Cover reduced and broker commissions cut as hard market bites

Insurers have slashed brokers' commissions and reduced cover in response to hardening market conditions.

Zurich has dropped commission on employers' liability (EL) to 7.5%. Meanwhile, AXA has restricted its terrorism cover on all commercial products.

Zurich has also cut the commission on its Small Business Centre products for smaller brokers from 17.5% to 15%.

UK commercial distribution and marketing manager Dave Smith said Zurich's EL account had been heavily hit by "increasing claims inflation, retrospective legislation and falling equity values".

"The insurer's return had been reduced, which leads to increased premium for policyholders so we've got to look at every element of the chain for greater efficiency and cost saving," he said.

Smith said commission on Small Business Centre products had been reduced to reflect the ease with which brokers could do business with the centre.

He said it offered no paperwork, quotes within seven minutes and documents within 48 hours.

Smith said the reduction was also introduced to mitigate premium increases.

"I expect other insurers to make moves on similar lines of business," he said.

Meanwhile, AXA introduced terrorism restrictions with immediate effect on new business, during February and March for commercial motor and fleet renewals and, from 1 March, for all other renewals.

There is a £100,000 restriction per head of cover on all commercial property perils and a complete exclusion on all public liability policies.

Terrorism cover for motor has been restricted in line with the Road Traffic Act.

AXA's commercial underwriting head Roy Watkinson said the restrictions reflected the decreasing amount of terrorism cover available from reinsurers, as reported by Insurance Times last week.

"There is also a real debate about whether some terrorism risks are, or should be, the responsibility of the private sector," he said.

"We expect similar communications to be issued by other insurers in the near future."