Allianz is getting tough on brokers not providing the insurer enough value as it gets set to take action this year to cut its cost of distribution
Allianz will this year use data to get tough on brokers not providing enough value.
General manager Simon McGinn told Insurance Times that as part of efforts to cut the cost of distribution, Allianz is using data to analyse the value each broker brings to the insurer.
Over the last 24 months, Allianz has developed a method to gain a deeper understanding of the value a broker provides. McGinn said this understanding would “manifest itself” this year.
This will include an assessment of current commission levels.
“We are looking at the cost of distribution and how our commission spends are relatively justified or not,” he said. “We’ll be having conversations about that.”
He said a general expectation of increasing commissions due to consolidation was a challenge for the industry from a public perception standpoint, and that the subject would always be contentious.
“Commissions is always going to be a point of contention because there is only so much value that exists in any particular customer,” he said.
“For me it’s about fairness. I am not about squeezing the broker so they can’t get a return – but equally we are running a P&L account as well and we have to work out can we make money.”
Value
McGinn confirmed it would be those brokers that provide the most value that Allianz would do more business with.
“Rather than just dealing with the people we’ve always been friends with, it’s about doing that analysis and working out how many of those friends are delivering us value.
“Equally we are looking at those people we haven’t dealt with in the past, and trying to establish from those, which of them bring us greater value and then accordingly paying greater attention to it.”
A key measure that Allianz will be looking at is how well the broker delivers the full Allianz proposition to the customer.
E-trade
But Allianz is also moving full speed ahead in driving efficiencies through a greater digital offering.
Total premium sold to brokers through its QuoteSME e-trading platform has grown by a quarter in two years.
Over the same period, the proportion of commercial lines premium (excluding engineering and terrorism) e-traded has grown by 11%. E-traded premium now makes up 20% of the total estimated £1bn in premium underwritten by Allianz in the UK.
For Allianz, much of the increase has been driven by the roll-out of new products on QuoteSME.
Over the two years, Allianz has introduced mini-fleet, D&O, PI and marine to the platform.
As Allianz looks to complete the transfer of the LV= commercial lines book and welcome 167 new broker partners, it also last year set up two new products on QuoteSME – truck and taxi – and rebuilt its digitally traded fleet product.
McGinn said the bedding in of the LV= products would be a priority this year, making the roll-out of any new products on QuoteSME unlikely.
But McGinn believes even without the introduction of new products to the site, he anticipates the proportion to digitally traded products with brokers to increase year on year.
“Brokers are increasingly digital, and they have to be because they face exactly the same cost pressures as we do as insurers,” he said.
“Their commissions are being squeezed and customers are demanding more services from them, so they have to look at efficiencies within their brokerages.”
Branches
In time, McGinn believes all Allianz products will be available digitally.
But he says this will not affect the insurer’s branch network, which he says will continue to be an important part of the broker offering.
“Whilst you might do nine out of ten cases on a digital basis, one out of ten might still require you to go through all the detail.
“So we will still have an existing presence through our branch network, and while that may change shape over the course of the next few years, that is a key strategy for us.”
For McGinn, it’s about striking the right balance between driving down the cost of distribution, and maintaining a quality service for brokers.
As the digital marketplace becomes more prominent across the industry, McGinn says maintaining a face-to-face option will be crucial.
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