3 Reasons Why You Need to Educate Your Clients About the Latest IPT Hike

Tuesday, November 1, 2016
Written By
Andy Hartman

3 Reasons Why You Need to Educate Your Clients About the Latest IPT Hike

Educate your clients on the latest Insurance Premium Tax (IPT) hike, or a competing broker will.

On 1st October 2016, the IPT, a tax on general insurance premiums, increased from 9.5 to 10 per cent, with the extra revenue funding national flood defences and resilience. This hike comes just after a previous 3.5 per cent increase on 1st November 2015, resulting in a tax increase of 66.6 per cent in 12 months.

Did you communicate the latest IPT hike to your clients and reassure them that your brokerage will do everything it its power to ensure that the increase has the smallest possible impact on their policy? If not, here are three reasons why you need to do it now:

  1. It proves that you are proactive.

Your clients want to hear from you. This is not just anecdotal—we know from Ernst and Young that 38 per cent of consumers prefer at least semi-annual communications from their brokers, while only 23 per cent actually receive that minimum level of communication. That’s a 15 per cent gap between expectation and reality. Commercial clients want a proactive broker who can engage and educate them on their unique risks. Reaching out unprompted establishes you as a proactive broker.

But, it’s not enough to engage clients just for the sake of engagement—you need to communicate valuable information or risk alienating your clients. Indeed, a separate industry poll found that 90 per cent of clients feel that they do not receive relevant offers and services from their insurer, and nearly 66 per cent have a reduced opinion of their insurer or broker when they receive irrelevant communications. So, by reaching out swiftly with valuable updates, such as an increase to the IPT, you establish yourself as a proactive broker with valuable guidance.

  1. It engenders trust.

Communicating price increases or renewals can be tricky, especially in an industry like insurance, which already has an ingrained problem of retaining consumer trust. Industry research shows us that only about 20 per cent of consumers consider insurers to be trustworthy, and new general insurance complaints to the Financial Ombudsman Service rose by 4 per cent in 2015/16—even when excluding PPI complaints.

It’s a grim reality, but it’s the truth: consumers do not trust us. So, waiting until renewal time to explain why rates increased, even nominally, due to the IPT hike reinforces the inaccurate belief that we cannot be trusted. Put simply: many insurance consumers do not expect their brokers to communicate potential price increases like the IPT until they absolutely have to. Prove them wrong and demonstrate why you deserve their trust.

  1. It educates clients.

An educated insurance buyer is a successful insurance buyer. Communicating the IPT hike to your clients helps educate them and prove your value should they shop around for a different policy at renewal. They probably will—about 80 per cent of consumers shop around no matter what, according to Consumer Intelligence (CI) research. And, the number of consumers shopping around solely due to higher premiums has reached an all-time high of 11 per cent according to the same CI research.

Price is central to consumers when deciding whether to purchase a policy—75 per cent of consumers rate ‘value for money’ as important, according to KPMG research. However, your ability to be a knowledgeable advisor is also important. In fact, 69 per cent of consumers in the same KPMG survey rated ‘quality of advice and service offers’ as important, making it one of the top five reasons consumers choose to purchase a policy.

If your clients are going to shop around no matter what, remind them that all brokers will have to bear the brunt of recent IPT hikes, but not all brokers will provide the educational and advisory services that you do. Price is important, but so is your ability to educate your clients on important risks and updates—and that includes the IPT hike.

How Zywave Can Help

With your expertise, proactive attitude and the right tools, educating clients on the IPT hike and other timely topics is a cinch. That’s why brokers across North America and the United Kingdom turn to Zywave’s Broker Briefcase and MyWave Connect sales and marketing tools to educate their clients. These tools allow you to continuously provide your clients with clear, valuable and up-to-date content to help them stay compliant, informed and successful.

For a sample of the valuable IPT content Zywave brokers can send to their clients instantly and successfully, click here.

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