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Rethinking Global Mandates in Insurance Broking: A Case for Local Expertise
In the world of insurance broking, global mandates are increasingly becoming a norm. These agreements between clients and brokers bind clients to prefer the services of a particular broker on a global scale. While such arrangements often hinge on the international relationships brokers have with their clients’ head office personnel, it raises a crucial question: Can this approach truly be objective, especially when it comes to managing risks?
As a long-serving insurance broker with a deep understanding of the industry, we’ve had our fair share of experiences with global mandates. We have had a couple of instances where we lost a client to another broker with a global mandate. This is despite the fact that the local office of our multinational clients wants to partner with us. Many times our clients have braved standing tall to their international counterparts, only to be told to back down and follow directives.
This is the pernicious world of global mandates.
Global mandates, as the name suggests, transcend geographical boundaries and tie clients to a single broker. While this might seem convenient on the surface, there are significant drawbacks to this approach. One glaring issue is the tendency to overlook the unique local conditions and needs of a client’s subsidiaries or branches.
Insurance is not a one-size-fits-all proposition; it’s an intricate tapestry woven from threads of regional regulations, market dynamics, and risk landscapes. Even when an international broker has a local setup, their top management often prioritizes pleasing their own headquarters over local customer interests. This misalignment can create conflicts and inefficiencies at every stage of the insurance process.
Moreover, global mandates can lead to slow decision-making processes. When a crisis hits, waiting for approvals and instructions from a central authority can result in costly delays. The one-size-fits-all approach may also not consider the evolving needs of each distinct business unit, leading to coverage gaps or excess coverage.
Well, after rattling our brains over the issue for several months, there seems to be one solution that could actually turn out to be a win-win-win. A compulsory co-broking arrangement. In such a setup, a local partner would have the freedom to collaborate with a local broker of their choice – someone they trust, someone with a proven track record in managing risk portfolios. This approach places emphasis on historical performance rather than unrealistic future projections.
We believe this approach also aligns well with the Vocal for Local approach as advocated by our Prime Minister. We see value in nurturing local expertise and partnerships in the insurance industry. It’s about finding a balance between global strategies and local insights.
In conclusion, the world of insurance broking is evolving, and so should our approaches. While global mandates have their merits, they also come with limitations that can hinder effective risk management. Embracing local expertise and allowing local partners to choose trusted brokers can be a step towards a more balanced and responsive insurance ecosystem.