commission, I am starting to think that the subscription model could offer a solution.
Firstly, it’s very attractive proposition for brokers/advisors not to re-broker every year but run a subscription model and keep receiving trail commission payments (as you’ll have read previously I believe that intermediary service must be remunerated appropriately). Secondly, as a subscription model prohibits brokers from adding fees, brokers are not being remunerated in ways that conflict with their customer’s best interests. Win Win.
However, Andy Thornley, BIBA’s Head of Corporate Affairs raised an interesting point in August when he said that in order for brokers to successfully offer subscription policies software houses need to up their game. He said the majority cannot currently offer the services brokers need to run subscription products. This highlights once again that the industry is not keeping up with demand. Customers are demanding more flexible products, but brokers are unable to flex their offerings to keep pace with emerging InsurTech subscription insurance providers.
I think GI providers could offer intermediaries a solution.
Don’t wait for software houses to play catch up. If your GI provider has strong enough insurer relationships they should be able to flex for you, whether that be in terms of increasing/decreasing levels of cover or cover limits to find the right solution for your customers. If they can find the right cover at the right price then premiums should not go up each year (except perhaps for inflation) inviting the same level of customer loyalty as a subscription approach. Get this right then you no longer need to re-broker every year, but instead invite renewals and focus your time on selling, or perhaps even diversifying your offering to drive even greater customer retention.