Industry's approach to commissions unsustainable, says new Hiscox chief
Hiscox has warned brokers that it will slash their commissions if they cannot show their worth.
Steve Langan, the newly appointed managing director of Hiscox UK and group marketing director, told Insurance Times that the insurer would not bow to pressure to increase commissions.
"If we are not getting value for money from our intermediaries, we would look to make moves to reduce brokerage. For those that add value, we will keep brokerage level."
Langan said that the industry's historic approach to broker remuneration was "unsustainable".
"In no other industry do intermediaries get as much commission as insurance brokers do. We will resist moves to increase commissions."
Langan also announced a six-fold increase in the insurer's marketing spend in a bid to grow its direct and intermediated distribution channels, including a TV advertising campaign.
"Hiscox has the infrastructure and scale. In 2006 we need to leverage that."
He insisted that the moves would be "around the Hiscox brand" and not solely focused on boosting the company's direct business.
"Consumers will choose the channel they are most comfortable with. We are committed to growing the broker channel, but we are also putting more into direct."
Direct sales currently amount to around 5% of Hiscox's book, but Langan said it could rise to 20%.
He also said Hiscox was looking to open a number of regional offices. This month the insurer opened an office in Bristol, and Langan said the company was looking at opening an office in the North West.
Steve Langan's marketing advice
The insurance industry is "stone-age" in its approach to marketing, according to Steve Langan.
The new group marketing director, who was previously a senior executive with drinks giant Diageo, said the insurance industry was failing to capitalise on the potentially strong brands that it has.
"It sells products not brands, yet it has good potential brands," he said.
He argued that the industry's focus on products rather than brands encouraged consumers to buy on price alone. By creating brands, consumers would be less driven to buy the cheapest product, he said.
"It doesn't see marketing as important. The industry markets to itself, but not to the people who actually stump up the money. Marketing is about understanding the people who buy the product. The drinks industry does this well."
Lagan said that Hiscox would be looking to develop "robust customer insight" in order to help it grow.