2020 is going to bring some interesting challenges including:
How will the FCA try to deal with dual pricing?
How will government and the insurance industry work together to ensure that consumers and businesses are protected from increased flood risks?
As a country, how will we ensure that all blocks of flats clad in combustible material are remediated or the risks suitably mitigated?
Will we see a properly hard market with insurers pulling out of lines of business left, right and centre?
Will the market continue to support mergers and acquisitions?
Will an insurTech succeed in starting to disrupt the traditional insurance market?
As always, there are significantly more questions than answers and I will be encouraging my team to embrace the uncertainty and constantly seek out opportunities for us to grow in every sense; grow our client numbers, grow our client satisfaction, grow our specialisms and capabilities.
I will be spending most of my time in 2020 seeking growth opportunities for Aston Lark and, in particular, we are looking for brokers that have a focus on a specialism or niche that either complements one of our existing specialisms or is a new adjacency which will add a further capability to our business.
One of the main benefits of growing through acquisition is that you can acquire real industry specialisation and skills. Our job is then to ‘join the dots’ between all of the specialisms and skills that we have acquired and make sure that all of our staff in all of our offices know where to go to access that help.
The brokers that we talk to typically fall into one of two categories; either (a) they are approaching or looking to plan for a retirement at some point in the future and don’t have any in-house viable succession planning or (b) they are not looking to retire from the industry but are struggling to grow and are unwilling to take on the debt that is often necessary to grow beyond their current scale.
The Aston Lark approach is to work on all of the cultural alignment issues upfront and then the numbers tend to look after themselves. We want businesses to join Aston Lark that genuinely want to be part of a community of independent minded brokers who see great benefit in ‘clubbing together’, sharing skills, specialisms and knowhow and using our collective scale to ensure that we offer fantastic propositions to our clients.
We want to be a big broker that looks, acts and feels like a regional independent broker. To that end, we’ve committed to our branch network and indeed we are looking to expand our branch network over the coming year and will support start-ups, insurTech’s and established brokers. If their ethos is right and there is cultural alignment then we will be keen to create a solution.
Turning to the insurance market and the definite hardening of rates over the last few months, I think that 2020 could be a really interesting year. Many MGAs appear to be struggling to renew their capacity and, as always seems to be the case, capacity looks to be very binary – they are either in full-on growth mode where prices get driven down to the floor or they are in risk averse mode where only sprinklered swimming pools seem to attract market interest!
For smart underwriters, a hardening market represents a fantastic opportunity. I find it really difficult to justify to clients why a premium one year should be 100% higher than the previous year and then in another market cycle we see premiums halving and halving again. It makes us look foolish to customers who fundamentally want to achieve the same thing: peace of mind and security for their businesses at a sensible cost that they can budget and plan for over the long term. I am hopeful that the debate around dual pricing will bring the topic of loyalty back onto the agenda. I have lost count of the number of clients who have expressed their irritation at the annual renewal cycle.
Why we can’t, as an industry, create genuine three-year policies or rolling open-ended contracts for straight-forward risks is beyond me. Brokers and underwriters are after efficiency and lower costs of distribution. Clients are after certainty and budgetary stability, so why can’t those alignments work together to create the logical outcome which would be true long-term policies?
Finally, I would like to touch on reputation. The FCA have been at pains to talk about the importance of culture within businesses and, as a general rule, I am really proud of the broking profession – the overwhelming majority of brokers that I meet genuinely care more about their clients than anything else.
Sadly, we have allowed a culture to become enshrined in the UK whereby customers feel the need to ‘shop around’ and the focus seems to be 90% on price and 10% on cover. Much of the regulatory intervention over the last few years has been around price rather than value and if there is one change, I would like to see made in 2020 it’s for that focus to shift the other way round.
Believe me, when you have seen businesses flooded or destroyed by fire, there is only one topic on everyone’s minds – is the cover fit for purpose and is it responding as it should? The price paid for the policy at that point is utterly irrelevant.
We are increasingly seeing insurTech’s and others looking to offer relatively complex insurance online on a non-advised basis and, I think, as a profession we are sleepwalking into horrendous PR territory. Consumers simply don’t know what they don’t know and, left to their own devices, will buy products online based primarily on price rather than quality. When the inevitable moment of truth arrives and a significant claim occurs, the reputation of the insurance industry will be shattered if people are let down by a policy’s failure to respond. We should ensure that all insurance products are provided with advice and that regulatory intervention should be primarily around quality of cover.
Price is an important factor but buy the wrong insurance product and it’s an incredibly costly mistake. So, as a profession, let’s not allow ourselves to be drawn into the internet price war game – instead let’s elevate insurance to its rightful place as a service requiring proper advice and with a top- quality reputation. Technology should be a fantastic enabler of advice and service quality, helping brokers to deliver excellent outcomes for their clients.
Here’s to an exciting 2020!