The global insurance industry, including in New Zealand, has experienced a softening of pricing across a range of lines. An upcoming event in Christchurch aims to lift the lid on the challenges and opportunities facing local brokers in this “steady as you go” softening market.
“This whole Expo is about arming brokers with the information they need to make sure they know what they are able to do to look after their customers in an environment which is changing,” said Craig Furness (main picture, left), CEO of TAI & Real Landlord Insurance.
The New Zealand Underwriting Agencies Council’s (NZUAC) Expo is in Christchurch on May 7. The event includes a keynote from Tim Grafton, former CEO of the Insurance Council of New Zealand (ICNZ), and novel 10-minute Rapid Roundtables where brokers can ask industry experts about market challenges and hard-to-place risks.
Andrew McFetridge (main picture, right side), NZUAC’s president, said a main aim of the Expo is to foster the connection between brokers and agencies and also educate brokers about alternative markets and regulatory challenges.
“NZUAC is trying to encourage brokers to be open minded about finding the best solutions for their clients and not restricting themselves to the traditional big three or four insurers in the market,” said McFetridge, who is also executive director in New Zealand for NM Insurance.
Furness suggested that a softening market with competitive pricing presents opportunities for brokers to sell more coverage with the help of underwriters and their niche offerings.
“If a broker is out talking to customers and giving good risk management advice about where their risks are and how they could manage that, you may find yourself talking about some niche areas and some specialist insurances,” he said. “That comes right to the point of what this expo is about.”
McFetridge said the softening market has reached a stage where some insurance lines are seeing reductions in premiums. He suggested the competition this creates means brokers need to be vigilant.
“So brokers, if they're not doing their job right, if they're not protecting relationships and if they're not looking after their customers, they do leave themselves open to a situation where an alternative broker can compete for their clients,” he said.
McFetridge said in times like this, brokers need to make sure they understand the drivers behind their clients’ business decisions. However, the cost savings clients are seeing on their premiums, he said, can be a broker opportunity to revisit lines that have suddenly become affordable.
“There's a real opportunity for brokers to get really close to their customers, both from a protective and from a risk management and advice perspective,” said McFetridge.
NZUAC’s president said this soft market is quite different to the previous one that ended during 2018.
“I think during the last soft market, what I remember is that things turned soft really quick,” he said.
At that time, a new insurer entered the market, he said, and the two largest incumbent insurers “dug their heels in.”
But the new kid on the block, said McFetridge, aggressively targeted market share and “did very, very well.”
He said in the current softening market, insurers are “trying to maintain it as hard as they can in terms of holding the line.”
“Will we see a repeat of what happened last time? I don't think so, because there are no new insurers or new capacity coming into the market,” said McFetridge.
There’s also the context, in recent years, of major losses from natural disasters and the current global geopolitical and economic pressures, particularly around US tariffs.
“Lloyd's have always been there but there's not a sudden influx of new players coming in to soften the market,” he said. “I think we're going to see a steady as you go type approach with reinsurers and also licensed insurers in New Zealand.”
This is a space where agencies can offer alternative capacity to brokers, he said.
“I think there'll be more stabilising of the market for the next 12 months but things will soften in areas, probably more so in the property space,” said McFetridge.
Furness said this slow and steady rate of softening means, unlike during the last soft market, underwriters are not dramatically relaxing underwriting terms.
This is another sign, he said, that there is not new capacity coming into the market.
“The other factor that I point to is that insurers, particularly in the property space, are coming off a couple of years of very low claims,” Furness. “There's so much uncertainty about what's going on with international economies that no-one's wanting to jump too quickly.”
What challenge and opportunities do you see in this softening market? Please tell us below
