Daily briefing: Friday - Fight or flight?

RSA and AXA have declared their intent to make inroads into the SME market. AXA wants to expand SME from 800m to 1.2bn in commercial by 2015. RSA UK chief executive Adrian Brown is aiming to add at least another couple of hundred million in SME over the next few years.

Meanwhile, Zurich UK chief executive Stephen Lewis, after a tough start in personal lines, is young and hungry enough to want to eek more out of SME. Allianz, meanwhile, has some talented people coming through the ranks, such as Harvard Business School graduate and broker chief Simon McGinn. The premium has to come from somewhere, and Aviva, a £4.5bn premium business across both lines, is the biggest target.

Furthermore, Aviva has assiduously built bridges with independent brokers over the last three years, where the margins are more healthy than consolidators. Along with the growth in motor, it’s the main reason behind Aviva’s impressive combined operating ratio performance for the half year of 96%. Rivals, well aware of this, will want more action with the independents.

Aviva will trot out the usual lines about not being bothered about rivals and concentrating on its own business, which is all well and good. But it can’t afford to be complacent. The battleground will be fought online and through the software houses. Easy to understand online products, allied to a swift turnaround and quality claims handling experience, juiced with a competitive rate, will win the day.

If the drought of the soft market continues to drags on, UK SME will continue to be a ferocious place where only the fittest survive. And Aviva, as the biggest beast in the jungle, will have to fight harder than most to maintain its dominance.

Zurich's lesson

There’s light at the end of the tunnel for Zurich’s Stephen Lewis. He was first out of the blocks last year in ramping motor up rates, but with an extensive network of relationships with personal lines brokers, Zurich faced a louder outcry than some of his rivals.

The good news for Zurich UK is that the action on motor helped improve its underwriting result. The revamped motor book helped boost profits 19% for the half year. Lewis was brought in to to do a tough job, and his masters in Switzerland will be happy.

But the lesson for Zurich is simple. If it really prides itself on being an exceptional underwriter, in the future it should not need to take such aggressive action so quickly. Spotting the signs earlier than the rest is the name of the game. Ideally, a more gradual and subtle approach to underwriting should be applied. After all, Admiral has achieved this and is now reaping the rewards.