I read with interest the letters of the last few weeks concerning NU Direct and the impending merger that will create CGNU.
I have no doubt that insurers can justify the differential in premiums that they charge between their various distribution channels actuarially and even if they can't, we brokers as business men have to accept that insurers are free to distribute their products by whatever means they choose.
Surely the real issue is not one of premium differentials, but one of branding. Like other commentators we have experienced vast differences in premiums not only between Norwich Union and their Direct arm but also with AXA, CGU and so on.
The problem is that the client (the consumer) cannot differentiate between the NU Direct and the NU policy sold through a broker. To them the product is the same (Comp £100 excess and so on). Quite naturally, the client believes that we the brokers are ripping them off and pocketing the difference. This is not the case, but the damage is done. A seed of doubt has been created, which can have a knock on effect where the client is also a business connection and has other policies. People have been conditioned through heavy advertising by insurers in the press and on TV to buy on price and whether we like it or not this is a primary influencing factor in the customers decision making process. So when we have placed, or have recommend a brand only to be undercut substantially by the same brand (I'm talking 20 – 30% and more), its not surprising we brokers get upset.
I would urge the directors of CGNU and other insurers to seriously consider using different brands for their direct and intermediary channels in the same way the Zurich have done following their merger with Eagle Star.
Perhaps NU for Financial Services, CGU for the Broker channel and GA or CU for the Direct arm? This will remove confusion, create two distinct market places and at the same time help to improve relations with the broker. We can then get on with doing our job, which is to add value without worrying about being stabbed in the back by insurers.
Goss & Co (Insurance Brokers) Ltd
NU Direct praised
I have read the recent correspondence in relation to direct writing arms and dual pricing with interest and dismay.
Brokers and intermediaries may carp all they want about direct arms of major insurers but they ought to know that they will not go away. Indeed, such direct writers are providing a worthwhile service for certain sections of the insuring public.
I have encountered such in dealing with an employee in the family pub business.
One of the bar staff asked me for advice on an offer from Norwich Union Direct. It was for a good value personal accident protection policy for a family man and all he had to do was sign a direct debit for a monthly premium of £3.50. I recommended the cover and declined the offer of putting up an alternative because it would have cost our business to attempt to arrange such cover at £3.50 per month.
Norwich Union Direct are entitled to praise in providing such protection to a targeted group of consumers who are often under-protected.
If the dual pricing problem is to be redressed, I would suggest brokers, intermediaries and their trade associations should target the non-executive directors of insurers. Ask them to establish if the direct arm is making money or is it being subsidised by intermediary business. The non-executive directors should only be interested in shareholder value, not market share.
Keep the pressure on
With reference to the article on the front page of Insurance Times on March 30 relating to my mother, I enclose a copy of the quotation that they would charge my mother if she was born in 1930 instead of 1913. I clearly informed the telephone operator that my mother was 86 and he asked me her date of birth.
But even based on my mother being born in 1930, you will note that the intermediary rate is still 100% higher than we can obtain through our EDI facility, which is at a discounted rate because the NU would virtually have no work to do to complete the documentation as we would transmit the information electronically.
There is no justification for this pricing difference other than the fact that the broking channel must be subsidising the direct channel. I'd like to thank your publication on behalf of the broking industry in providing a means of putting pressure on the insurance companies to bring about a level playing field.
Derek Eastwood Insurance Brokers
Assitalia's UK snub
With reference to your headline 'Assitalia bails out of UK market', I feel that some clarification of the position is required. It is unfortunate that no formal statement has yet been issued by the company as some of the misunderstanding could well have been avoided.
I am surprised at the statement that the withdrawal was expected and that it was due, in part, to poor results. Nothing could be further from the truth, with a strong
balance sheet and its account, particularly on the direct side, growing well beyond its initial projections, most notably through the new provincial operation, which is based in Birmingham.
Put quite simply, the reason that Assitalia is withdrawing from the UK commercial insurance market is as a result of the acquisition of our parent company by Generali, which does not consider the UK account to have achieved critical mass and to form part of their strategic plans.
General Insurance Manager
We specialise in motorcycle insurance and regularly receive communications about rates having to harden. Generally rates have hardened, but each year at least one underwriter undercuts the market in a ridiculous manner.
It was Hastings Direct for a while and sure enough there was a management reshuffle and a rate revision. Now Motorcycle Direct are spoiling the entire motorcycle market with their cheap premiums. However, it is the underwriters Axa I blame.
I have spoken to very experienced people in this area and we agree that the rating levels are quite suicidal. The sports bikes are extremely difficult to make money on, especially with no bonus, yet Axa are allowing Motorcycle Direct to quote less than half the going rate. Why is Axa underwriting at such levels? Why is Axa delving like this into a market where it has no apparent experience? Why is Axa spoiling the entire market and forcing established players such as Allianz Cornhill and Zurich out of it?
I predict a horrendous loss for Axa on its account and either a hefty rate revision or its disappearance from the market. The question is who is the next mad underwriter for Motorcycle Direct?
John Gray, Director,
G. Temperley (Insurance Consultants),