LV='s Treloar looks forward to a new alliance

If you’re looking to push your broker commissions higher, don’t come knocking on Steve Treloar’s door.

There’s been much controversy over the past couple of years about consolidators putting pressure on insurers to beef up their commissions.

AXA and Aviva have been especially vocal about their determination to resist the pressure to the extent of cutting off ties with brokers who push too far.

“We do much less business with the consolidators than Aviva and AXA, much less than both of those,” Treloar tells Insurance Times in his office on Cheapside in the City of London.

Some consolidators might think the address is appropriate, considering the stance on commissions taken by LV=’s newly promoted chief executive of general insurance.

Treloar’s new role is part of a revamp of LV=’s general insurance management ahead of the completion of its joint venture deal with Allianz.

A new partnership

Back in August, Allianz agreed to buy a 49% stake in LV’s GI business for £500m, in a deal which the companies claim will create the UK’s third largest personal lines insurer.

Allianz also plans to buy a further 20.9% stake for £213m in 2019, taking its stake to 69.9%, which will give it a controlling stake in the LV GI unit.

The deal values the whole of LV’s GI business at £1.02bn.

The two companies plan to create a new personal lines joint venture, that combines the personal lines GI business of both Allianz and LV. The combined entity will have £1.7bn in annual premium income and will operate under the LV brand.

The new venture will acquire Allianz’s personal home and motor renewal rights. In turn, Allianz will acquire the renewal rights to LV’s GI commercial business.

“It’s a great opportunity for this business to move on to the next level. Allianz brings bring fantastic global expertise to pricing, claims, digital, and technical expertise; and we’ve got a brand to die for,” says Treloar.

“We are the UK’s most recommended insurance company. And that is what our partner has bought into.”

Allianz and LV= can’t begin integration until they have regulatory approval.

“It’s a bit like a house purchase,” he says. “We’ve exchanged contracts, but we haven’t yet completed.”

In the meantime, the businesses are still competing.

“We have to continue to provide a great service to our brokers and to our direct customers as if nothing had changed,” he says.

Heartland brokers

“We are focused on growing our business through our heartland brokers,” he says, using the term that LV= calls its regional broking partners.

“They’re the people that we find most responsive to our business and we are most keen to work with. They share our values around giving the customers a really great service, and they do so in a way that we are really happy to support.”

Treloar says he understands the philosophy behind the consolidators’ push for higher commissions.

“I wouldn’t describe the consolidators as shaping the marketplace, I would say they’re responding to it by trying to create more margin in their channel by consolidation,” he says.

“There is pressure on margins across all of the distribution channels, and their response is to consolidate and try to drive more margin.

“They’re responding to what is now a more competitive, dynamic and challenging marketplace.”

But those are pressures that normally drive prices down, and here the consolidators are trying to push them higher.

“Do you think they will succeed? Given those dynamics, do you really think they’re likely to succeed?” Treloar responds.

“We’re operating in a competitive market, and if people try and push commissions too far, they will find themselves being uncompetitive” he says.

“There will be a natural readjustment because the economic order will effectively readjust it for you in a competitive marketplace. We don’t think that the consolidators can continue to push commissions to excessive levels.

“Some are trying to push them to levels that are unsustainable in the longer term.”

Consolidation will continue

Treloar expects consolidation in the broker market to continue.

“Consolidation doesn’t necessarily improve choice for the end customer, but I think it will continue for a period because there may be more broker capacity than is necessary to support the market place.”

And he cautions: “Brokers aren’t the only access to market for consumers and for businesses.

“In the business space there are now a number of insurers who have direct commercial offerings, and in the personal space you have aggregators, you have brokers, you have regional brokers, you have direct insurers.

“The opportunity for the consumer to access the market is now vast, and that creates a much more competitive marketplace than perhaps there would have been in the past.”