The COVID-19 crisis has highlighted the need for brokers to add value to the insurance transaction, according to Toby Esser, chairman of AFL Insurance Brokers, a London-based independent broker.

Indeed, Esser said, the COVID-19-related coverage disputes involving business interruption pandemic exclusions have not reflected very well on either insurers or brokers. Esser spoke to Carrier Management for a podcast on the state of the insurance and reinsurance markets. (The full audio podcast is available below).

He speaks from experience in this matter because his wife has her own business just outside of London and bought a specific pandemic extension to her business insurance policy.

“She made a claim to her broker and the broker dismissed it immediately,” said Esser.

They decided to argue the point with the broker, which operates in personal lines and small commercial lines arena.


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“The broker then put us in touch directly with the insurer. We had a debate backwards and forwards with the insurer over the extension, but they declined the loss,” he said. “We heard nothing more, other than from the various lawyers being in touch over class action suits until the case with the [UK Financial Conduct Authority] went to court.”

At that point, his wife heard back from the broker who said: “Actually, there’s a chance that it might be covered.”

(As a result of a test case brought by the FCA, a London court on Sept. 15 ruled that some of the world’s biggest insurers were wrong to reject COVID-19-related business interruption claims from more than 350,000 small businesses. The FCA, which brought the test case against eight insurers, said the court had found in favor of policyholders’ arguments on the majority of key issues. After the court decision, Esser provided an emailed update on Sept. 20, saying he and his wife have been informed by their broker of the FCA finding but have received no further details.)

Insurers and Brokers Criticized

During the interview, Esser criticized the broker for failing to add any value – an essential part of the role of an intermediary.

“You have to add value, whatever level of business you’re in, in our world. So, I don’t know that any of [the business interruption coverage dispute] reflected very well on brokers or on insurers,” he said.

If an insurer offers specific extensions for pandemic insurance for small businesses, it should be covered, he emphasized.

“That’s what leads to very unhappy customers. And, I think it’s especially clear that the broker needs to explain to the customer what that coverage is and not just give them the [policy].”

Staying Competitive with Specialty Expertise

Nevertheless, Esser is bullish about the future of independent Lloyd’s brokers – of course, those brokers that add value to the insurance transaction.

Although the large brokers appear to be dominating the market, Esser said there’s “always room for competition.”

“I was a small broker and then I was a fairly big broker, and then I was a small broker again. So, the argument is slightly different depending on where you are, but there’s always room for somebody else. There’s always room for competition.”

While bigger brokers clearly have leverage and are able to attract high volumes of quality business, smaller brokers can be hungrier and more aggressive, he said. “Particularly in specialties, and particularly where you can be exceptional, there’s room.”

He acknowledged there has been a massive amount of consolidation amongst the largest retail brokers, such as Marsh and JLT’s 2019 merger and Aon’s impending acquisition of Willis.

“But we’re also seeing consolidation of the specialist wholesalers and reinsurance brokers,” he affirmed.

“There’s great consolidation continuing to go on, but that’s always happened, and you will always get people who want to start up new businesses or who want to break off and start a new wholesaler.”

Maybe there are fewer brokers today and maybe the cost of entry is more complex, he said.

Yes, he added, more money is required to start a new broker, and it’s more difficult to grow from a small broker to a big broker today, but there are “still plenty of prospects out there for the smaller ones to compete with the bigger ones.”

Visit the Big Re, Carrier Management’s reinsurance hub, for complete reinsurance coverage. Launched during the week of what would have been the Reinsurance Rendez-Vous de Septembre, this special page aims to provide complete reinsurance coverage of, by and for reinsurance professionals and buyers— including news, features, interviews, commentaries, white papers, videos, webinars and more.