The soft market is continuing to be a big challenge for underwriters in both New Zealand and Australia. At the NZUAC Expo in Auckland, local underwriters gave their view of the current soft market challenge.
Liz Geden (pictured with Agile CEO Robin Barham), country head of New Zealand for Agile Insurance Group, an Australia-headquartered managing general agent based in Auckland, focuses mainly on liability – and that's where the pressure is sharp. She said rates in the market have continued to drop quite significantly over the last year.
"We're seeing expiring pricing 40% less this year," Geden said. She's seen the pressure most in the professions space, where pricing has dropped to the point where she'd rather walk away than write the business.
"It's safer to walk away than play the game," Geden said.
The problem, she said, is that pricing and claims are now moving in opposite directions.
"Our claims costs have gone up, but our pricing for the risks are all going down," Geden said. "There's got to be a shift soon. We can't keep going down like that."
Matthew Ziegler, head of Pacific agencies at Underwriting Agencies of New Zealand (UANZ), an Auckland-based agency and part of the Steadfast-owned UAA Group that also trades as Underwriting Agencies of Australia, agreed the soft market is a challenge – but a familiar one for a firm that has weathered cycles before.
"It's not our first rodeo, so we know how to deal with it," Ziegler said.
He was careful to correct himself on where the pain actually lands: combined with an underperforming economy, the soft market makes conditions harder for underwriters, but not necessarily for clients.
"It's better for our clients because they're paying a little bit less in insurance in this cycle," Ziegler said. Competition hasn't let up either – UANZ competes with all the major insurers and two other underwriting agencies in its space, which he said keeps the business honest.
With price no longer the differentiator, Ziegler pointed to the same lever underwriters across both markets are now leaning on: competing on service rather than price..
"You've got to rely on your relationships, your experience, your product, your service – all that sort of thing outside of price," Ziegler said.
David Leather, CEO of Concordia Underwriting Agency, a New Zealand agency that represents a Lloyd's of London underwriting syndicate specialising in cover for churches, community housing and care organisations, framed the same pressure from the insurer side.
"The soft market conditions are starting to prevail as loss ratios are tending to rise," Leather said. His answer is to underwrite more selectively rather than chase volume.
"The main challenge for us is to be selective in our risk underwriting to ensure that we make ongoing profits for our backers," Leather said.
None of the three suggested the cycle is about to turn. But the read-across for Australian underwriters, many of whom are watching a similarly soft commercial market at home, is direct: agencies with an Australian footprint or Australian parent, like Agile and UANZ, are seeing the same rate pressure and reaching for the same lever – relationships and service, not price.
