Brokerage director on how to face complex insurance risks

Narrator: Welcome to IB Talk, the leading podcast for the insurance industry across Australia, New Zealand and throughout the Asia Pacific region. Brought to you by Insurance Business.

Daniel: Hello and welcome back to IB Talk. I’m Danny Wood, news editor of Insurance Business Australia. Brokers face many more complex risks these days compared to even just a few years ago, and more of their work is risk managing rather than just transactional. Shane Brady is director of McLardy McShane, South east based in Dandenong in Melbourne’s metro area. We’ll be talking to him about how he handles a complex risk. Shane Brady, welcome to IB Talk.

Shane: Thank you very much, Danny. Thanks for having me.

Daniel: It’s a pleasure. But to start off with, how did you get into the insurance industry in the first place?

Shane: Yeah, my entry into the broking world is quite peculiar and probably different to everybody else’s. It was back in around 2008, 2009. So 14, 15 years ago at that stage I was playing local football for my old club. So at the south east of Melbourne and I happened to have broken my arm, so I had to watch training from the sidelines and I ended up chatting to one of the fathers of two kids that I didn’t know at that time. And he happened to be the director of a small family brokerage in Dandenong. And over the next couple of weeks we started chatting more and more on the sidelines at the footy and I noticed that the questions became a lot more centred around what I did for work, what my future aspirations were and what sort of pathway I wanted to carve. And I look back in hindsight now. It was sort of an informal job interview really. At the time I was in a completely different sector, completely different industry, and yeah, he was pretty much sussing me out whether I might be a good candidate as a junior coming into his brokerage. And yeah, one thing led to another I started really is just an absolute newbie with no knowledge of what an insurance broker did, no real understanding of what insurance was. And yeah, from there over those first initial few years just really learnt what it is that we did in this industry. And then from there just perfected my craft and, you know, turned myself into a career insurance broker.

Daniel: Hmm. It does seem like it’s a good industry for people who can think on their feet and are clever, you know, both in an academic way, but also just just savvy sorts of people. Do you feel as well that it seems to attract a really nice cross-section of personality types and intelligence types, for want of a better word?

Shane: Yeah, yeah, yeah, definitely is. I think that the skill set that you learn in the broking role is just so diverse. It’s a skill set that’s so transferable to other industries. So not only do you need to be able to communicate and empathize, especially in positions when you’re dealing with people that are in desperate circumstances and really need help. But you learn a lot about how industry works, and that’s what I find has been most powerful for me. As an insurance broker. You get exposed to all sorts of stuff. So how stuff is made? How just commerce and economics in general sort of work, you know, analyzing balance sheets, panels to try and work out business interruption. You learn about supply chains, you just learn about really how the commercial world works. And there wouldn’t be many other types of industries where you get such a hands on level of experience across such a broad range of business. So it’s not just about analyzing risk and helping clients mitigate that risk. You really have to have a deep understanding about how that business works to do a really good job. And when you’re talking to a technical broker or a really competent expert level broker, they can tell you all about how their clients operate, what their balance sheet looks like, and how we’re using techniques to protect that business from unforeseen circumstances. So yeah, it really does give you a really good broad knowledge about a lot of things, and that’s transferable, which makes it really a haven for younger people looking for a career path that may not necessarily know what direction they want to head in. Broking is a really good feeding ground to get yourself into a position where you can learn so much about so many different things and choose a path of expertise and pursue it.

Daniel: It’s a very involved job too, and we’ve swapped stories on this because we both have young families and we’ve empathized with each other down the phone line a few times. I think you run a brokerage now. How do you get your family life in balance with that?

Shane: That’s a balance that’s really hard to manage sometimes. I think that. I’m in a bit of a different stage of my career now. Having done this for almost 15 years, all the hard work in pouring the foundations of my career and putting it all those extra hours and extra effort. I feel like a lot of that. I won’t say it’s behind me because I obviously still work very, very hard. But one thing that I prioritize now that I may not have in the past is that your family and your personal life, you have to make sure that that comes first because you know you can get consumed in working those long hours and staying back and and getting sort of drawn into that type of life. And all of a sudden, five, ten years goes past. You raise your head and you realize that you’ve lost really precious time and time is the most precious commodity and you’ve got to spend it wisely. So these days, especially with a young family and, and yes, you and I have spoken about it a lot that, you know, they come first. And and that’s certainly my mantra at the moment. I make sure that I have that balance when I go home at night and get home and see the boys and see my partner, it’s that’s my time to really enjoy and it would have to be sort of an emergency or something really urgent for me to want to sort of distract away from that. But yeah, I feel like I’ve got a good balance at the moment.

Daniel: We’ve done some coverage on IB of mental health issues, mainly because it seems to have really come to the fore across the industry, I mean mainly because of COVID 19 and the pressure that was putting on people. Do you take specific measures to take care of your own mental health?

Shane: Of course, yeah. And I think that anyone who doesn’t really, really should. Mental health is one of those things. It’s like a physical health. You do all these things and everybody’s aware that you can do things to improve your physical health. You can go to the gym, you can go for a run, you can eat well, you can exercise and all of those sorts of things. But I think especially over the last few years, that’s becoming equally as important in some people’s minds with the mental side of things because it is just as important. You need to take steps to to look after your own head and make sure that you’re all in order. Otherwise you’re just not going to be operating at your absolute best. And yeah, I certainly take steps with that exercise and healthy eating and just making sure I manage stress levels and all of those sorts of things are just basic fundamental steps that you can take just to make sure you look after yourself. Because when you’re not working, nothing much works for you. So yeah, it is absolutely paramount. I’ve noticed that insurance business have got a real focus on that, and I think it’s a good thing. And there’s some really huge advocates in our industry, one that pops to mind. Damien Coates, Dual. He’s a huge advocate as well and is always standing on the on the podium shouting it from the rooftops because it is just so important for everybody in the industry to understand just how important mental health is. And one of the things about broking, one of the drawbacks is you’re carrying everybody else’s stress, so the weight of everybody else’s risk, you carry that with you. And if you don’t take the right steps to look after your own mental health, that can really get to some people.

Daniel: Yeah, it certainly can be a stressful job. I lived away from Australia for 20 years, came back and when I left we still had this idea that, you know, Aussie men especially had to be, I guess, tough and kind of put up with whatever difficulties they were having. And it seems to have changed a lot. Have you noticed that change? It’s like we’ve gone from being tough Aussie males who wouldn’t talk about things to opening up a lot more. Is there a long way to go or are you finding that at work that you actually sit and talk to your colleagues about mental health? Is that actually a topic you can talk about openly?

Shane: Yeah. Look, it is becoming a lot more open these days and and that’s thanks to the work of so many that have brought it to the forefront. And, you know, just thinking out into the public arena, Danny Frawley is probably the most high profile case in the Australian sort of sporting landscape that fell victim to to poor mental health over the years. And it’s just such a sad story. And, you know, everybody I think is aware of it and and everybody takes some sort of steps to look after themselves, but there’s still a long way to go and there still is a bit of a stigma around it with some people. But yeah, I’m a big believer. I mean, there’s no nothing tough about bottling everything up inside and battling it by yourself. There’s help out there and there’s chances are people are going through it exactly like you are. And you’ve just got to find those people and talk it out and and collectively just get better at looking after one another. And yeah, there is absolutely no shame in asking for help.

Daniel: Let’s move the conversation on to talking about insurance broking. It does seem like brokers are expected to do a lot more in their jobs these days and do a lot more risk managing. I mean, what for you constitutes a complex risk, I guess.

Shane: Yeah, well, we are what you would probably say is a bit more of a boutique broker where we go to a lot deeper sort of levels to understand a business before we engage or or work with a new client. So the work that we do upfront, what we determine and go through a process that we call risk mapping. So when we sit down with a new prospective client, we’ll understand what it is that they do, how they do it, how they’re different to all of their other competitors. And then we go away and we have a really good think about where the risk lies in that business. So what makes a risk complex can be a whole range of different things. It can be the industry that they operate and what they do or the type of insurance that they need. You know, finding the insurance that, you know, businesses require is getting harder and harder to source capacity is definitely harder to source. So to answer your question, what makes something complex? Well, these days, a lot more things make a risk more complex because the market is in the part of the cycle that is difficult. And we’re certainly working a lot harder to get the same results we were a few years ago. You know, I haven’t been around for anywhere near as long as some in this industry, but I can still remember 14 years ago when we first sort of started working on commercial insurances at my old brokerage, it was a relatively easy market. It would be very rare for a risk to come across that we couldn’t find a solution for. It just felt like and maybe this is just nostalgia, but it felt like all the insurers really wanted to compete for all the business. And, you know, looking back at that now, in hindsight, that was a soft market. It was it was easier to broke in. You were able to negotiate more competitive arrangements because there was more markets that were willing to work with you. But slowly but surely over the last sort of ten, 12 years, all the losses that stay relatively stagnant, whether you’re charging a higher, a lower premium, they remain. So when you’re charging less and incurring a higher amount of claims, obviously insurers don’t make as much money. The GFC, that obviously hit very hard as well. Insurers obviously losing a lot from the investment side of their businesses. And all of this culminates into a hardening market. And add on top of that all the catastrophes and all the natural disasters across the globe. Yeah, we’re now in a part of the market that’s really difficult. And more and more we’re finding that risks are either uninsurable in the local market or we really need to spread the risk amongst a number of insurers and fill the slip by using three, four or five sometimes more insurers on something that would have required just one, you know, five or eight years ago.

Daniel: And insurers themselves, understandably, are getting a bit more demanding. Is it possible for for you to explain a little what what things are you showing to insurers these days to get renewals that you didn’t have to do a few years ago?

Shane: One of the symptoms of a hardening market is insurers really drill down into a lot deeper detail now before they decide whether they want to take the risk or not. So what do we need to show? Well, it’s not so much necessarily what do we need to show insurers to get terms? It’s more we have to answer a lot more invasive questions and understandably so from the insurers point of view. They want to understand the risk before they decide to take that risk for that business. But yes, some of the things like cyber is a really good example. There’s minimum levels of security that insurers nowadays expect of of a potential insured. So two FA for two factor authentication, password protocols, disaster recovery plans, all these things are now mainstream obligations of insurers whereby five years ago you answer five questions on an insurer’s system and you’ve got cyber terms. So we’re doing a lot more work and it forces a lot of brokers to go to deeper levels of detail with their insureds before going to the market, which in turn creates risk awareness. So it’s not all bad. All it really does is weed out those insureds that are just looking for the cheapest price and not really concerned about their risk. You know, those that really take pride in the insurance program and want to get it right. They’re the insureds we like to work with and it was a level of detail we were already going to already. So it hasn’t had a huge impact on on the way that we operate, but is certainly bringing up the standard across lots of different industries to make sure that the level of detail you’re going to when you’re presenting your risk is really thorough.

Daniel: Before I let you get back to more, more serious stuff, can we talk a bit about your specialty area, which is the manufacturing sector? I mean, what sort of risks are you covering there and what sort of things do you need to do to get them covered?

Shane: Yeah, Yeah. So manufacturing so a bit of background. At my first brokerage, it was probably our bread and butter. The manufacturing sector from a broking point of view is become our specialty. So what sort of risks do we have? It’s food and beverage. It’s engineering and fabrication type risks. It’s the makers of all sorts of stuff. So yeah, we see a lot of manufacturers. First of all, obviously liabilities is absolutely paramount when you talk about product liability, you know, parts that go into vehicles, aeroplanes, helicopters, all these sorts of things. When you’re making components that go, it goes into an end product use in a particular industry that amplifies the risk by in some cases a hell of a lot. So in terms of sourcing liability cover, it’s a hard market at the moment. The ways that we present the risk hasn’t necessarily changed, but the insurers appetites change constantly and knowing which markets they go to can sometimes be difficult. But yeah, getting back to what we sort of do, we structure programs for manufacturers in a way that’s maybe a little bit different to others. So things like product recall programs we can bolt on to a liability and a property programme, professional indemnity, where there’s an element of design as well. There’s all these complex layers that takes a lot of effort and and experience to really understand so that you can provide advice that’s fit for that business and knowing the markets that you need to go to and who to speak to, how to negotiate, what the end result needs to be, that takes a level of expertise that, you know, can only be learned and accumulated over time. So we’d like to think we’ve got a level of knowledge and experience that helps us place those types of complex manufacturing risks relatively easily. But yeah, it got, it takes a lot of effort to to understand and to really do a good job.

Daniel: Shane Brady is director of McLardy McShane, South East based in Melbourne. Thanks for sharing some time with IB talk.

Shane: Thank you very much, Danny. Appreciate it. Cheers.

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