Commercial rates still soft but Aviva is on track, says GI boss

Commercial rates remain soft, Aviva UK GI chief executive David McMillan said this week as the insurer announced a return to growth, with a 4% rise in net written premium to £913m in the domestic general insurance market for the first quarter of the year.

McMillan said rates were hardening in personal lines, particularly motor, but remained stagnant in commercial. He reiterated that Aviva was willing to be flexible on commissions. The insurer’s return to growth followed a tough 2009, when £1.1bn was wiped off its premium, to £4.3bn.

McMillan said: “On the personal lines side, we’re seeing what the rest of the market is seeing: a degree of hardening. On commercial, the rating environment continues to be quite tough. Our rates aren’t declining; they have been rising but not by massive amounts. We are in the same position as the rest of the market: we’d like rates to rise but we’re very, very conscious that we’re in the teeth of the recession.

“There are a lot of businesses out there that are really struggling, and brokers are finding it increasingly competitive. We’re trying to be sensitive to that.”

Aviva recently extended a 2% uplift in commissions for new business for the second quarter of the year. McMillan said: “We are really looking at commission relationship by relationship, deal by deal. I don’t feel dogmatic about commission levels per se – we need to look at the combined ratio of each piece of business.”

McMillan said the insurer’s growth was coming from strong retention and new business wins. He said: “We’re seeing very good retention levels on our core business, which is good as we spent a lot of time last year tidying the book up. Our new business win levels for the quarter are the best in about 18 months. We’re up on the same quarter last year significantly in terms of new business sales.”

He added that the insurer was growing in broker personal lines too: “A key strategy is to take direct pricing into broker personal lines, and that is starting to really bear fruit. We’re on a couple of the software houses at the moment and we’re expecting to be on all the principal software houses by the end of the year. Broker personal lines is going very well for us.”

Group-wide, Aviva announced a 16% rise in general insurance net written premium to £2.5bn for the quarter and said that, despite heavy losses due to adverse weather in the first quarter, it still aimed to meet its target combined operating ratio of 98% for the full year.

Sales of long-term savings products were up 16% to over £10bn and sales of investments rose to more than £1bn.