“A managed risk is a reduced risk,” according to Gary Head (pictured), director of schemes & delegated authorities at AXA UK. It’s a particularly relevant takeaway given that being the schemes provider brokers and their insured’s need in today’s market goes beyond just the protection of assets and livelihoods offered by insurance products. It’s also about ensuring customers have ready access to the support, expertise and assistance they need to truly manage their risks.
Offering his insights into what’s happening across the delegated authority (DA) space in 2023, Head noted that, at a high level, more customers are choosing to place their insurance with schemes providers – which is leading to overall growth in the marketplace. With more customers choosing to buy through a scheme or DA, he said, the onus is on schemes providers to deliver the products customers need and want, and to ensure these are fit for purpose.
“Crucially that means that these products deliver expected outcomes when it matters, at the time of claim,” he said. “Today, the schemes market is finding innovative ways to target specific segments that perhaps aren’t catered for by the more mainstream product lines and which have a nuance or a specialty element to them which makes them more niche. Schemes can be set up to make sure those nuances are recognised and that the product delivers in the unfortunate circumstance that a claim might happen.”
Examining what’s driving the uptick in the schemes market, Head pointed to how the power of great service is coming into its own. From conversations with the DA partners AXA works alongside, he said, he knows how highly they prize responsiveness, whether that’s around risk referrals, customer requests and queries, or claims.
“If we’re giving back quick service to our DA partners, they, in turn, can give quick service to their customers and their brokers,” he said. “And I think that’s probably the driving factor behind customer choice because, in this day and age, you can use your phone to order things with three taps of a screen. So, providing that service and speed of response to consumer needs is really at the forefront of what we’re trying to do.”
Assessing some of the opportunities that current market conditions are presenting to brokers operating in the schemes market, Head highlighted that they tend to fall into two categories. On the one side, he said, there are the brokers placing business through schemes, who should be carefully evaluating the responsiveness, service and customer care that having the right DA partners brings to their own value propositions.
On the other side, there are those brokers who are able to demonstrate expertise or specialism within a certain customer segment who might consider setting up a DA themselves. That could be with the aim of offering products directly to customers and/or through other brokers. For those considering the latter opportunity, he said, the key thing to bear in mind is the difference between acting as a broker and as a schemes provider.
“Going back to basics,” he said, “the broker is acting as the agent of the customer and so has to cover the whole market, provide advice and try to ensure the insured gets the best product at the best price. Whereas the DA partner is very much the agent of the insurer, acting as a mini insurer providing terms and quotes into the marketplace... That’s a crucial distinction because everybody should be looking to make sure that customers understand what they’re buying.
“We at AXA look very closely at management information each month with our DA partners to make sure that our customers do absolutely understand what they’re buying, and to make sure they’re not putting forward claims that aren’t covered under the core cover. That’s something we track very closely to make sure the understanding is there to guarantee those expected outcomes for customers.”
For brokers who have thoroughly researched the market, there is a wealth of opportunity to be found in the DA space, but Head cautioned those looking to access these opportunities of the need to ensure they’re working with the right partners. One of the challenges facing brokers today, he said, is finding partners with a long-term orientated view and ambition, as the DA business requires a long-term approach.
“We are going to get years when catastrophe has happened and years when there are large losses,” he said. “And we’re prepared for that within our business plans and our models. I think the thing to be avoided is people coming into the marketplace and then exiting when conditions get tough because this leaves customers and brokers in a difficult position.
“We have seen some exits this year so I would advise [potential DA partners] to really understand the context of the market and how it works, and to work with those who have long-term commitments to being in this for the long run – which we certainly are.”
On that note, Head advised DA partners to look to the pedigree and history of those they are considering entering into the schemes business with. Those with a strong history tend to be able to bring better data, more insights and a stronger capability to work through tough market conditions and steer their partners through the marketplace sustainably and profitably.
“Because at the end of the day, that’s what customers need most of all,” he said. “They need to know they’ve got support and clarity around their insurance spend, and most critically, that when they have business-threatening losses or issues, they have strong financial support behind them to put them back on their feet as quickly as possible.”
What are your thoughts on this story? Feel free to share them in the comment box below.
