Firms say RSA risks losing confidence of brokers for “knee jerk” reaction to difficult motor market

Cars in the street

RSA’s withdrawal from the brokered personal lines motor market in the UK was driven by aggressive insurers who have entered the sector and cut premiums sharply, according to brokers. 

One Answer chief executive Paul Muir said it was a “real shame” that another personal lines insurer was pulling out of the market.

“Some of the smaller entrants that felt that if a certain rate was being charged by a lot of insurers, [they could] come and cut that by 10-20% and it should still make money, have been found out,” Muir said.

“As soon as they stop writing like that, the industry as a whole can move forward and start charging the right rate for the right risk.”

Be Wiser chief executive Mark Bower-Dyke questioned the timing of RSA’s withdrawal. He said it was a ”knee-jerk reaction” at a time when rates are set to rise.

Another broker who wanted to remain anonymous also thought RSA had been premature: “There are a lot of insurers who have been pricing very irrationally, or certainly not writing for underwriting profit. They are beginning to feel the pain and rates will start to go up. It just seems as if [RSA] are withdrawing from the market at the wrong time.”

RSA - non specialist

Broker consultant Tony Cornell said he wasn’t surprised by the move, as RSA is a generalist competing against specialists.

“They had operating ratio of 113% in first six months so obviously it is difficult for them, They are a mainstream player with no real skills and they’re trying to compete with the likes of Ageas and LV= who are specialists in that area,” Cornell said.

“To compete in that market, when you do not have the skills, will not produce profit. The broker market is becoming contaminated by an awful lot of the larger brokers who do both direct to customer and aggregators.”

A case of trust

Intermediary firms said the RSA risked losing the confidence of more brokers because it was not the first time it had made a decision to reduce its motor portfolio. RSA announced in May last year that it was cutting its ties with 800 brokers who solely placed motor business with the insurer.

Muir added: “The frustration for us with RSA was that they championed being partners with brokers and really gave it a go and within 18 months that all died a death.”

Capacity remains

However, brokers are confident that there is enough capacity to absorb the book of business that RSA is letting go.

Muir said: “I don’t think that will see any demise of any brokers. It means the good clean business will be moved to other insurers and some of the adverse will have to go through a correct rate to make it a profitable book of business.”

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