Aviva seeks to champion the independent regional broker

It’s hard not to be awe-struck by the sprawling panoramic views of the City of London from the twenty-third floor of Aviva’s swanky London headquarters. City workers scuttle along ant-like and cars appear as toys. It’s a suitable setting to meet two of the senior leaders of what is the UK’s largest general insurer. 

Rob Townend and Phil Bayles are a familiar double act for the broker fraternity. Townend is general insurance managing director at Aviva and Bayles is managing director for intermediaries. And like many great double acts, there is genuine friendship between them which stems from a long career working together.

“We’ve grown up in the business together,” Townend tells Insurance Times. “We go back a long way. Getting the chance to work closely and run a business with someone you understand well makes the wider team click a lot better.” There’s also ‘good’ tension between the two sometimes, Townend adds, which is “positive and healthy” in his view.

Townend began his current role in January last year, but strategy has remained consistent before and since, he insists. As far as brokers are concerned, that strategy has centred on providing quality service – on which Aviva has been accused of being inconsistent in the past, Townend concedes.

“We had agreed a strategy in the senior leadership team and we knew it was the right one – being consistent in our approach and continuing support for the broker market.” This approach has seen the commercial business grow steadily over the past 12-18 months. Another highlight in his current role is the launch of AvivaPlus, which was the company’s answer to what Townend describes as the “dysfunctionality” in the personal lines market. Whether the product is a success or not will be played out over the next 12-18 months, he says.

Cream of the crop

Bayles reiterates the importance of being consistent. “We’re very conscious that brokers and other intermediaries build their businesses around what we and others can offer. The last thing they want is people flip-flopping in and out of markets and changing their strategy every six months. We’re predictable, they know where we stand. It enables them to grow and focus on their own business with us instead of worrying about what we’re going to do next.”

In concrete terms, this has meant building a “top quality” team with a mix of “dyed-in-the-wool” industry veterans who’ve “been there and done it” alongside the “cream” of the insurance world who can bring different perspectives, especially in areas such as IT, which Townend says is key to the company’s proposition in terms of both delivering a service to frontline staff, and how it interacts digitally with brokers and customers.

Results have so far vindicated the strategy. Aviva reported a strong underwriting and claims performance with a 92% combined operating ratio last year. Townend attributes this to both a great claims team and disciplined underwriting. He emphasises that it is vital for the business to understand the risks it is writing and exercise discipline when it comes to risks that it doesn’t like and those that it doesn’t have capability around.

According to Bayles, the other key to success is about making good choices on distribution. With an array of distributors out in the market, Aviva focuses on working and growing with those who share its values. The company has a successful strategy of working with mid-market independent regional brokers through its Club110, and last year launched its Aviva Broker Community, aimed at the small businesses.

“We have a reputation for supporting independent broking and we’re seeing the brokers reciprocating,” he said. “You don’t have to work with everyone. If you work with the best that’s better from our point of view than not using discretion and working with everyone across the market,” he adds.

Consolidators

Although it is proud of its role championing regional independent broking, Aviva is keen to work with brokers of all sizes – including consolidators. “There’s always going to be consolidation. It’s a completely natural part of the market,” Bayles states. “What we’re saying is you shouldn’t feel you have to consolidate because you haven’t got a voice with us or other insurers. We will work with you regardless.”

However, entrepreneurs need succession plans, such as selling the business to management or passing on to a member of the family, or merging with a local broker – and sometimes selling to a consolidator. “There’s no wrong choice. They are all valid. What we’re saying is make an informed choice and we’ll help you to make that choice.

“What we are seeing is that despite consolidation, actually the proportion of this to the large and regional brokers is staying broadly the same because we’re growing at a strong rate with the independents. We’re not finding the skew of our business changing dramatically as a result of consolidation.”

The company’s commercial business is leading the way in terms of growth. SME is trading strongly, from online through to mid-market. Aviva has also seen significant growth in schemes, and it continues to grow its UK corporate business and commercial special lines. There are no areas which aren’t experiencing growth at the moment, Bayles says. The personal lines business is more challenging, but the company is holding its own there too, despite it being a difficult market to make a profit in.

Personal lines

Aviva writes around £500m personal lines business through brokers, Bayles says. But it’s a challenging market at the moment, although he believes there is evidence of a ‘shakeout’ in the personal lines broking market. Big names such as Swinton are being bought up by the likes of Ardonagh, the AA and Saga are also looking at their business models.

“You’ll see brokers trying to differentiate their products and offerings more from the mainstream. There are some very successful models like A-Plan, a very strong personal lines broker and in some respects quite counterintuitive – they’ve been opening branches when others have been closing them down, but they’ve been successful. They cross-sell in a way that other personal lines brokers don’t manage to do.”

Bayles highlights telematics as a successful area for personal lines brokers to pursue, as well as products like short-term insurance. He believes that the personal lines market is undergoing disruption,  followed by reinvention.

“[Personal lines] is a tough place to be. If you don’t have a differentiator then the pressure on low cost and low price is huge. You’re starting to see brokers pivot away from those positions and looking how to add value and which niches they can play. That’s a more sustainable position for them.”

Personal lines business has also been under regulator scrutiny after the Citizens Advice ‘super-complaint’ last year over dual pricing. In response, Aviva has been looking at new products to counteract the renewal pricing issue. One of those was AvivaPlus, which began development 18 months ago and was launched last year. He said the product gives consumers an alternative to buying insurance through an aggregator.

Regulatory pressure is forcing the industry to address questions such as “are we doing the things that customers expect us to do”, says Townend, as well as looking at whether the products actually work for the customer, and if they are value for money. “If we focus on not surprising customers, we’ll do well as an industry,” he adds.