Delivering good service key to smaller broker survival in tough market

Brokers across Europe remain concerned by the continuing hard market and fear their clients will be facing price rises again for the 2022 renewals, despite increases for the past two years.

Surveying brokers from across Europe for our Risk Distribution Survey 2021, sponsored by Sompo International, Commercial Risk Europe found that intermediaries are worried about a third year of price increases on top of previous rises.

They warned that while the arguments for price rises are understood and accepted by their clients, there is real concern that “the chaos of the end of 2020” might return again this year as insurers withdraw capacity, regardless of their history with any particular client.

Talking to brokers at the unisonSteadfast annual Independence Day Conference in Prague, as well as virtually, the vast majority of delegates said clients had faced price hikes at the 2020 renewals, again in 2021 and are now looking at increases for the 2022 season. 

They were most concerned about sudden withdrawals of capacity and cancelling of contracts at short notice, particularly in lines such as directors and officers (D&O), cyber and property. 

As Mark McKay, co-owner and CEO of the Highcourt Breckles Group, said: “It is about the timeliness of terms being presented and giving us some mobility to react. We start our larger renewals 90 days ahead of a plan, we have a strategy, we have agreements and then you engage with the underwriting side of the equation and it doesn’t fall into place. It seems we are on their schedule.”

His other major concern is around limit stability. “You might have had a $10m tower going into renewal and that tower is priced the same per million, but you only have $2m from that same underwriter and all of a sudden you have $8m that is attached against a contract or bank agreement and you need to find cover. That is the biggest concern, along with it taking three times as long to produce. For example, you book a Zoom call and then it gets put back and before you know it, it has taken three times as long to sort out,” he said.

He also reported that some clients are still facing 300% or 400% price increases on “what should be a normal renewal”. Mr McKay added that while some partnerships have shone through these tough times, others have been found wanting.

Capacity is key

Niek Post, commercial director at Kröller Boom Assurantiën BV in the Netherlands, agreed with Mr McKay that timing has become a crucial factor. “Capacity is also key – if I look at the co-insurance market in the Netherlands, it is shrinking. So, finding 100% capacity is the essential thing, but we are faced with differences in pricing and in terms, so it is taking three times as long to do a normal renewal,” he said.

Matthias Böhm, managing director at Nordwest Assekuranzmakler GmbH & Co KG in Germany, said a lot of insurers are “cherry picking” risks. “We are seeing what they don’t want to insure but it is only the insurance industry that can do this job,” he added.

Tommaso Lucca, vice-president at ASSITECA in Spain, is most worried about the length of time it is taking to negotiate programmes. Spending so much time on every client is not easy, Mr Lucca explained, particularly when brokers themselves are being challenged by pandemic lockdowns. 

Many brokers in Spain are very small businesses without the capacity to cope with all the extra hours required to sort the same programme that may have previously been agreed in just a few hours, he continued.

This he said, could result in brokers leaving the market. But every challenge is also an opportunity, said Mr Lucca, who expects there to be some consolidation, with smaller brokers being snapped up.

This could improve standards in the Spanish broking sector, which would be one positive to emerge from an otherwise tricky environment, he added.

His colleague Steven Zan, director, international division at ASSITECA in Italy, said the transition to using technology is critical for the insurance industry. 

“We are lagging in terms of technology. A lot of things could be standardised – the quotation process for example, where everyone uses different formats and questions. Each risk is a little different but the questions are the same,” he said. 

Mr Zan said his own firm, along with many others, is investing heavily in technology to be fit for the future. “A lot of smaller businesses, particularly in personal lines, will see more competition from tech firms into the future. When I joined the industry there were more than half a dozen large brokers but now there are two, maybe three, of the mega-sized brokers. The difference from when I started out to today is also that those giants have flags in many countries now.” 

He said broking networks such as unisonSteadfast can definitely compete with the big players but ultimately it comes down to the people. “The idea of an independent firm truly helps when it comes to delivering good service – and that is what the clients want,” he said.