For private circulation only Issue 23

ExpertSpeak@RQBE

Q: Are there any specific trends emerging in the broking business?

A: The main obvious trends are in facilitisation; brokers streamlining the number of carriers they use to create scale

efficiencies. This also raises some concerns in my mind; generally there has been a negative outcome when financial

products get packaged – the benefit to the customer needs to be clear, but

I’m not sure it always is. Another interesting development is the Aon Carrier

Link which seeks to direct more specialty business to the Lloyd’s Market,

one which clients tend to find opaque. In our research we are seeing that

brokers on the ground are consolidating the number of insurers they use

and tending to gravitate toward the larger players who offer one-stop-shops.

Q. Is there something pushing brokers and even insurers closer to

clients?

A: Potentially; the specialist insurers are growing in size and at the same time

developing brands with unique propositions. These will become more visible to end customers as marketing builds

and this could lead to more brand loyalty driven by the client. We are also seeing that competition is driving brokers to

want more from insurers in terms of helping them to win business; this inevitably means that greater understanding of

customers’ needs is rising up the priority list for both. Regulation is also indirectly pushing insurers and brokers to

understand more about their customers, especially in the delegated authority arrangements; in future there will be

greater transparency all round and this will change the nature of the broker-insurer-client relationship.

Happy reading & Happy holidays!

Ben Bolton is the Founder MD of Gracechurch Consulting set up in 2001. Gracechurch has since then focussed on building a mix of research and advisory projects. It has an impressive range of clients from legal, accounting, pension, banking, commercial insurance as well as a number of professional and trade bodies. Ben is an extremely astute observer of the evolving trends in our industry. Based out in London, the Mecca of Insurance business, his observations on the insurer-client-broker dynamics are note-worthy. To all of us, in a key emerging market particularly India, his insights can be invaluable. In this conversation with Praveen Gupta he candidly shares what’s evolving in this segment.

“We are also seeing that

competition is driving brokers

to want more from insurers in

terms of helping them to win

business; this inevitably

means that greater

understanding of customers’

needs is rising up the priority

list for both.”

Q. Value proposition for customers - in what ways are brokers driving the change behaviour in insurers?

A: As above – they are demanding that insurers are more innovative and creative so that the brokers can be more

effective in winning business. Claims service is likely to become more important too, as this currently is underplayed

by brokers, but of paramount importance to clients.

Q: Do you see any external competition emerging for brokers?

A: To some extent; some corporates may begin to go more direct and this may be encouraged by large insurers;

technology may have a hand in this. Mostly though it’s too early to say, the brokers are adapting quite quickly to the

competition and still hold the best hand of cards in that they are closest to the clients.

Q: To what extent is the game moving from pure transactional to solutions based?

A: Not sure; that is still to play out – there is intense price pressure right now– so it is less risky to join in on a facility and shore up the business than try and develop something value-add. Also culturally this is a big change for the insurance business (in London definitely).

Q: With over capacity, pricing pressures - how much is there a scope for value add?

A: Personally I think a great deal of scope: insurance is a valuable and important product – but the industry has to stop blaming every woe on price pressure and start to innovate and develop new products otherwise it will be further commoditised. In many areas it is the internal institutional barriers that slow/kill the innovation and pace of change, which means that businesses just don’t get exciting new products and services out to market often or fast enough – one of the reasons the public is underwhelmed by the sector. We have been involved recently with the Lloyd’s Innovation Awards – there were some great submissions, but equally most businesses did not have any innovation function in the business and struggled to put anything forward. I’d advocate that every insurer has an R&D or Innovation function. Q: Is fee based remuneration here to stay and strengthen? A: I hope so; it seems to be more healthy for the industry than commissions and should better reflect the value that the customer receives. I predict that commissions will decline in relation to fees. Specialty Product Bouquet @ Raheja QBE:

Our insurance solutions are tailor-made for those clients whose business is not "run-of-the-mill". We provide a one-stop shop, avoiding the need for intermediaries to negotiate through other avenues for harder to place risks. This is achieved by accessing the global capabilities of the QBE group and other authorized markets to seek placement for business that cannot be underwritten locally.

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“Insurance is a valuable and

important product – but the

industry has to stop blaming

every woe on price pressure

and start to innovate and

develop new products

otherwise it will be further

commoditised.”