2019: Seeing the Wood Through the Trees
Is it me or does each year feel like it flies by even quicker than the last? It is now a whole 12 months ago that we started a new year thinking of the things that would occupy us as an industry and, more specifically as MGA’s: from GDPR to the Insurance Distribution Directive, from market capacity to market rates and of course – at that time, somewhere in the distant future – Brexit!
12 months on and what occupies the thoughts of those of us in the MGA and wider insurance sector?
The Dreaded B word:
We cannot commence any such piece without of course mentioning Brexit. The only thing for most of us that is clear in this regard is that the future is very unclear! There are, as we all know, various ways that this can pan out, but the insurance sector will now have made its plans and where necessary, relocated head offices and ensured access both into the UK and Europe. For those of us concentrating solely on UK based business the future is not so clouded, but the weeks ahead will certainly be interesting to all.
Restrictions, Withdrawals and Hard Markets
As 2018 ended there was a distinct feeling of market change in the air – especially around the City and Lloyd’s – with syndicates having 2019 plans either approved or otherwise. Syndicates are exiting long established business lines, capacity is being withdrawn for certain trades and industries, lines of business are seeing rate increases the likes of which having not been seen for a number of years – all leading to that age-old question – will this drive a hard market? It is clear rates are hardening in certain sectors driven by the reduction (and withdrawal) of capacity and many people I speak with, brokers and underwriters alike, are talking up the market convinced of a hardening. I am sure there will always be a home for the quality risk but who knows, maybe this is an opportunity for a meaningful market correction – but I won’t be holding my breath.
FCA – Customers and Fairness: No Excuses
The end of last year saw the FCA issue their findings on pricing practices within the insurance market and whilst focused on personal lines (and more specifically, Household business) there was still plenty of food for thought for commercial insurers. Whilst the FCA is not pro price-regulation, one would be foolish to ignore the warnings especially given some of the shocking examples of price differentiation between long-standing and new customers within certain companies highlighted by their report. We as an industry need to put the customer at the forefront of our minds and ensure we treat them fairly at all times. There really is no excuse for doing otherwise.
Linking to this, the Senior Managers’ Regime comes into force later this year as the Regulator looks to drive an improvement in culture, governance and accountability within financial services firms. Individual accountability comes to the fore with the result that all of us in such positions must become fully aware of conduct issues and the way that our businesses go about their daily work.
Painting the Forth Road Bridge
There are many other such considerations for the market at this time of year but for all of us how we grow the top line whilst bolstering the bottom remains the underlying conundrum. For an MGA that ever-challenging task of maximising its own income whilst ensuring carrier profitability (and at the same time demonstrating value in the partnership) is an ongoing task – the MGA equivalent of painting the Forth Road Bridge. But with ever increasing opportunities to utilise analytics, with new and improved ways of enriching data and with technological advances allowing us to better determine risk at the outset we will face that task head-on.
2019, as with every year, promises to be challenging but I think we can safely say, it certainly won’t be boring!