Insurer says it 'lost its way a bit' and wants to learn lessons
Norwich Union is planning to bring the prices it quotes brokers for personal lines closer to those paid by direct customers.
John Kitson, sales and marketing director, said the insurer had “lost our way a bit” in 2007, but was now back on track.
Lessons learnt from the personal lines direct business, which focuses on online services, would be passed on to the broker side, he said.
“The direct business was a significant focus for us in 2008 – getting the offer right, the price point and product right for the general UK customer, particularly in motor,” said Kitson.
“In 2007 we had lost our way a bit, but in the second half of 2008 we were coming round.
“We are transferring this learning to the broker channel, working hard in 2009 to come up with more competitive personal lines products for brokers.”
This will reduce price differences between direct and intermediated business, although there will be some variation, he said. He accepted that Norwich Union (NU) had not been competitive in personal lines, but said this was being rectified.
“It is not just about cutting prices, it is about better pricing and underwriting,” he said.
Speaking at an Insurance Times round table in Birmingham last week, George Berrie, director of trading, said the latest cut in interest rates would place pressure on insurers to improve underwriting profitability to make up for the lower returns from investments.
But he added that this could be good news for brokers, whose income would increase as premium prices rise.
“The pressure on combined operating ratio is going to go up, and it will go up for every single insurer. Is it good for brokers?
I think it is, because the market will have to harden. Otherwise we are going to see red ink,” he said.
Janice Deakin, NU’s corporate sales director, said the insurer’s balance sheet was transparent and its investment portfolio remained strong despite the stock market turmoil.
Deakin said insurers would need to improve combined operating ratios by 5% to 6% just to “stand still” as the economy worsens. She said this made it unlikely that commission rates for brokers would rise.
NU has made well-publicised attempts this year to drive down consolidators’ commissions.