AXA chief Peter Hubbard admits that service levels for brokers have fallen dramatically over the past year and suggests its aggressive acquisition strategy may be responsible
It has been just over a year since AXA shocked the market with its aggressive broker acquisition plans.
Following its swoop for brokers Stuart Alexander, Layton Blackham and Smart & Cook, and after declaring a bold five year profit goal for its intermediary business, panic began to spread through the market – brokers were worried and the FSA began to watch closely.
The market was predicting that AXA’s ambition and hunger for growth would spell the death knell for independent small brokers across the country, especially as speculation intensified that it would compete with Towergate to become the market’s leading consolidator.
The question of independence
AXA executives moved quickly to set the record straight and spent weeks putting out fires in a series of roadshows in an effort to reassure the market that brokers would indeed remain independent.
But at the same time the message was clear, AXA had no intentions of slowing down its acquisition drive and an age of insurers buying brokers was upon us.
AXA’s integration of its new brokers is now just beginning and the market is once again awash with speculation. Former Stuart Alexander chief executive Stuart Reid has been placed at the helm of AXA’s broking division, Venture Preference, at the expense of the other broker co-owners Paul Meehan and Chris Blackham.
And AXA’s distribution model is again in the spotlight with speculation over who the insurer giant, that earns more than £160m in profits and writes in excess of £2.5bn in GWP, will buy next.
However, in the midst of acquisition frenzy that has seen AXA take ownership of the second largest SME broker in the UK market, other brokers feel something has been lost. Somewhere along the line, the service provided for AXA’s army of broker agents has fallen by the wayside. And brokers have begun to speak out in anger.
In a major research study about brokers’ views of insurer service conducted by Insurance Times’ parent company Newsquest Specialist Media, AXA has been ranked last in almost every category when it came to service provision. Brokers lamented that AXA seemed unconcerned that they struggled with its trading system. And the insurer’s claims handling was described as “shocking and awful”.
Perhaps the most telling comment was one anecdotal quote that read “AXA is generally not an insurer I would recommend to my clients.” The verdict was loud and clear that action was needed.
“It was not a great year for customer experience at the beginning of 2007. But we know that and we have to stand up and accept it.
It’s 8am Thursday morning in the boardroom of AXA’s UK headquarters on Old Broad street and chief executive Peter Hubbard is keen to tackle the criticisms head on.
Dressed in his usual stylish dark suit, with his shirt collar unbuttoned and wearing his trademark glasses, Hubbard says the company has experienced this sort of negative feedback before, just as he was taking over AXA in 2001.
Patching up the leaks
He says that at the time AXA had “huge problems”. The company was losing money and Hubbard set upon an aggressive path of patching up the leaks and setting growth targets, resulting in some impressive figures. He is adamant, too, that this latest feedback is certainly fixable.
“The survey didn’t come at a great time for us,” he admits. Having undergone a major transformation of the company’s branches –in an effort to focus more resources on the customer and less on back-office processing – AXA began to experience major backlogs that severely impeded its ability to churn quotes out to brokers.”
Hubbard says the company was accepting quotes, but failing to get back to brokers and this had a knock-on effect to everything else. “The challenge was when we started to get these backlogs we were in a soft market and we struggled with it. It sort of peaked in May and we started to get some pretty direct feedback from brokers,” he adds.
“It was not a great year for customer experience at the beginning of 2007. But we know that and we have to stand up and accept it.”
The negative feedback certainly hasn’t had any impact on the company’s ability to grow profits. AXA reported general insurance revenues were up 9% – with underlying earnings of £160m – in the first half of 2007, despite the impact of the January storms and the June floods.
But the affable AXA chief is certainly aware of the extent of the problems, which range from inadequate resourcing, branch closures and communication nightmares.
Yet there is a willingness on the part of brokers to believe Hubbard can make it right. And it reflects the respect he has gained from the market over the last six years.
“Peter is prepared to make the difficult decisions,” says Broker Network chief executive Grant Ellis. And Biba chief executive Eric Galbraith who has got to know Hubbard well over the past few years, adds: “Peter works really hard at building relationships and I think he really wants to make it work.”
“If I look at the survey we got marked down in a lot of places and I am not going to judge it, I am going to accept it. The challenge then is to go out and address it.
Hubbard explains that his strategy to tackle the backlog of problems began back in September. He hired an outside company to clear away the troublesome backlogs and he is spending massive amounts of money and resources in putting 13,500 staff members through intensive customer service training.
Following a successful pilot project, the decision to migrate brokers to an automated office in Bolton has proved to be significantly beneficial by freeing up the branches to handle the larger and more complicated relationships.
But still, Hubbard says he can’t help but think AXA’s controversial growth plans – a strategy he admits is bold – might be behind some of the service criticisms fired at his company by brokers. He says that he conducted research about a month after he read Newsquest’s research and the verbatim he got from brokers was: “we’re not quite sure what AXA’s position is in the market”.
He adds that brokers were thinking: “Can we trust AXA to stay in the broker market? Is it going to go into the broker market and get brokers to write its own business?’ So I think there was huge degree of uncertainty. I think the challenge though, in some ways, is also perception versus reality.”
And Hubbard still doesn’t know if he has succeeded in alleviating brokers’ fears. But he hopes that Stuart Reid’s appointment will send a clear message to the market as he is someone from outside the AXA family.
He says, the appointment didn’t come as a shock to Layton Blackham chief executive Chris Blackham or Smart & Cook boss Paul Meehan. “It’s important to recognise we made this decision with Paul, Chris and Stuart and it was always going to be one of the three of them that would take the business forward.”
He reiterates that the objective has always been to get the market leadership in the small business arena.
“I think that to a degree what threw the market was that we did it. It was a bold move. But that’s okay. We are a bold organisation,” he says.
Hubbard reveals that AXA will buy more brokers but will not disclose where his sights are set. In the meantime he is philosophical about the judgments made about the current state of his business. “If I look at the survey we got marked down in a lot of places and I’m not going to judge it, I’m going to accept it. The challenge then is to go out and address it. What are the big things that will really make a difference? And I think that’s where we came back from.”
IT - What do you do to unwind?
PH - Cycle, garden with a passion, I have loads of friends and I love to travel.
IT - What is your drink of choice?
PH - French red wine it was one of the great appeals of the job.
IT - If you could describe the insurance industry in one word what would it be?
PH - Exciting.
IT - What characteristics do you most admire in others?
PH - Openness and integrity.
IT - What characteristic do you most dislike in yourself?
PH - Sometimes I run ahead.
IT - Where in the world would you most like to travel?
PH - Latin America because an emotional person and it seems like quite an emotional culture.
IT - If you could have a super power what would it be?
PH - I don't want to be a superhero. I just want to be Peter Hubbard.
IT - What keeps you awake at night.
PH - Nothing.