Weekly briefing: 17-23 June - a week of contradictions

Love it or loathe it, e-trading has become a vital part of the insurance value chain at every level. In this months edition of The Knowledge, we track how far the industry has come with e-commerce, and look at what’s next for commercial lines.The race is on to keep control of the customer relationship as the commercial market shows signs of following personal lines to become an internet direct purchase. The Buy pinpoints the technology-driven changes that are happening in the distribution network, and how they are challenging intermediaries. Certain insurers are making a play for a piece of the UK’s £5.4bn SME commercial market by designing new products specifically for sale through e-trading with brokers and direct via the internet. The Big Story pictures the policies that are being e-traded and charts the development of the market since 2009. Plus IT BrokerView gives the inside track on what brokers really think of insurers’ e-trading platforms for commercial lines.

Cutting back on the sweeteners

Broker commissions are back in the spotlight. Earlier this week, we reported on how a number of the top insurers are reviewing their commission deals with brokers in the latest move to strengthen their bottom line. With commercial rates showing little signs of hardening, the large commissions being paid to the biggest brokers are once again being described as unsustainable in the current environment. Insurers including Allianz and AXA are leading the charge to make small reductions on business that does not return the kind of profit to warrant such high sweeteners. Others, such as Aviva and Zurich, have already made moves and may well see this as a chance to win back lost business. We also looked at how and why insurers are doing this. Their answers may seem simple but it could take some tough negotiations to convince the broker market that this is the right time to start hitting their income.

Towergate keep it in the family

After a number of defections to Gallagher earlier in the month, Towergate Underwriting has been busy in the past week rebuilding its ranks. It began by taking a team from Rural into its agricultural underwriting business, Towergate AIUA. The team of four included a number of former staff who have returned to Towergate. Today it moved to fill a number of senior roles. Three new managing directors have been appointed to lead the e-trading, household and entertainment businesses and come from within the existing Towergate group. Underwriting chief executive Clive Nathan clearly feels that internal candidates can offer more value to the business.

How low can brokers go?

The 2010 results covered by Insurance Times this week show the crossroads that the UK general insurance industry finds itself at. The results from Aon Limited and Cooper Gay & Co – the UK operations of Aon Corporation and Cooper Gay Swett & Crawford – provide further evidence that many brokers are finding revenue growth extremely tough in the current environment, and are relaying on cost cutting to stay in profit. Cost cutting can only go so far, however. Brokers live or die by the service they provide and cannot afford to compromise this by cutting back too much.

Kwik-Fit bucks the trend

The results from recently acquired motor insurer Provident demonstrate that some firms are slowly but surely pulling themselves out of the more created by bodily injury claims. However, there is clearly still work to be done before the industry as a whole gets better. There’s always the odd exception, of course. Kwik-Fit Insurance Services may have made a loss after factoring in tax and the exceptional charges resulting from last year’s acquisition by Ageas, but unlike many of its broking peers it certainly doesn’t seem to have a problem with revenue generation.

Construction looks into integration

Construction insurance is set for an overhaul if plans for integrated project insurance (IPI) gets the green light from the government. The IPI plans, drawn up by the Specialist Engineering Alliance alongside Tysers and Griffiths & Armour, form one arm of the government’s new construction strategy. Draft versions of integrated insurance projects have never really succeeded in the past, and did not manage to steer troubled construction projects away from a blame culture and expensive litigation. In the past, the industry showed considerable resistance to anything resembling integrated insurance, with some brokers asking what the point was and insurers declaring that integrated insurance was not in their interest. But now there is no shortage of industry interest. Several firms have already backed the proposals, and there is a lot more interest out there, if the numerous phone calls to the Insurance Times office are anything to go by.

Motor accident claims soar but we can handle it

New research, exclusively revealed by Insurance Times this week, contains mixed messages for the insurance industry. The study, carried out by an actuarial working party on injury claims, shows that the proportion of motor accident victims who seek compensation is continuing to rise. This is perhaps linked to another finding that the number of claims management companies was up by one-fifth last year, surely making the sector one of the economy’s fastest-growing areas. Both findings reinforce the salience of the government’s measures to implement the Jackson Review, published in the Justice Bill on Tuesday. But it’s not all doom and gloom. The report also shows that the time taken to settle claims settlement has fallen over the past year, while the cost appears to be levelling off. The authors link both developments to the Ministry of Justice’s recently introduced system for handling low-value motor claims. The claims process has increasingly looked like a bottomless pit in recent years. For ministers, limbering up for what will no doubt be a bruising battle with the claimant lobby over the Justice Bill, the report shows that the problem is not insoluble.