Aviva's Hodges gets flexible on commissions

Aviva could put commissions back up and does not foresee any significant rise in rates this year, incoming chief executive Mark Hodges told Insurance Times.

Hodges also overturned his predecessor Igal Mayer’s blanket ban on commission plus expenses totalling more than 30%.

Hodges, who officially took the reins as boss of the life and GI businesses on 1 January, said Aviva’s strategy would not change significantly, but that he would build on relationships with key distributors. “A lot of the heavy lifting has been done … Having been through that change, it’s now about, how do we move on from here?”

Asked about commissions, Hodges said: “I don’t have a hard and fast target. It’s a ratio, and a number that I keep a keen eye on, and I will continue to do so, but different tranches of business have different levels of commission.”

Asked if he would put commissions back up in a reversal of Mayer’s controversial policy, Hodges replied: “I would say that I would put them up or down – there’s no one-way bet here. Commissions will be dependent on the relationship, the quality of the book and the prospects over time.”

Hodges admitted that rates had failed to rise as fast as Aviva expected, though he denied that it had put prices back down. He was cautionary in talking about rates this year, saying: “The end customer out there is struggling to meet their own targets. The cost of insurance is a big feature for them and they are obviously putting the broker, and therefore the insurance companies, under pressure. I do see the trading environment as tough and I don’t think we will necessarily see a big hardening in rates.”

Asked whether Aviva had a duty to lead the market on rate rises, he said: “I think it’s a fallacy that as market leader you have to be the person who leads the way … At the end of the day, we are in a market and it is competitive, and I’m not sure that just putting up rates and expecting everyone else to follow is necessarily the right thing to do.”