SCHEMES SPOTLIGHT 2016 Schemes spotlight 2016 First Edition The UK schemes market insight: An in-depth review of the schemes market Published by The number 1 UK brand for schemes 1
A foreword from UK General s managing director Karen Beales Schemes are an increasingly significant revenue stream for general brokers. A recent survey exploring the current schemes market found 73% of brokers thought that the general market has become more geared towards schemes in the last year. UK General has been a leading schemes provider for over two decades and has 620+ live schemes in the market place. Our schemes experience is second to none, so we can provide all the insight needed to create and manage a successful scheme. In early 2016 we conducted our annual market survey on the schemes market place. Now in it s 5th year, over 300 brokers took part, our highest response to date. We discovered that nearly 70% brokers thought that schemes had grown for specialist and niche classes of business opposed to mass market transactional business. What is clear is that schemes are a response to genuine consumer needs and brokers are continually innovating ideas for schemes amongst their target market segment. In our schemes spotlight, we provide you with a collection of articles that we hope you ll find of valuable interest. As well as highlighting more findings from our market research, you ll find helpful guides on how to market your schemes effectively, as well as insight from our underwriters, product managers, claims and compliance teams on their perspective on industry trends during the next twelve months. 02
SCHEMES SPOTLIGHT 2016 We hope you enjoy the first issue of our Schemes Spotlight. We welcome your feedback and comments, and please let us know if there are any topics you would like us to cover next time. Contact sayhello@ukgeneral.co.uk Best wishes Karen Beales Managing director UK General Insurance Karen Beales is managing director for UK General Insurance. sayhello@ukgeneral.co.uk 03
Schemes market Improving our understanding of brokers attitudes towards the schemes market, will inform decisions about new opportunities that lie within this thriving and growing market sector. The annual schemes survey conducted by UK General Insurance, in association with Insurance Times, gave over 300 general brokers the opportunity to voice their opinions and help shape the future UK schemes market. It revealed that the demand for schemes continues to grow with more than 70% of brokers suggesting that the general market has become more geared towards schemes. 68% of these brokers argue that this growth is achieved through specialist and niche classes of business as opposed to the mass market. 84% of brokers revealed that their schemes business has grown over the past five years with only 4% suggesting it has remained the same and 12% suggesting the book has declined. GROWTH GROWTH 17% Over 60% growth 17% 35% - 60% growth 33% 10% - 35% growth 18% Up to 10% growth 4% Remained the same 12% Declined 04
SCHEMES SPOTLIGHT 2016 When asked what the biggest threat was to scheme brokers, increased competition was of greatest concern (55%) followed by compliance and regulatory demands (43%) and aggregators accessing niche products (43%). However, market confidence is clearly high as 79% said they believe their schemes business would either increase, or substantially increase. The respondents also commented that by far, the most important purchase decision for their customers remains the price with 91% in agreement. Breadth of cover, customer services and ease of access are also important criteria when purchasing an policy. Own website 2014 2015 2016 24% 59% 59% Unsurprisingly, technology continues to be at the forefront of the industry with 59% of brokers trading schemes via their own website. This is an increase of 24% in the past two years. Interestingly, aggregator trading has doubled since 2014 and social media has been revealed as a new channel for transacting schemes. Furthermore, those surveyed commented that social media is the biggest opportunity for schemes brokers during the next three years, with white-labelled schemes and mobile accessibility having the greatest impact. Aggregator 9% 13% Face 2 face 47% 39% Telephone 71% 59% 20% 51% 72% Social Media New media marketing opportunities Branding Flexibility 1 size does not fit all Affinity partners Social media 41% 34% 15% Demand of bespoke offerings Development of MI New distribution Exclusive arrangements White-labelled schemes Almost 60% of brokers trade schemes via their own website 05
How to pitch the perfect scheme We live in a world where consumers needs are constantly evolving. Schemes allow brokers to take advantage of this ever changing landscape by developing products tailored to customer requirements, where standard products no longer meets their needs. We know from our own research that that the number of brokers writing most of their GWP through schemes has increased to 37%, which is a 16% increase from 2014. This growth in broker schemes activity suggests that brokers are increasingly plugging into the advantages of offering products that appeal to distinct groups of consumers. Karen Beales, UK General s managing director, gives her view on how brokers should pitch their new schemes ideas in a mature market: As the UK s largest MGA that specialises in schemes, we ve had two decades of success with schemes, as well as one or two not so successful schemes. We learn from the ones that don t work, as well as those which do. It starts with identifying the target market for your scheme proposal. Property Leisure & lifestyle Financial loss Warranty Income protection Travel 06
SCHEMES SPOTLIGHT 2016 Motor financial Identifying your target market The first stage is to have a clearly defined target market. If a new scheme idea presents itself, it may seem a fantastic opportunity to you but remember that value is in the eye of the beholder. If your scheme does not provide value for the customer it will fail. It is essential that you give your customers what they want and not what you think they want. Effective product development starts with identifying your target market and researching the products they need. Finding the insurer of best fit It s important to find an insurer you are comfortable working with and one that shares the appetite and ambition to write the risks you are proposing. This is our USP as a business and we currently have 620+ live schemes to prove it. A good first question a broker should ask themselves when looking to partner with a scheme insurer is: What other support and added value benefits can the insurer provide? We know that 98% of brokers currently trading schemes felt that they need further support from their insurer, ranking underwriting and marketing support as top priorities. As a smaller insurer, this is something we pride ourselves on. We have the agility and service offering to enable us to offer support in these areas. Personal accident Pitching the perfect scheme Once you have selected an provider you feel comfortable working with, get your foot in the door by presenting a clearly defined business case. Despite what you may think, the success measure of a scheme proposal is not based solely on the number of policies a broker is predicted to sell. As a broker, you will need to define the measure of success in the early stages of planning your scheme by identifying your objectives. When defining your objectives, you need to consider what you expect to achieve from your scheme and understand how it aligns with your overall business strategy. Other examples, apart from financial motivation, should include customer retention, better meeting customer demand and maintaining a competitive advantage. Preparation is key and if you pitch a scheme idea that is well defined, segmented, researched and accompanied by a plan of execution, there is little room for your insurer to say no. Launching your scheme! Once you have a insurer lined up to support your new scheme, planning the launch is paramount. It is important to understand exactly who you are trying to target, and build a campaign surrounding this. A common mistake is to take a mass market approach when your scheme can only cater for a segment of this audience. This will only eat into your budget and resource with little return. Industry experience is essential to the launch of a new scheme; the complexities of the regulatory environment and understanding the consumers needs can be difficult to navigate. However, we have had schemes success with brokers whose background is outside the industry and it does bring a fresh perspective and innovation into the schemes market. 07
Strategy for a claims crisis Advice from a personal lines claims expert In recent years catastrophic and surge events have been on the rise both at home and overseas, directly impacting the industry. The 2015/16 winter floods in the UK cost the industry 1.6bn. Tsunamis, ash clouds, floods and terrorist incidents directly impact on the insured and indirectly affect them through the claims journey. If choosing to work with an outsourced model, the direct impact on internal resources is reduced but in turn, there is an increased responsibility to ensure that claims administrators are sufficiently aware and equipped to respond to all customers needs. Obligations to insurers will also be necessary to maintain the correct level of oversight and strong, flexible relationships with administrators will be expected in order to fulfil any additional requirements insurers might have in these times. It is also recommended that a crisis strategy document is devised and distributed, providing advance guidance and detailing the processes and procedures that must be adhered to. It should outline best practice before, during and after an event to ensure that reputational damage is minimised and administrators can respond smoothly. 08
SCHEMES SPOTLIGHT 2016 So, how to respond? Philosophy during a surge is simple: the focus should be on early detection and open communication. Keep tabs on the news and what s going on across the world. That way, catastrophic and surge events will become quickly apparent. When an event is identified discussions can immediately get underway between key stakeholders to assess: Likely impact on customers, claims administrators and brokers The claims and underwriting stance Requirements of internal and external stakeholders. the focus should be on early detection and open communication Also consider the communication to administrators via a bulletin by the relevant technical expert. This should include details of the event in question, your company s stance by section of cover and any additional requirements e.g. cat coding and any links to press coverage/official guidance that is available however, monitor the event as it progresses. It is likely the document may change as an event evolves for better or worse. It s also important to consider that in some cases where the event is significant enough, a surge committee should be formed with representation from key stakeholders that agree on; approach, next steps, ongoing requirements, frequency of communications and meetings, additional claims funding and means of communication with administrators. After a significant event it is important to take stock. Once the dust has settled, organise an internal debrief, including the views of the administrators most affected, to discuss how the event was managed. This feedback will be important to learn from for future reference. Diana Ghirardi, Supply chain manager at UK General Insurance Find me on LinkedIn or email me via diana.ghirardi@ukgeneral.co.uk 09
Are you prepared for 2016-2017 regulatory changes? We live and work in an industry where regulation and compliance are of paramount and increasing importance. Annually, the components of compliance are reviewed and assessed. Here are a few for 2016-17 you need to consider: Insurance Distribution Directive: The Insurance Distribution Directive (IDD) came into force on 22 February 2016. This implementation has made it easier for firms to trade cross-border by creating consistency among all participants while strengthening policyholder protection. Member States have two years to incorporate the IDD into national laws and regulations, i.e. before 23 February 2018, on which date it will replace the current Insurance Mediation Directive. Senior Managers Regime: Increased regulatory responsibility is being placed upon individuals and there is now a greater importance on evidencing the allocation of responsibilities. It has been argued that the regulatory duties placed on approved persons (i.e. a position of authority) may potentially pose problems in recruiting and keeping the right people due to the scope and scale of responsibility. It should be considered that those with personal regulatory responsibilities may become more risk averse and hence may reduce innovation and creativity across the general markets. Outsourcing & Delegated Authority: The Financial Conduct Authority (FCA) has intensified its focus on outsourcing arrangements in the general industry. Demonstration must be shown in line with satisfactory systems and control over third parties to which authority is delegated. Add-on products: The market study into general addons continues to impact the industry. New rules require a deferred opt-in for sales of Guaranteed Asset Protection (GAP), and since 1 April 2016, the ban on opt-out selling of any type of add-on product in conjunction with regulated primary products has come into effect. Renewal Transparency: In August 2016, the FCA published a policy statement that brings in new rules and guidance on renewing general policies. The new requirements from 1st April 2017 are: disclose last year s premium at each renewal include text to encourage consumers to check their cover and shop around for the best deal at each renewal identify consumers who have renewed with them four consecutive times, and give these consumers an additional prescribed message encouraging them to shop around an annual premium reflecting any mid-term adjustments, instead of last year s premium. 10
SCHEMES SPOTLIGHT 2016 We hope you ve enjoyed the first edition of Schemes Spotlight! Here at UK General we work hard to push boundaries and stay ahead of the curve in order to deliver personal lines and bespoke schemes to each and every one of our brokers, trading partners and consumers alike. Through hard work, determination and your feedback we are continuously looking to develop new innovative products. We are always keen to hear your thoughts and opinions so feel free to get in touch with us via sayhello@ukgeneral.co.uk to let us know what you think. Alternatively if you want to give us a call, speak to us on 0370 421 4503. Stay tuned for the second edition. A broker s guide to new methods of marketing Come fly with me: Travel Insurance Plus more... Coming soon. 11
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