Insurance news

“In terms of what that means for us as an insurance industry… we have to strike a very careful balance now in terms of how we price and how we maintain adequacy of commercial terms for insurance and reinsurance. But we also have to keep in mind that products need to remain relevant, and certainly affordable for our customer base. Putting all those factors together, you can certainly appreciate that this is going to be a key challenge for the industry as a whole in 2023.”

Lay highlighted that, linked to the dilemma presented by this challenge is the drive for greater efficiency across the market. Whatever costs can’t be passed on to a market have to come out of a company’s own operations, he said, which has led to demand for greater cost efficiencies in distribution and operationally. This, in turn, is creating further demand for product innovation as insurers need to be able to personalise coverages more in order to eradicate unnecessary costs.

Underinsurance – a pressing concern

From the perspective of Lay’s team, which operates a very property-heavy book that is highly responsive to the inflationary challenges that remain a theme in 2023, underinsurance presents a pressing concern. There is the risk that coverages either are inadequate or are becoming inadequate over time if the underlying insured values are not adjusted correctly, he said – and this is a risk for the consumer as well as the insurer.

“On my point around affordability, I think in an environment of prolonged inflation, and [elevated] costs of settlements, the affordability of insurance becomes a challenge. And our response to that as a distribution company is our emphasis on more efficient distribution avenues, but also on creating bespoke products that are really more relevant for the customer, and therefore allow us to price more competitively for the cover provided.”

Driving business forward with digital innovation

Looking back to the launch of GrovesJohnWestrup Private Clients (GJW PC) – a Munich Re company serving the high-net-worth insurance space – Lay noted that some of the key market themes at play then are continuing now. We are still operating in a heavily intermediated market, he said, and in this market, it is still a challenge to drive true digital innovation in digital businesses.

“But I think we have been pretty good at demonstrating that even in a very complex product space, like high-net-worth, that it is possible,” he said. “And we will certainly continue our digital innovation in other intermediated segments, whether it’s SME or regional P&C business.”

That digital innovation has had numerous benefits, he said, from data-driven decision-making that cuts down manual handling to the use of data in driving dynamic propositions. These innovations and this evolving technical capability are the right response to the commercial challenges that are currently facing the market – particularly given that the volatility and unpredictable nature of this environment looks set to remain in place.

The advanced agility and data capabilities of his team have been integral to its development, he said, providing the capacity to respond to the challenges of the market in a commercially savvy way, while also leveraging the new opportunities presented by present market conditions. Validating this is how the hybrid working environment installed after the lockdowns has pinpointed the immediate benefit of the business’s digital placement capabilities in the way that it is now interacting with brokers.

“You are now a lot more dependent on digital means to trade. And I think having established that in the context of COVID and then having seen it [evolve] in 2022 has been a very strong validation of our proposition,” he said. “We are now seeing around 40% of all quotes directly on the platform. And we’ve got some brokers that are doing over 80% of their placements with us directly through the platform.

“These are very early indicators that even a very large and complex proposition like high-net-worth can be transacted in such a way. Especially if you always combine it with a human touch. Because we’re not taking the underwriter out of the equation, it’s quite the opposite…. It’s just the simplicity of doing business, the agility and the ability to offer bespoke coverage which is taking away some of those pressures.”

It’s rewarding to see how the market is responding to the business’s offering, Lay said, because as a distribution company for Munich Re, it’s built into his team’s DNA to create a proposition that works. And, so, the development of its digital capabilities is a proposition that the business is going to leverage further and across other lines of business in the future.

Specialty business – key focus areas for the year ahead

Lay and his team have several core areas of focus for the year ahead under the newly established board division, which brings together various primary insurance businesses of the group under one coherent specialty business unit. In addition, the group welcomed a dedicated board member responsible for all specialty primary business across the Munich Re group – and Lay’s business unit in the UK is one of the integral parts of that.

“That new setup gives us scope and it gives us relevance to drive specialty primary initiatives further,” he said. “I think our business model in the UK is really interesting in that we’ve created a business blueprint that is quite transferable in the way that we’ve worked with Munich Re entities together to create one coherent business model.

“That is a blueprint that I would like to take now into other territories outside the UK. In terms of lines of business, it is specialty, which means it’s largely a commercial lines offering with certain complexity criteria that you could attach to it. And we will expand that specialty P&C proposition further outside the UK space. So, that is something that is certainly on the agenda for the next year.”

What are your thoughts on trends in the HNW space? Please feel free to share your comments below.

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UK holidays group and insurer Saga Plc (Saga) is in exclusive discussions with Australian insurance group Open Insurance (Open) regarding a potential sale of the UK insurance business’s underwriting arm, Acromas Insurance Co., according to reports.

Acromas currently underwrites around 25% to 30% of the insurance business, making it the largest business in the group. However, it has struggled due to rising claims, leading to a half-year loss and a threat to full-year earnings in September. As of July 31, 2022, the company’s net debt was £721.3 million.

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“I’m very pleased to report that Lancashire continued its strong growth trajectory during 2022, increasing gross premiums written year-on-year by 35% to $1.7 billion and delivering a combined ratio of 97.7%. In the five years since 2017, our gross premiums written have increased by almost 280%,” Lancashire Holdings Group CEO Alex Maloney said, emphasising that the company’s robust underwriting performance came against a backdrop of high industry losses and a volatile macroeconomic environment.

In line with its “underwriting comes first” principle, Lancashire Holdings expanded its footprint and focused on organic growth opportunities and rate increases across most of its product lines.

Lancashire Holdings’ response to extreme weather events

Lancashire Holdings revealed that its catastrophe and weather-related losses for FY22, excluding the impacts of reinstated premiums, totalled $218.4 million. The total included the impact of Hurricane Ian, which was at the lower end of the $160 million to $190 million range provided by the company in Q3 2022.

Previously, Lancashire Holdings set aside $22 million for direct claims resulting from the Ukraine conflict. In Q4 2022, the company revised the amount to include an additional management margin for any potential indirect claims related to the conflict across several classes, now totalling $65.8 million.

“From a capital perspective, we held a very strong position throughout the year, and we have the necessary headroom to continue to write profitable business and deliver returns during what we expect to be a harder market in 2023,” Maloney said.

Lancashire Holdings’ 2023 performance

Lancashire kickstarted 2023 with strong renewals on January 1, which saw a market-wide reassessment of property catastrophe risk. Pricing, coverage, and terms and conditions responded positively, substantially improving expected returns.

Increased demand for Lancashire Holdings products due to recent industry loss experience and broader inflation was not met by an increase in the supply of capacity as investors repriced the cost of capital.

“Overall, this gave considerable momentum to the current favourable market dynamics, which we expect to continue at least at the current level as we go into the mid-year renewals,” Maloney said.

“In other lines, the pricing environment remains supportive, albeit rate rises were not as high as in property catastrophe lines of business. Our specialty book has seen five years of rate increases, and this looks set to continue in 2023, while our casualty business is more stable, with rates remaining close to historical peaks.”

Lancashire Holdings expects wider capacity constraints due to the increasing cost of capital and historic loss activity.

“I very much look forward to the opportunities for further profitable growth that the next 12 months may bring, and I’d like to thank all of our colleagues for their hard work and our investors, clients, and their brokers for their support during the past year,” Maloney said.

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A New Year is in full swing and our thoughts have turned to what we might like to achieve in 2023 – and this could be an important year as we lay the foundations of true digitalisation and understand what that means for the more traditional methods of trading. And it is time to get a wider cross section of the market engaged in that debate.

We have made a lot of progress in our modernisation efforts over the years – albeit not without struggle. But, accelerated by the pandemic, well over 90% of placements in London happen on one of the electronic trading platforms – primarily Placing Platform Limited (PPL). That is a huge achievement in a market as addicted to paper as ours was. But this adoption, while a major behavioural change, has done little to disrupt the fundamental way business has been conducted. I always said that PPL was about getting people to use computers. Once you had delivered that, how they used computers in cleverer ways to deliver more effective methods of delivering world class client service would be up for debate. That is the point we are reaching now.

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US-focused Argo offers a full line of specialty insurance products for the property and casualty market, while Brookfield Reinsurance owns and operates a growing global insurance and reinsurance platform.

As part of the agreement, each issued and outstanding Argo common share will be converted into the right to receive US$30 in cash at the closing of the merger, funded by existing cash on hand and liquidity available to Brookfield Reinsurance.

Argo has also agreed to suspend the payment of dividends on its common shares through the closing of the transaction.

“This transaction brings a successful conclusion to Argo’s strategic alternatives review process and represents the best path forward for Argo, our employees and policyholders while also maximizing value for our shareholders,” said Thomas A. Bradley, executive chairman and CEO of Argo.

“By joining Brookfield Reinsurance, Argo will continue to serve our brokers with greater financial strength and opportunities to grow as a US-focused specialty insurer.”

Sachin Shah, CEO of Brookfield Reinsurance, said the acquisition of Argo represents another milestone in the firm’s continued expansion.

“Argo’s leading US specialty platform adds a foundational piece to our expanding US P&C operations. We look forward to partnering with the Argo team to support the growth of its core businesses, build on its strong franchise, and deliver value for policyholders,” Shah said in a release.

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Car insurance – buyers face additional costs

Car insurance buyers are now more likely to find themselves facing additional costs when shopping around, on top of the rising price of motor cover. In 2018, around eight in 10 (79%) insurers did not charge a set-up fee, but this had shrunk to just over five in 10 (52%) in 2023. The average car insurance set-up fee was £40.02 in 2023, up from £31.92.

Set-up fee charges – car insurance
	2018	2023
No fee charged	79%	52%
Less than £20	2%	3%
£20 – £39.99	10%	10%
£40 – £59.99	4%	25%
£60 or more	5%	10%
TOTAL	100%	100%

Source: Defaqto

Loyal customers were also more likely to face renewal fee charges in today’s market. The average car insurance renewal fee for 2023 was £39.69, an increase on 2018’s £31.65. As of 2018, more than eight in 10 (83%) insurers did not charge a renewal fee, but this had declined to 55% in 2023.

Renewal fee charges – car insurance
	2018	2023
No fee charged	83%	55%
Less than £20	1%	2%
£20 – £39.99	8%	8%
£40 – £59.99	4%	25%
£60 or more	4%	10%
TOTAL	100%	100%

Source: Defaqto

“As you can see, there has been a notable change in the number of standard comprehensive car insurance products that are now applying these fees, with just under 50% of products applying a ‘set-up’ and ‘renewal fee’ in 2023,” said Defaqto insight consultant (general insurance) Mike Powell.

The proportion of insurers with products charging a higher post-cooling off period car insurance cancellation fee also grew. In 2018, 58% of policies had a cancellation fee charge of £40 or more – this had grown to 77% in 2023, and the average cancellation charge was £52.42, compared to £47.02 in 2018, according to the Defaqto data.

Cancellation fees
	2018	2023
No fee charged	21%	10%
Less than £30	16%	7%
£30 – £39.99	5%	6%
£40 – £59.99	48%	49%
£60 or more	10%	28%
TOTAL	100%	100%

Source: Defaqto

Average Fees for car insurance – 2018 – 2023
	2018	2023	% Diff
Set-up fee charges	£31.92	£40.02	25%
Renewal fee charges	£31.65	£39.69	25%
Cancellation fee charges	£47.02	£52.42	11.50%

Source: Defaqto

High net worth and telematics policies were excluded from Defaqto’s standard motor policy analysis, which compared 227 products from 2018 to 238 products from 2023.

Almost one-third of car insurance buyers buy their policy based solely on price rather than breadth of cover, a recent Trakm8 survey found. Car insurance costs have been on the rise, driven by inflation and pricing rule changes, with the average premium at £629 for Q4 2022, up £100 year-on-year, according to WTW and Confused’s Car Insurance Price Index.

Home and contents insurance see set-up fee charges rise

Fee changes were less pronounced in home insurance, which was split into buildings and contents insurance for Defaqto’s analysis.

While the number of insurers not charging a set-up fee for buildings insurance remained static at 73%, for those that did advertise a charge the average set-up fee cost was up 9% from £26.15 to £28.44.

Set Up Fee Charges – buildings insurance
	2018	2023
Fee is ‘not stated’	13%	3%
No fee charged	73%	73%
Less than £15	2%	5%
£15 – £29.99	10%	7%
£30 – £49.99	1%	10%
£50 or more	1%	2%
TOTAL	100%	100%

Source: Defaqto

Renewal fee charges were also up slightly for buildings insurance, at £28.54 versus £27.44 in 2018. However, 74% of products did not include a renewal fee, up from 71% in 2018.

Renewal Fee Charges – buildings insurance
	2018	2023
Fee is ‘not stated’	15%	3%
No fee charged	71%	74%
Less than £15	1%	4%
£15 – £29.99	10%	8%
£30 – £49.99	1%	9%
£50 or more	2%	3%
TOTAL	100%	100%

Source: Defaqto

The average annual cost of buildings insurance was £288 as of Q2 2022, according to ABI data.

In contents insurance, buyers of just over one in 10 (13%) products could expect to pay a set up fee of £30 or more in 2023, up from 2% in 2018.

Set Up Fee Charges – contents insurance
	2018	2023
Fee is ‘not stated’	15%	3%
No Fee Charged	72%	71%
Less than £15	2%	6%
£15 – £29.99	9%	7%
£30 – £49.99	1%	11%
£50 or more	1%	2%
TOTAL	100%	100%

Source: Defaqto

Some consumers could also find themselves facing hiked renewal fees for contents insurance, with 12% of products advertising a charge of £30 or more, up from 2% five years prior.

The average cost of contents insurance was £116 as of Q2 2022, the ABI has said, meaning a charge of £30 would be equivalent to just over a quarter (26%) of the total average policy cost. Two per cent (2%) of products included a £50 or more fee – or at least 43% of the value of the average policy.

Renewal Fee Charges – contents insurance
	2018	2023
Fee is ‘not stated’	16%	4%
No fee charged	72%	72%
Less than £15	1%	4%
£15 – £29.99	9%	8%
£30 – £49.99	1%	10%
£50 or more	1%	2%
TOTAL	100%	100%

Source: Defaqto

Cancellation charges after the cooling off period across both buildings and contents insurance, though, shrunk by 10.5% and 11% respectively, with the average cancellation cost falling by £3.24 for buildings and £3.32 for contents.

Buildings Average Fees – 2018 – 2023
	2018	2023	% Diff
Set-up fee charge	£26.15	£28.44	9%
Renewal fee charge	£27.44	£28.54	4%
Cancellation fee charge	£33.48	£30.24	-10.50%

Source: Defaqto

Contents Average Fees – 2018 – 2023
	2018		2023		% Diff
Set-up fee charge	£26.92		£27.53		2%
Renewal fee charge	£28.25		£28.27		0%
Cancellation fee charge	£34.00		£30.68		-11.00%

Source: Defaqto

Defaqto compared 451 contents products in 2018 against 338 products in 2023, and 439 buildings products from 2018 to 312 in 2023.

“The home insurance market has not seen as much change when compared to the car insurance market,” Powell said.

“However, we can still see that for both ‘set-up’ and ‘renewal’ fees, more products apply higher fees in 2023 compared to 2018 and this is also confirmed with the slight increases in the average fees.

“Though, the average ‘cancellation fee’ in both the buildings and contents products has seen a decrease by over 10% in 2023 compared to 2018.”

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Our annual Global Best in Insurance report recognizes all of the insurance award winners from this period. The list provides a definitive collection of those who have delivered outstanding results, introduced new initiatives, refined existing working practices and also acted as a source of inspiration to colleagues.

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Lockton Re has recruited Matthew Silley as a broker in the cyber practice of its specialty division. He joins from Axis Capital, where he is cyber portfolio management lead.

Silley brings to Lockton Re more than 10 years of analytics and cyber experience, with different areas of focus. Prior to Axis Capital, Silley held key roles at CyberCube and PwC UK. According to Lockton Re, Silley is actively engaged in the wider cyber industry and is a member of many industry groups. He has also made multiple contributions to the field as an author and subject matter expert.  

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Net income for the full year increased to US$2.589 million, or US$12.13 per share on a diluted basis, compared to US$1.255 million, or US$5.55 per share, in the prior year.

Total revenue rose 2% to US$3.1 billion, including 5% organic revenue growth in Q4 2022. Full year total revenue also rose 2% – to US$12.5 billion, including 6% organic revenue growth.

Cash flows from operations in the whole of 2022 increased 48% to US$3.2 million – an all-time high –compared to the prior year. The rise is primarily due to the transaction costs in the prior year period and strong operating income growth, Aon said.

Aon’s commercial risk solutions division saw 4% organic revenue growth across most major geographies, driven by strong retention, net new business generation, and management of the renewal book portfolio.

Growth in retail brokerage was highlighted by double-digit growth in Canada and Latin America, driven by continued strength in Aon’s core property & casualty business. The US retail brokerage, however, was pressured by transactions solutions, which declined due to lower external volume, Aon noted.

Reinsurance solutions saw organic revenue growth of 9%, reflecting double-digit growth in the strategy and technology group and facultative placements.

Health solutions posted organic revenue growth of 7%, and wealth solutions, 6% organic revenue growth.

CEO Greg Case said Aon employees delivered “a very strong year” for the global risk management firm.

“These results continue our long-term progress and demonstrate the success of our Aon United strategy as we enter 2023 in a position of strength to continue delivering results for clients, colleagues, and shareholders,” Case said in a release.

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Insurers acquired as part of the Envest brand include Allstate Underwriting and Blue Zebra Insurance.

All in all, Envest employs more than 550 employees and writes over $800 million in premium each year. The group reported $60 million in consolidated revenue for the financial year to June 30, 2022.

As originally agreed, the acquisition allows Envest managing director Greg Mullins to continue to lead it while operating as part of Ardonagh Global Partners under the latter’s CEO Des O’Conner.

Before it acquired Envest, Ardonagh previously invested in Resilium Insurance Broking and Epsilon underwriting. Both Australian insurers would now sit under the company umbrella of Envest while operating as usual, led by their current management teams.

Executive director of Resilium and Ethos Broking Australia, Adrian Kitchen, will join Envest’s executive team, while Ardonagh non-executive chair Paul Lynam will continue to oversee all Ardonagh Group’s operations across Australia.

“Our exciting journey with Envest has officially started,” said O’Connor.

“We are ready to forge ahead in a new fast-paced chapter in our growth ambition supporting Envest’s drive towards further opportunities within the fast-growing and evolving Australian insurance markets and economies.”

O’Connor previously called the deal a “hugely complementary acquisition” which aligned with Ardonagh’s growth ambitions in Australia.

“We’re so excited to get back to business and focus on supporting our businesses to achieve their strategic objectives,” Mullins said in reaction to the transaction.

“With the strength and experience of Ardonagh behind us, we look forward to accelerating our growth and offering customers quality service and products in the Australian insurance market.”

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