Buildings and contents insurance (B&C) is probably the most natural general insurance (GI) product for brokers and intermediaries to sell, so why aren’t penetration rates higher amongst brokers?
B&C insurance appears to be following the trend of the motor market and has become increasingly commoditised.
The impact of aggregator sites has meant that GI products are increasingly being bought by consumers on price alone and this has inevitably put a squeeze on broker and insurer margins.
However, I personally believe that, with a better understanding of the products and a good approach to sales and marketing, brokers have a golden opportunity to make valuable income.
According to Mintel, 13% of outright home owners and 15% of mortgage holders do not have any B&C cover, potentially leaving them at risk of facing a hefty bill should the worst happen.
Mintel also predicts that the value of new gross written premiums could rise from an estimated £6.9bn in 2011 to £9.1bn in 2016, which translates as good market potential for brokers.
GI products are an important part of an intermediary’s portfolio, but they are still relatively new territory for many.
I believe there could be a lack of confidence in selling the products and a lack of understanding as to what the opportunities really are for intermediaries. This can put unnecessary barriers in place to selling more B&C.
It can, of course, be difficult for brokers to find the budget or time for training. Yet, some GI providers, like Assurant Intermediary, provide free online training and a range of materials, from product guides and workbooks to suggestions and tips on establishing clients’ personal needs requirements.
Here are just a few considerations when selling B&C:
It is the cost of rebuild, not the market value, that is the sum insured for buildings cover and the most that an insurer will pay out under any circumstance. It is therefore the responsibility of the homeowner to get the insured sum right.
However, most homeowners do not know the full rebuilding cost of their property. So how can you help your client determine the right sum?
Register to use the house rebuilding cost calculator with the Building Cost Information Service, a joint venture between the RICS and the ABI.
Alternatively, look for insurers that rate buildings insurance on the number of bedrooms in the property.
Bedroom-rated policies automatically provide cover up to a pre-determined limit, eliminating the need for homeowners to calculate the cost of rebuilding their home and greatly simplifying the broker’s job.
The age of a property is also a key consideration, as new builds (generally defined as any property less than 15 years old) tend to attract lower premiums.
In addition to the structure, a buildings policy covers all the permanent fixtures and fittings. Policies also generally extend to include outbuildings such as garages, greenhouses and garden sheds.
However, not all policies cover boundary walls, fences, gates, paths and drives, so it is important to check exactly what the homeowner is looking to insure.
As the risk of flooding has risen in many areas of the UK, homeowners have become more aware of the benefit of a buildings policy that will help to meet the reasonable costs of alternative accommodation if a home is so badly damaged that the owners cannot live in it until repairs are done. Some insurers include this as standard, while others offer extensions of cover.
When it comes to contents insurance, there is a persistent issue with under-insurance.
It is worthwhile encouraging your clients to be systematic and visit every room – not forgetting the garage, the loft and the cellar, if they have one – and listing down everything.
It is important that your clients identify valuable items. Most insurers include a reasonable limit for unspecified high risk and valuable items. However, you should check to determine if this limit will be adequate for your clients and whether the single item limit is more appropriate.
Add-on covers can make a significant difference to the overall cover your client has in place (depending on their needs, of course) as well as providing you with an opportunity to drive a little more revenue.
These apply in particular to B&C cover and include legal expenses, home emergency, multi-appliance warranty and even gadget insurance.
Finally, as an intermediary, if you initiated a customer’s policy, you know when it is up for renewal.
Do not wait until the week before to contact the customer and offer assistance in the renewal process. Get in touch a couple of months before with two or three quotes based on what you already know about them, and suggest a face-to-face visit to review their requirements to enable you to shop around on their behalf.
Even if you did not arrange their B&C cover initially, you will know when they completed on their mortgage and when they are likely to be renewing.
Brokers have got a strong client bank, so make the most of it. Selling B&C is an income generating opportunity to be seized.
