Schemes and delegated authorities (DA) are an increasingly important part of the insurance landscape, particularly in commercial lines. But there was a time, not so long ago, when the value and long-term viability of schemes was in question.
“The market got itself into a real mess around ten or fifteen years ago, with schemes popping up everywhere. There was no commonality, no thread to identify the scheme and no benefit to the insurer, customer or broker,” says Gary.
“They became a vehicle to demand more commission and revenue. But the market woke up and started taking a more forensic view of schemes, doing them properly and building out a real customer-led proposition.”
What was once an opportunistic market is now much more robust, healthy and growing. But how did this transformation come about and what’s the profile of the modern, successful scheme?
“I’d estimate that the marketplace has doubled in the last five years because Managing General Agents (MGA) have focused on service for brokers and customers. They have also designed products that are reflective of a particular specialism, niche or route to market,” explains Gary.
Part of the change has been driven by greater regulatory scrutiny but, equally, the expectations of insurers have increased. Only those brokers and MGAs that can culturally align themselves with their partners will win out.
“We’re open to all conversations, but whatever’s being proposed needs to ensure the customer is being looked after, the underwriting is on a solid footing and the scheme will be sustainable and profitable,” says Gary.
The desire to meet all these needs was present in the past, but the means to define, track and deliver on them wasn’t necessarily there. But today, through the power of technology and data, all of these crucial needs can be met.
“The relationship has evolved from trust, to trust and verify,” says Gary.
“It’s very difficult for us to trust and hope these days, so we regularly look at conduct Management Information from partners to understand how the customer is being treated. We’ll look at the number of and reasons for claims repudiations. That’s where the data comes in.”
He explains that data allows AXA and the DA partner to secure a truly detailed view of performance - everything from underwriting profitability and tracking rate, to looking at the geographical spread of risks and how the risk exposure is developing over time.
“Brokers who can produce historical data and an understanding of their book of business from a customer and profitability standpoint will have the best opportunity of attracting new capacity,” says Gary.
Such is the power of data, and its ubiquity in the schemes space, that trying to secure a DA without it is increasingly difficult.
“You can set up a scheme without historical data, but it’s the exception rather than the rule, and much harder to do” says Gary. “Take a start-up MGA; we might choose to work with them if the individuals have been in the market a long time and are known to be experts in their field.
“Some insurers won’t consider it at all, but if you have a specialty class of business, have created an MGA or broker for a specific part of the market, can articulate your expertise and explain why the scheme will work, you can still secure the capacity required. But your business plan needs to be exceptional, with a strong focus on both the top and bottom line.”
For Mike, data is no longer a “nice-to-have” but a basic hygiene factor in the schemes market and he believes that technology has only started to make its mark.
“To have a good scheme, richness of the data is paramount. It informs on pricing, the risk selection, claims requirements and even product design. Everything should rise out of that data,” he says.
“The overlay of technology has ironed out a lot of the inefficiencies in this market, but there’s still some bandwidth such as the use of AI in the management of a scheme.”
And when it comes to the data that brokers or MGAs are bringing to insurers, the message is clear – the format isn’t important, it’s the raw data that counts.
“Within reason, it doesn’t matter what state your data is in. Bring it to us and we will help make sense of it and give you the insight you need,” says Gary.
“Data is all about the quality of the underlying business. If there’s robust data sets that can split the premium and claims data, then we can always help to interrogate it.”
While the use of data has revolutionised this market, the underlying principles that have made schemes a mainstay for so long remain unchanged, as Gary explains.
“DA’s want good service, quick referral turnaround, a partner who’ll work with them to develop their business and they want a partner with a broad risk appetite,” he says.
“From AXA’s perspective, we’re looking for schemes that will endure and partnerships that last 15 years rather than 15 months.”
And underpinning all of that is the need for trust.
“If there’s been poor performance on the book, be open about that and what you did to correct it. Tell the story because that adds gravitas to the pitch. Insurers will help iron out any wrinkles in a scheme, as it’s all about partnership,” says Matt.
And that, ultimately, is what any insurer is looking for in a scheme, whatever it is, however it’s created and whichever way it’s distributed.
“We want DAs that are obsessed with the customer, can demonstrate underwriting expertise and value the strength and importance of AXA’s history, position in the market and expertise,” says Gary.
“We’re looking for partners that are building things for the long term and who are really committed to their clients and serving the sector they are in. We’ve being doing DAs for 30 years now and we plan to be doing them for another 30 at least.”