Broker’s shift of business a concern for market?

Broker’s shift of business a concern for market? | Insurance Business

Broker’s shift of business a concern for market?
A recent move by Aon New Zealand to shift all the policies it had placed with a particular underwriting agency over to one insurer has worrying consequences for the market, the agency believes.

As well as the loss of business to them individually, the agency – who preferred not to be named at this point - said it was concerned about the customer’s loss of choice, describing it as ‘only offering one food group rather than the full menu’.

“We’ve enjoyed a great, longstanding relationship with them so this action surprised us,” the agency CEO said.

The CEO said he was told it was a directive from the parent company abroad: “They say it’s because they ‘lose control’ and there is confusion over who owns the client between them and the agent,” he told Insurance Business.

“We’re not ones to tell another company how to run their business, but we were obviously disappointed for their customers who would no longer be given a choice when renewing their policies.”

He added: “It does make you question whether the broker is doing the best for the policyholder.”

Aon has declined from confirming the move and wouldn’t comment on its preferences, or otherwise, for using underwriting agencies.

CEO of the Insurance Brokers Association of New Zealand (IBANZ), Gary Young, said while he hadn’t heard anything, the move could be connected with solvency ratios and credit ratings.

“As a broker you want to make sure whoever you place your client with is secure and is going to be there when all hell breaks loose, like with Christchurch,” he said.

Insurance Business has spoken to several NZ underwriting agencies, some of which do have business with Aon – as well as others who said their lack of business with Aon was seen as a plus by some in the market.

Another agency owner was resigned to the fact that the brokers had all the power, with Aon being particularly powerful.

“The brokers can do whatever they like, they’ve got the book of business. So if they decide they’re going to move a book of business there’s nothing you can do about it.”

Underwriting Agencies Council general manager William Legge said the move was not particularly surprising as there were similar stories over in Australia too.

“I’ve heard the rumours for quite some time. Nothing’s been confirmed from Aon but I do understand that globally they’re going to move their MGA business into one avenue which will be One Underwriting, the old Freeman McMurrick organisation.

“My understanding is they’re getting concerned about the number of underwriting agencies, coverholders and MGAs around the world that are owned by opposition broking groups and opposition brokers, and they don’t want to be giving their clients to other brokers to look at and possibly poach.”

Legge said it actually made ‘a lot of sense’, especially given the size of Aon’s clients globally.

He said the issue over rights to clients was also a fairly serious consideration.

“Especially in the northern hemisphere, because in the UK the lawlords have said once the business is placed with the underwriter it belongs to the underwriter, which of course is directly opposite to what it is in Australia and New Zealand where the source of the business owns the business, not the final resting place.”

Legge was philosophical about the ramifications if the move was carried out more broadly.

“It will affect some of our members and some of the MGA activity in both New Zealand and Australia as there have been placings all round the operation.

“Some of the underwriting agencies do share in the pools that Aon run so there will be an impact and always is when a major business makes a change in its distribution platform.

“But then it’s up to our membership, who are very agile and whose strength is that they can think outside the box, to think ‘how can I use that or not be hurt by that?’

“You just have to move on, you have a bit of a whinge and then you get back to work.”