Last year's move by several major insurers to merge their personal and broking channels has already reaped some benefits - however, as may be expected, some of the changes are taking time to filter down to the 'grass roots' and this is raising some interesting questions. Stephanie Denton reports
Last year some of the major insurers, including Zurich, Royal and Sun Alliance and Axa, changed the way they divided up their businesses. Commercial and personal lines were no longer divided, and brokers - be they personal or commercial - were joined together to make one broking channel.
Mike Lawton, director of regional sales at RSA, explains why the insurer felt the need to do this: "Personal lines and commercial lines came together under the broker division, which is headed up by Brendan McManus. The reason we have done this is all about a better line of sight for the brokers."
Dave Smith, managing director of the broker division for Zurich general insurance, agrees: "A combination of listening to what brokers want, but also the fact that our range of propositions have been seen as disparate, has made us want to bring this together. I think the broker wants to be seen as a single entity and talk to insurers about what it wants. For this, we need to look through the broker's lens rather than just at what we want."
Others in the market see this as a trend that will continue. John Dawson, head of broking network Countrywide, says: "In a rapidly changing distribution landscape, I doubt Zurich, RSA and Axa will be the only restructures we see in 2007. The industry has a natural herding instinct.
"With few exceptions, a notable one being Zurich, insurers have focused external resources on commercial-lines brokers and utilised newly formed call centres to deal remotely with personal lines - 'the poor relation'."
So what are the benefits of this type of restructuring? And are they all on the insurers' side? Not at all, says Cathie Bruce, distribution and customer-service director for Groupama, which also operates this system: "For intermediaries, we have one point of contact, and this helps brokers because they are not having to spend time with two account mangers. Our aim is for stronger relationships, as it is always the same person the broker is working with.
"The most important thing to brokers is accessibility and whether they can access the people who can make the decision. Access to the decision maker came highest on a British Insurance Brokers' Association survey, although service was also high up."
Clive Nathan, chief executive of underwriting at broking consolidator Towergate Partnerships, says this is good for intermediaries: "We prefer just having one account manager. They then advocate our case externally and internally."
"We have found in the past that we get on with one division and have a conversation with them, and then we have to do it all again with another division," explains Paul Smith, managing director of Heath Lambert Insurance Services. "One conversation and one relationship is good, and is helping. For example, we have a motorcycle business and we have also looked to work with dealers to do insurance with them too. But we now only need one conversation to do this."
Access to experts
Another bonus gleaned from this arrangement is an access to experts. Zurich's Mr Smith explains: "Brokers want to speak to an expert and to underwriters who know what they are talking about. We, therefore, enhanced access to underwriters and we have freed up more time for our underwriters to speak to brokers. This access is direct not through the account executive."
Matthew Donaldson, group director for Budget Group, says this has been key: "From an insurer's perspective, the recent experience has seen them be able to focus on putting high-calibre people in place to focus on broker business. We prefer this as it means there are senior people focusing on our business.
"RSA is a prime example of where this has worked very well, and under Brendan McManus there is now a high-calibre team that we now actually have access to, despite specialising in personal lines."
But there are, of course, benefits for insurers too. Mr Lawton says: "For the first time, we can see the value to us of a single broker, and also ensure that there are no situations where someone from commercial lines and someone from personal lines are talking to the same broker in one day without knowing about the other one.
"We can also use the relationships we already have as leverage. For example, if we have a good relationship with one brokers on the commercial side and they also do some personal lines then we can use the relationship to move into other lines."
But he explains that this benefits brokers as well: "Brokers can also use the one contact to see how much business they do and use it as leverage, for example, if they do a lot of commercial they might be able to use that leverage to get better rates on personal."
Mr Dawson agrees that this is an option: "There is a blurring of lines between personal and commercial, with small commercial being viewed as a 'commodity'. With this comes an opportunity for personal lines brokers to move into small commercial using their existing skills. No doubt the forward-thinking insurers will be doing all they can to make sure they are best placed to help their agents at this time."
However, not everyone is as positive about this approach and its effects, especially those who are not seeing these changes at the grass-roots level. A source from one of the larger personal lines intermediaries, who didn't want to be named, says: "This is a laudable objective and one that has merit. There has been a lot of talk about it, but we are not seeing it and still have different points of contact. We do personal lines, but we also include commercial and life, and these changes haven't filtered down to us.
"One big frustration has been that commercial don't speak to personal and vice versa. Each division doesn't understand the other, and so they miss opportunities. We are not hearing the same voice from each side. There seems to be an entrenched modus operandi."
He adds: "We have tried to engage them - for example, we have a fleet operation and we have considerable personal lines operations where we have a good relationships - but fleet departments won't speak to us as they are more interested in their existing business and we are too small. They say, 'Mr head of fleet will call you', but what you actually get is his assistant's assistant. There is still no access to the real decision makers."
Others also question how easy it will be for the insurers' 'one point of contact' to be informed enough to answer all the questions asked of them. Glen Gillam, a commercial director at Green Campbell Fisk Insurance Brokers, says: "We are soon to have one inspector, but he admits he knows nothing about personal lines and his opposite knows nothing about commercial lines.
"However, in reality, the new role demands a less in-depth knowledge of the products, more a conduit to pass on issues to the correct teams to take them forward or resolve them - a bit like a GP, rather than a specialist."
And even Zurich's Mr Smith admits there are limitations to the strategy: "There is always a balance, and it is impossible to be a jack-of-all-trades and an expert in everything. How can one person have all the knowledge about all of our products? Only allowing one point of contact is a watered-down service. We need to be able to tell brokers what we have and how they can get access to it, then allow brokers direct access to it."
Another issue is how feasible it is for insurers to deliver on these promises. Sue Alabaster, a commercial director at Green Campbell Fisk Insurance Brokers, says: "Commercial and personal lines offices are often at different ends of the country. This will make it very difficult for field staff to forge relationships with internal colleagues, which is important for them to do a successful job in helping us."
Her colleague and commercial director at the broker, Michael Hall, agrees: "I think it would be much better to have one point of contact, but doubt if it will work now as insurers' personal lines departments are so far removed from commercial, both geographically and in philosophy. I suspect the insurers see it secretly as a way of saving money by giving their commercial business developers the additional burden of personal lines, and thus reducing the workforce."
Ms Bruce claims it is possible to provide a contact to discuss both lines, but she admits that the back-office operations have not been changed to support this front-of-shop strategy: "We have key account managers who are able to talk about both personal lines and commercial lines. The back-end operation may not merge as it is not in the plan to change, but over time it may happen. There are massive differences over the way the two sections work in terms of administration, and it might be harder to merge."
And the back-office issues are crucial, according to Eric Galbraith, chief executive at Biba: "If the back office is inefficient, it will still be inefficient. Brokers in personal lines have their own way of working, as do commercial-lines brokers. As long as the support exists through the insurers' organisation, there is no reason the one point of contact won't work. It all depends on the back office though."
Same old 'new'?
Some insurers, such as Allianz Cornhill, are continuing with the existing model of working with brokers. Alan Griffett, divisional distribution and marketing manager says: "We still have a separate focus for personal lines and commercial lines. But it is fair to say we are focused because most business is done through a small number of brokers."
However, Heath Lambert's Mr Smith raises a note of caution for those insurers continuing to do this: "When we have the choice to work with two contacts or one, if all the other factors were equal and we were treating the customer fairly, then we would look to work with the insurer with one contact."
According to Mr Hall, the 'new' strategy has been done before: "They say there is nothing new under the sun, and this is a classic example. This 'natural change, which the market wants' is a bit of a joke as the natural change from what it used to be to what it is now, the splitting of points of contact, was something the market did not want but had it foisted upon it anyway."
Zurich's Mr Smith says: "It is true that this is not new, and if you go back 10 or 15 years, insurers used to have people who covered life insurance as well. What happens in the market changes to reflect the needs of that time, but sometimes this means the pendulum swinging backwards and forwards again."
Whatever strategy insurers are using to reach brokers there is one thing they can all agree on and that is the importance of the channel. At Zurich Mr Smith explains: "Around 70% of our personal lines business comes through brokers, and while we see that the regional market is shrinking, we want to increase our share of this market considerably. Against other insurers' trend of reducing partners, we are widening our broker alliance to 600."
The personal lines commentator concludes that the insurers that truly take this strategy on board will be the long-term winners: "Personal lines brokers offer commercial insurers a big opportunity. There is a lot of business to be had, but they don't see this. The problem has been that insurers listened to management consultants too much and not enough to brokers.
"The insurers that recognise that the broking channel adds value will be those that have a foot in several channels and the best chance of success."
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