Brokers View · services to our Member Brokers and our Clients. It is a highly regarded...

Brokers View A detailed narrative of the AIMS portfolio

Issue 3 – April 2018

For Internal Use Only by AIMS Network Brokers

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Brokers View - Issue 3

Released April 2018, from results pertaining to November 2017 AIMS Member Broker Insurer Survey.

Important Disclaimer

The information in this report is given in good faith and derived from sources believed to be accurate at this date but no warranty or guarantee of accuracy, completeness, timeliness or reliability is given and no responsibility arising in any other way, including by reason of negligence for errors or omission in it is accepted by AIMS, Austbrokers, IBNA or Member Brokers, or their respective officers or employees (all collectively referred to in this clause as “We”, “Us” and “Our”). We also do not warrant or guarantee the performance of services of any persons referred to in the report.

Actual results may vary from any forecasts and any variation may be materially positive or negative. Forecasts, by their very nature, are subject to uncertainty and contingencies, many of which are outside Our control. Past performance is not a reliable indication of future performance.

Subsequent changes in circumstances may occur at any time and may impact on the accuracy of the information.

This report does not take into account any of your particular objectives, financial situation or needs. Before making any decision in relation to this report, you should, amongst other things, independently obtain confirmation of the accuracy and currency of any relevant information on which you may intend to rely. Any information provided should not be considered as a recommendation in relation to continuing to utilise Our services or not.

© Copyright

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AIMS (A&I Member Services Pty Ltd), is a member services provider servicing over 150Member Brokers across Australia. AIMS is a joint venture between Austbrokers andIBNA and works for the collective benefit of the Members Brokers.

AIMS conducts a bi-annual survey of its Member Brokers and has been doing so forthe past seven years.

The survey is completed by Member Brokers across Australia who are “in the field”and hence the survey/this report represents an accurate commentary on the tradingrelationship they have with our Strategic Relationship Insurers. Therefore being the“Brokers View”.

This survey is used extensively as a qualitative analysis of the comparativeperformance of participants in the Insurance Marketplace and their provision ofservices to our Member Brokers and our Clients.

It is a highly regarded benchmarking tool providing periodic analysis of the changesin the Insurance Marketplace and how Insurers respond to the varying needs ofClients in conjunction with the economic performance of the Insurance Marketplace.

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Executive Summary Recent industry research again confirmed customers are more likely to return “if the end of an insurance buying or claims experience provides a good outcome.”

This applies equally to AIMS Broker’s experience when dealing with our Strategic Relationship Insurers.

Our Brokers are the Client’s “front line” for the buying of insurance and their claims experience.

When we see a downturn in the results established in our survey, it can be indicative of dissatisfaction and can surely lead to an aversion to return.

However, in the latest survey we have seen a New Trend. What could cause this? This is the second survey conducted since all Insurers decided to address current profitability levels. Of course, by the very nature of competition, this causes a huge disparity between Insurers in how they have to adjust their individual portfolios. Simultaneously we have seen many Insurers “manufacturing” the same product to suit their multiple client facets. Some of the individual tailoring of the past, has been removed.

Clients and Brokers have choice, and they have become accustom to exercising this choice to obtain the most suitable buying experience. As a result we see the beginnings of the movement of coverages to Insurers who will be more individualised in their pricing and coverage. The clients who value intermediaries are having their individual needs catered to via our intermediaries.

Even more importantly is the experience when a claim occurs. High expectations have been established, and in most claims they have been met. When not met, this leads to significant dissatisfaction by the Broker and the Client. The effect of this expectation is amplifying and many clients are beginning to make this a key feature of their purchasing choices.

Effectively the survey results in this period are the display of satisfaction levels with our Strategic Relationship Insurer’s current moves in addressing profitability levels and their ability to provide the features intermediated clients value.

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Current State of Australian Insurance Market

Financial commentary provided by Macquarie Bank.

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APRA Personal Lines

Source: APRA, ASIC, Company data, Apr ‘18APRA Commercial Lines

Source: APRA, ASIC, Company data, Apr ‘18

We have now clearly passed the bottom of the insurance cycle, which many believed to be the worst in a generation. In the coming pages we provide an update on some topical issues in the industry, but first we provide refreshed estimates of channel splits for the Personal and Commercial insurance markets in Australia, followed by estimated market shares by major insurance broker.

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Commercial Lines Market Share: SME and Middle Market Only (APRA Regulated Only)

Commercial Lines Market Share (APRA Regulated Online)



These charts show the size and scale of the insurance marketplace transacted via intermediaries, and recognises the significant position of AIMS, who have a particular strength in among Commercial and SME client segments.

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Incumbent Insurers Continue to Remediate Portfolios

Consistent with the experience mentioned in the previous issues of Brokers View, the largeAustralian insurers continued to walk away from risks in the Dec ’17 half. This manifestedin material market share losses for IAG and SUN as shown in the figure below.

GWP growth by type (6 months to Dec ‘17 vs. pcp)



Source: APRA, Company data, Apr ‘18

Notes: Dotted lines highlight company-specific asset sales or non-recurring headwinds. New Zealand data is in constant currency. 80% of IAG’s Personal lines in the Business Division are allocated to Home and 20% to Personal Motor.

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Each of the domestic insurers (IAG, Suncorp and QBE) experienced continued pullback in Commercial lines through the Dec ’17 half, with international carriers such as XL Catlin, AIG, Allianz and Chubb participating in a disproportionate amount of new business wins. While portfolio de-risking appears as though it will continue for the coming 12 months, it does appear that the larger repositioning has already occurred.

• Expanded Polystyrene risks (EPS) are one example which we believe remains on the list for de-risking and / or repricing in the next 12 months.

In Property lines (Home and Commercial), the NSW ESL has impacted the perceived growth of the market as a number of major insurers were unable to capture this levy for the first couple of months in the Dec ’17 half. We anticipate carriers will attempt to recapture a large amount of this shortfall in the coming 12 months, but recognise staggered repricing by carrier could create higher churn particularly for Home.

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Source: Aon Benfield, Apr ‘18

Global Reinsurer Capital and Growth of Alternate Capital

Alternate Capital Unwavering

As the HIM (Hurricanes Harvey, Irma and Maria) losses struck the Americas in the Sept’17 quarter and early loss estimates cycled ~US$120b, many insurance industryparticipants called for the peak of alternate capital in the global (re)insurance market.

Since that point #1) estimated losses from these events have contracted to ~US$75b; #2)most alternate capital providers have reinstated, if not increased capacity; and #3) pricerises at 1/1 were materially less than expectations.

As we have done in the last two issues of Brokers View, we provide a cautious outlook forthe strengthening of reinsurance prices. Given the global market is poised for price rises,we believe this could attract even more alternate capital, weakening the prospect ofprice strengthening.

• We recognise that the major US Property Catastrophe reinsurance programs renew at1/4 and 1/7 and expect stronger price rises through those periods than 1/1.

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Outlook

Commentators continue to be positive on the outlook of the Australian Commercial Insurance market. They argue that insurers cannot continue to sustain losses and will continue to reprice at a rapid rate. We agree with this view, in part.

There remains numerous carriers with appetite for growth in Australian risks. Where one insurer believes prices need to increase 30% another will see opportunity at 5%. Further, as insurers complete their portfolio remediation, at some point they will once again push to grow market share, thus perpetuating the cycle.

In an economy which continues to provide weak volume growth, and a financial environment not spurring asset growth (outside of unsustainable property pricing in certain states) price will be the primary lever for insurers to attain growth.

But one thing is certain, as long as premium rates are increasing it will be positive for insurance brokers.

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AIMS Premiums – Last Four Years (2014-2017)

21%

8%

8%

14%

2%

7%

39%

AIMS 2014

Business Pack ISR

Liability Commercial Motor

Private Motor Home and Contents

Other

25%

8%

8%

13%

2%

7%

37%

AIMS 2015

Business Pack ISR



Other

24%

8%

8%

15%

1%

7%

37%

AIMS 2016

Business Pack ISR



Other

24%

7%

8%

13%

3%

6%

38%

AIMS 2017

Business Pack ISR


Private Motor Home & Contents

Other

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0

AIMS has six tailored products and a number of preferred products which are available to their Member Brokers and their Clients.

The largest of these remains Business Pack, being 24% of our overall portfolio.

Placement of other Insurance lines (i.e. the non-tailored products) increased slightly to 38% and the bulk of these placements are in the “open market”.

This provides significant leverage to our Member Brokers and their Clients by having our five Strategic Relationship Insurers providing tailored products to a substantial portion of the Australian SME and Commercial Client base.

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Consolidated Strategic Relationship Insurer Overview

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AIMS Product/Premium Placements: 2014 – 2017

12%

18%

17%

9%8%

36%

AIMS 2014

Allianz CGU QBE Vero Zurich Other

12%

18%

17%

8%6%

39%

AIMS 2015


12%

18%

18%

7%5%

40%

AIMS 2016


12%

17%

17%

7%5%

42%

AIMS 2017


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AIMS has a significant relationship with our five Strategic Relationship Insurers.

These five Insurers currently participate in 58% of our overall portfolio.

This brings significant benefits to our Clients by having one of the most expansive relationships in the Australian Marketplace.

With the New Trend in the marketplace this has also led to AIMS expanding its relationship with other key Insurers. This is currently most notable with Chubb and SURA Underwriting.

Our market relationship is larger than any of the International Brokers and demonstrates a commitment by AIMS Member Brokers and our Strategic Relationship Insurers to bringing local relationships and Insurer support in the provision of Insurance to our Clients.

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Overall Satisfaction Average (All Products) - All Insurer Partners

Allianz has remained stable from last wave, and has been overtaken QBE following their rapid improvement. Zurich was the only other insurer not to have seen an increase in Overall Satisfaction from earlier in 2017.

We have seen some significant changes from the last Survey. Most of the upswing appears to be in regard to improved Claims Responses in certain areas. Certainly claims handling is a major contributor, but not the only factor. Insurers are continuing to streamline their underwriting and processing. This is creating ongoing challenges. Add to this, varying risk appetite in comparison to the past and Brokers are faced with a myriad of challenges on behalf of their Clients.

However, we are now seeing differing responses and varied methods of handling the changes.

What does this produce? Greater variety of response as will be noticed throughout the survey results.

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Throughout this report, comparative data has been used from surveys conducted over the last six years. In addition you will see new data on new Insurers as we have broadened the survey.

The Overall Satisfaction average is comparative data of all major Insurers based on our Member Brokers assessment of their satisfaction with the trading relationship and how these Insurers deliver their products and services in support of our Clients.

This is assessed on all products and states throughout Australia.

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Though Vero and Allianz have eased from last wave, Zurich, CGU and QBE improved. This was most notable for CGU, which now takes the lead following Allianz’s 7-point decline.

When we add the data for the other active Insurers you will note that the positioning and Satisfaction Ranking Changes – see further pages.

Business Pack - All Insurer Partners

As mentioned prior, Business Pack, is our “lead line” of Insurance. Hencecommentary on this product is our most pertinent indicator of the relationshipbetween our Member Brokers and Strategic Relationship Insurers.

The above shows the comparison results for the major 5 Insurers. However, thisyear we have extended the survey to other Insurers who participate actively inthis portfolio. The broader based results are on following pages. As we furthergather comparative data accruing on all 7 Insurers we will be able to combinefuture charts. The above results are a combination of factors includingCompetitiveness, Quote Turnaround and Claims Satisfaction to produce anOverall Satisfaction score.

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CGU leads the Business Pack in both Overall and Claims Satisfaction, though is surpassed by Chubb for Quote Turnaround and both Chubb and Sura in Competitiveness.

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Insurers for Home Insurance have maintained their relative positions from last wave, with large increases evident in the highest (CGU) and lowest (QBE) performers.

We have now extended the survey to include Chubb who write a “Masterpiece” product coverage for High Value premises. This is a differentiated product to the more traditional Householders coverage.Given its unique nature and individualised service, it rates very highly with our Brokers.

Home Insurance - All Insurer Partners

This line of Insurance, Home Insurance, is transacted with only four of our Strategic Relationship Insurers. Zurich do not provide Home Insurance coverage to our clients. As mentioned Chubb transact a Masterpiece Product.

A minor decline in Overall Satisfaction is noted with some Insurers, whilst some have improved mostly driven by improvement in handling of claims. Whilst most Insurers generally respond well to claims, some difficult claims treatments have been encountered by our Member Brokers. The upturn for Vero is due to a significantly changed appetite for risk and significant re-engagement with our Brokers and Clients.

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Chubb saw the highest Overall and Claims Satisfaction for Home Insurance, though only scored just above average on Competitiveness. Vero dominates on Competitiveness, though rates below average on all other service aspects.

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Allianz was the only insurer to possess a lower score this wave compared to last, continuing its steady downward trend from 2015. Due to this, CGU enjoys the leading score for the first time on record.

Private Motor - All Insurer Partners

Again this line of Insurance, Private Motor, is transacted with only four of our Strategic Relationship Insurers. Zurich do not provide Private Motor Insurance coverage to our Clients.

The flatness in Overall Satisfaction is driven by competitiveness issues as more direct competitors appear on the horizon for Private Motor Insurance.

However, why the variance between Allianz/CGU and QBE/Vero? It appears this is purely a response to appetite and competitive pricing. All Insurers now provide good, quick responses to Clients claims and QBE in particular have changed their claims methodology and this has removed some past issues. However, the ranking on the next page still shows a lag on improvement. This is a very customer centric line of business.

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Quote Turnaround appears to be driving CGU’s lead in Overall Satisfaction, though it also shares the lead for Claims. Allianz performs just as well for Claims Satisfaction, as well as possessing the highest score in Competitiveness.

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In ISR, CGU maintains the lead, though QBE now trails by only 2 points. Vero demonstrates the only decline from last wave, currently standing lowest following vast improvements from Zurich and QBE.

When we add the data for other active Insurers you will note that the positioning and Satisfaction Ranking changes – see further pages.

ISR - All Insurer Partners

CGU maintained the lead for the past three waves on this portfolio, however QBE are closing the gap. However, all remain significantly behind Chubb as you will see across the page. Chubb certainly transact a smaller portfolio but Brokers are finding an enhanced response.

All Insurers are struggling with the current pricing levels on property risks. Most Insurers have risen to the challenge and have seen new opportunities within their risk appetite.

The relative changes by Insurers is representative of their changes in underwriting attitude to a class of risk that has come under substantial profitability issues in the last 24 months.

The very selective nature by Insurers to this class of business has a marked impact on the Overall Satisfaction experienced by our Member Brokers and Clients.

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Chubb dominates in all aspects of ISR, leading by a large margin. CGU and QBE generally follow in no clear order, being the only other two insurers to outscore the average in all service aspects.

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Most insurers enjoyed a rise in score from last wave, with CGU maintaining the lead. Allianz softened, now possessing the lowest score alongside Zurich.

When we now add the data for the other active Insurers you will note that the positioning and Satisfaction Ranking Changes markedly – see further pages.

Liability - All Insurer Partners

As with our ISR portfolio, the relative changes by Insurers in Liability is a response to changes in their underwriting and claims attitude. This is a major driver for where our Member Brokers and their Clients renew policies or place new business opportunities. A large portion of this portfolio is placed with other Insurers and underwriting agencies and this is demonstrated by these now occupying 3 of the top 4 rankings. Liability is one of our most diversely spread portfolios; matching Insurer expertise and attitude to our Client’s risks more extensively than elsewhere.

Liability risks are getting more complex and Brokers will always respond to Insurers with expertise, efficient service and an understanding claims response.

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Dual’s Overall Satisfaction is marred by its Claims Satisfaction, as it possesses the highest Quote Turnaround and Competitiveness scores. More consistent scores by Chubb and CGU likely contributed to higher Overall Satisfaction.

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All insurers improved from last wave, though none were as substantial as QBE which has risen from last to third place.

When we add the data for the other active Insurers you will note that the positioning and Satisfaction Ranking changes – see further pages.

Commercial Motor - All Insurer Partners

Commercial Motor remains a very competitive portfolio, hotly contested by all our Strategic Relationship Insurers. You will note across the page that the specialist agencies occupy 3 of the top 4 rankings.

Changes is underwriting attitude, principally driven by the performance of individual Client fleets, has a marked impact on where placements are made and the Overall Satisfaction with Strategic Relationship Insurers. Given the volume of claims experienced in this line of Insurance, the handling of claims by Insurers is of paramount importance. Any improvement in results is reflective of a better overall outcome being achieved by our Clients.

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GT and NTI perform similarly in both Claims and Overall Satisfaction, with Sura sitting in the middle of the pack despite its highest Competitiveness. Allianz possesses the highest Claims and Overall Satisfaction of the major insurers, though is outscored by QBE for Quote Turnaround.

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Our Member Brokers have enjoyed significant relationships with the Strategic Relationship Insurers over many years. All our Insurers have strived to build personal relationships with our Member Brokers and Clients and take significant interest in providing best services.

This enables the best possible transaction and placement on behalf of our Clients. Insurers deliver their services to our Member Brokers on a face to face basis (through BDMs) or via Central Service Centres (Underwriting Call Centres). Dependent upon scale of services required and the complexities of the placement; various Strategic Relationship Insurers select to provide their services via the two service models.

The Overall Satisfaction average scores are representative of how our Member Brokers judge the provision of these services either via BDMs or their Underwriting Call Centres. As this is the “front line” of our interaction with Insurers, this is a very important commentary on the relationship with our Insurer Partners.

As Insurers strive to streamline and simplify their distribution process; they look to transact further business via Underwriting Call Centre’s. Our Brokers and their Clients note the service differential and the scoring represents their sentiment.

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BDM Overall Satisfaction

Call Centre Overall Satisfaction

Allianz and Vero weakened substantially in terms of Call Centre satisfaction, and QBE now rivals Allianz for a distant second place behind CGU.

After overtaking QBE last wave, Allianz dropped the lead in BDM satisfaction, although only by a couple points. CGU and Zurich experienced an improvement since last wave, with only Allianz softening.

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BDMs & Call Centre’s – All Insurer Partners

QBE and Allianz rival for the lead amongst BDMs, while improvements in QBE’s call centres results in a second place position.

→ BDMs & Call Centre – Total

As mentioned prior, the above graph is very representative of Broker satisfaction with the trading relationship. The BDM graph and the Underwriting Call Centre are shown side by side. You will note there are significant differences between satisfaction with the two models for each individual Insurer.

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As explained earlier in this publication, this is the first time we have expanded our survey and conducted a more extensive view of our other main active Insurers.

The following four graphs show the comparative data for all 10 Insurers.It should be noted that some of these Insurers participate on all our classes of cover and some may only specialise in one or two classes. This could provide some “skewing” of the ratings but the same rating system was applied to the survey results for all Insurers.

As you would expect, differing degrees of Overall Satisfaction are experienced. It is not unexpected that an Insurer who specialises in one or two classes of business; may feature more highly than an Insurer who is providing services across all classes of risks.

What is surprising is that companies such as Chubb and Sura who are starting to participate more broadly in the AIMS portfolio, are ranking so highly.

This tends to support the Macquarie observation that other Insurers are responding well to the pull back in appetite of some of the traditional large Insurers.

As we proceed to the next survey it will be interesting to see if this trend is to continue.

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Quote Turnaround – All Insurer Partners

DUAL has a comfortable lead in Quote Turnaround followed with some distance by GT, Chubb and CGU. Allianz, Vero and Zurich score below the average score.

Our Member Brokers approach Insurers seeking renewal and/or new business terms and a necessary negotiation process is undertaken.

The ability of Insurers to provide these terms in an efficient and timely manner is important as to how our Member Brokers can obtain the necessary terms to provide to their Clients. Speed, ease and consistency of positive response to our Broking submissions dictates the survey result.

This is evaluated and ranked as Quote Turnaround.

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Overall Competitiveness – All Insurer Partners

DUAL also possesses the lead in Competitiveness, followed by Sura, GT and Chubb. Similar to Quote Turnaround, Allianz, Vero and Zurich were below the average, as was QBE, leaving only CGU above the average amongst major insurers.

Following on from Quote Turnaround is the Overall Competitiveness of the terms provided by Insurers to our Member Brokers. The ranking is always heavily negatively impacted by Insurers not providing terms at all.

A significant portion of this ranking applies to Insurers not quoting particular Client risks at all.

This graph is therefore a comparison of the Insurer’s ability to consistently offer competitive terms on the range of our Client’s business.

As expected, those Insurers who focus and specialise in certain lines of business should have an Overall Competitive advantage.

A future issue to consider: Can the specialists provide a unique differentiation when responding to our client’s needs?

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Claims Satisfaction – All Insurer Partners

NTI and GT held equal highest, followed at some distance by Chubb, Allianz and CGU. Scores for Zurich and DUAL were lowest, with Sura, QBE and Vero also below the average score.

Our Member Brokers take great pride in being able to assist in handling and settlement of our Client’s claims when they arise.

This is a core feature of our service to our Clients. Therefore the satisfaction with the claims service provided by our Insurers is a very significant element of our relationship with them.

This has a significant bearing in the selection and recommendation of Insurers for our Clients.

It is without doubt this will become the most significant indications of Insurer selection by our Brokers and Clients. You will note the divergence with some Insurers from their other key indicators.

Claims Satisfaction will have an even bigger bearing on Overall Satisfaction in the future.

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Overall Satisfaction – All Insurer Partners

Chubb users had a clear lead as the insurer with the highest level of Overall Satisfaction, followed with some distance by GT, NTI and DUAL. Below average scores were held by most major insurers, with only CGU ranking above the average.

The combination of Claims Satisfaction, Competitiveness and the ability to offer terms efficiently is assessed in the Overall Satisfaction graph.

These three elements combined are a significant indicator of performance by Insurers in addressing the needs of our Member Brokers and their Clients.

A higher satisfaction score certainly correlates to more positive engagement, and increased placement, on renewals and new business.

Allianz Overview

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Allianz in the Market Allianz is the fourth largest insurer in the Australian Commercial Insurance market, with ~9.9% market share of GWP as at June 2017.

Est. Commercial Insurance Market Share at June ‘17

Source: APRA, ASIC, Company data, Apr ’18

Despite the fourth place ranking, Allianz does not dominate many segments or products like its peers in the top five. Consistent with its positioning in Personal lines, Allianz Australia is well diversified across products and customer segments, with a skew to risks on the east coast.

Allianz’s relationship with insurance brokers in the small to medium segments of Commercial lines is much stronger than with international brokers, as evidenced by the share of wallet with the AUB Group.

Looking forward: It is widely understood that challenges in the motor dealer channel, iCare fees, and NSW and QLD CTP scheme reforms could put pressure on Allianz’s Australian arm in 2018 and 2019 and industry data indicates a dis-proportionate amount of growth may be required from Commercial lines to balance lost profits from other segments.


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Product Summary Usage - Allianz

Allianz’s Private Motor continues to have the highest usage across insurers, while Business Pack was second and Commercial Motor was 4th. All other products were 3rd highest used.

598

74%2nd of 7 insurers

58%3rd of 5insurers

63%1st of 4

insurers

Business Pack Insurance

Home InsurancePrivate Motor Insurance

18%3rd of 6 insurers

35%3rd of 8insurers

58%4th of 8 insurers

ISR Insurance Liability InsuranceCommercial Motor Insurance

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The graphs opposite represent the degree of usage of Allianz in addressing the needs of our Clients in regard to each class of Insurance.

Example: 63% of our Member Brokers use Allianz for the placement of Personal Motor Insurance policies. This ranks them as No. 1 out of the four Strategic Relationship Insurers in regard to the degree of usage.

The Overall Usage and Satisfaction has a very high correlation to the amount of business they transact for our Clients and their ability to address and satisfy the Insurance needs of our Clients.

This usage is very reflective of who our Brokers approach “first” when seeking Insurer support for their Client portfolios.

Alli

anz

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Overall Satisfaction Year on Year - Allianz

The following three graphs show the Year on Year change in Overall Satisfaction, Competitiveness and Claims Satisfaction. The individual product lines showing a green differential represent an improvement and the individual product lines showing a red differential represent deterioration.

This provides a more granular view of the change in Overall Performance of Allianz.

While ISR and Commercial Motor have shown small improvements in Overall Satisfaction since last wave, all other products continue to decline, resulting in a downward trending aggregate top 3 box score across the last 12 months.

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Overall Competitiveness Year on Year - Allianz

Allianz’s Competitiveness continues to trend downwards, as only Liability showed some improvement compared to last wave.

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Claims Satisfaction Year on Year - Allianz

Most products have improved in Claims Satisfaction, with the exception of Liability which has performed contrarily to other products in the past year. Aggregate scores have also marginally improved compared to this time last year (+2pts).

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CGU Overview

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CGU in the Market

IAG (and its related Commercial Insurance brands including CGU and WFI) is the largest insurer of Australian Commercial Insurance risks, with ~20.5% market share as at June ’17 (including Strata).



Macquarie estimate that IAG’s Business Division grew +1.8% in 1H18 vs. the Australian Commercial Insurance market at +3.7% (excluding Workers Compensation and Personal Lines within IAG’s Business Division). Adjusted for the Swann portfolio exit and NSW ESL headwinds, IAG’s underlying growth was closer to +4.6% for Commercial risks.


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CGU in the Market

IAG GWP Growth (6 months to Dec ’17 vs. pcp)

Notes: Dotted lines highlight company-specific asset sales or non-recurring headwinds. New Zealand data is in constant currency. 80% of IAG’s Personal lines in the Business Division are allocated to Home and 20% to Personal Motor.

Source: Company data, Apr ’18

The decline in Commercial risks in 1H18 was due to many factors, but primarily stemmed from broad based portfolio remediation. Despite the shrinking Commercial book, IAG Group remains extremely strong, with high margins in Personal lines underpinning Group earnings.

Looking forward: We expect IAG to continue to remediate its Commercial portfolio in FY18 and FY19. Further, we believe the business will continue to focus on the direct and authorised representatives channels for growth in Commercial lines to balance their reliance on brokers.


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Product Summary Usage - CGU

The Business Pack was CGU’s highest used product (77%), followed by Home Insurance. CGU products generally had high relative usage, with many the highest used across all insurers (Business Pack, Home, ISR, Liability and Commercial Motor), and otherwise 2nd (Private Motor) or 3rd (Management Liability and Cyber) highest used.

598

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The graphs opposite represent the degree of usage of CGU in addressing the needs of our Clients in regard to each class of Insurance.

Example: 77% of our Member Brokers use CGU for the placement of Business Pack Insurance policies. This ranks them as No. 1 out of the five Strategic Relationship Insurers in regard to the degree of usage.



CG

U

52

CGU has experienced a notable improvement in its aggregate Overall Satisfaction score, with each product providing at least a marginal improvement year on year.

Overall Satisfaction Year on Year - CGU


This provides a more granular view of the change in Overall Performance of CGU.

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Overall Competitiveness Year on Year - CGU

Competitiveness has experienced some fluctuation, having improved since 6 months ago but not exceeding its score year on year.

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Claims Satisfaction Year on Year - CGU

Claims Satisfaction has improved year on year overall, with most products also rising since last wave. ISR and Liability are the only products in deficit since one year ago.

QBE Overview

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QBE in the Market QBE is the second largest insurer of Australian Commercial Insurance risks with ~18.5% market share as at June ’17 (including Strata).



QBE dominates all segments of the Australian Commercial Insurance market. Whilst IAG has a preference for small to medium sized insureds, QBE truly spans from small clients, as evidenced with their share of the AUB book, all the way through to global accounts, which they support through their global network. In our view, the added exposure to large corporate accounts will be a drag on pricing growth of QBE’s Australian Commercial portfolio for the next 12 months, due to the additional competition in these segments vs. smaller accounts.

QBE moved in a different direction after ANZ management changed in mid-2016, walking away from risks, tightening claims and underwriting teams, pulling back on growth for Workers Compensation products in WA. Most importantly, QBE clearly communicated with insurance brokers that prices needed to rise. These efforts are now rolling through their first renewal season.

As the Lenders Mortgage Insurance (LMI) and New Zealand units contribute less to QBE’s ANZ division, more pressure may be placed on core Australian Commercial risks for growth and with another management change in this division in early 2018 we believe the prospect of targeted growth may not be too far away.


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As the Lenders Mortgage Insurance (LMI) and New Zealand units contribute less to QBE’s ANZ division, more pressure may be placed on core Australian Commercial risks for growth and with another management change in this division in early 2018 we believe the prospect of targeted growth may not be too far away.


Looking forward: We watch with interest as QBE’s new CEO for the Australia and New Zealand division builds his strategy for the region, be it growth for the sake of market share, or contraction with a focus on underlying profitability. We believe the performance of the local business will be paramount as the broader group undergoes further change.

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Product Summary Usage - QBE

Nearly 3 in 4 brokers work with QBE’s Business Pack, which was third highest of all the insurers. Private Motor was also third highest, with QBE ranking second for both ISR and Liability. While Commercial Motor ranked 6th out of 8, all remaining products placed in 4th position.

504

59

The graphs opposite represent the degree of usage of QBE in addressing the needs of our Clients in regard to each class of Insurance.

Example: 23% of our Member Brokers use QBE for the placement of ISR Insurance policies. This ranks them as No. 2 out of the six Strategic Relationship Insurers in regard to the degree of usage.



QB

E

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QBE’s overall top 3 box scores have enjoyed a substantial improvement across insurance products from last wave (207 to 257), and now stands higher than this time last year.

Overall Satisfaction Year on Year - QBE


This provides a more granular view of the change in Overall Performance of QBE.

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Overall Competitiveness Year on Year - QBE

Though most product types have demonstrated some improvement from last wave, this was not enough to outweigh QBE’s softened scores in the beginning of 2017.

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Claims Satisfaction Year on Year - QBE

As with Overall Satisfaction, QBE’s Claims Satisfaction has more than recovered its scores in the current wave, with all products improving from May 2017.

Vero Overview

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Vero in the Market

Suncorp (and its commercial insurance brands including Vero and GIO) is the third largest insurer of Australian Commercial Insurance risks with ~12% market share as at June ’17.



Macquarie estimate that SUN’s commercial division contracted -0.4% in 1H18 vs. Australian Commercial Insurance market growth of +3.7% (excluding CTP and Workers Compensation). Adjusted for NSW ESL headwinds, we estimate SUN’s underlying growth was closer to +3.1% for Commercial risks.


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SUN GWP Growth (6 months to Dec ’17 vs. pcp)

Source: Company data, Apr ’18

In February 2017, management told investors that the Group would seek to grow in the SME segment and strategically pull back from large corporate accounts. Anecdotally this mix shift has played out, but we often hear comments from the broker channel of broad based losses of share of wallet.

The Suncorp Group remains profitable, with high margins in Personal lines and CTP supporting the company through the bottom of the Commercial lines cycle and a transitional year in FY18 which will see rebranding, investment in technology, and the creation of a rewards program.

Looking forward: We believe Suncorp’s Commercial insurance portfolio will continue to contract for the coming 12 months, led by volume losses on a short tail Commercial portfolio which by our calculations has not made money for the last three years.


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Product Summary Usage - Vero

Although nearly 7 in 10 brokers dealt with Vero’s Business Pack, they only ranked in fourth place, with Private Motor, ISR and Liability also obtaining this position. Vero’s Home Insurance was second highest in terms of usage, while Management Liability and Commercial Motor ranked fifth and seventh respectively.

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The graphs opposite represent the degree of usage of Vero in addressing the needs of our Clients in regard to each class of Insurance.

Example: 60% of our Member Brokers use Vero for the placement of Home Insurance policies. This ranks them as No. 2 out of the five Strategic Relationship Insurers in regard to the degree of usage.



Ver

o

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Overall Satisfaction Year on Year - Vero

Aggregate improvement in Overall Satisfaction from last wave can be attributed to Private Motor, Liability and Commercial Motor.


This provides a more granular view of the change in Overall Performance of Vero.

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Overall Competitiveness Year on Year - Vero

Competitiveness has remained fairly consistent in the last year, with only minor fluctuations within each product. The only shifts larger than 6 points were from Home and ISR insurance year on year, at +8 and -10 respectively.

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Claims Satisfaction Year on Year - Vero

Though most product types (excepting ISR) had strengthened in Claims Satisfaction from last wave, this was not enough to counter the universal declines from Nov-16 to May-17.

Zurich Overview

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Zurich in the Market

Zurich is the fifth largest insurer of Australian Commercial Insurance risks with ~5.9% market share as at June 2017.



Zurich has been through much publicised change in recent years. Zurich has contracted from underwriting ~$1.6b of premiums in Australia in 2013 to ~$0.9b in 2016. This decline was accelerated by the decision to cease underwriting for NSW CTP and Strata in 2016 as well as consumer credit insurance in 2015.

Looking forward: Zurich purchased travel insurance specialist “Covermore” in 2017 and announced their relationship with “BZ Insurance” for Home, Motor, Landlords and SME insurance in early 2018. We will continue to look at the AIMS survey feedback for markers as to whether brokers perceive Zurich are improving their underlying Commercial offering in the Australian market.


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Product Summary Usage – Zurich

The Business Pack is Zurich’s most used product (63%), followed by their Commercial Motor insurance. In comparison with other insurers, all products are either the 5th or 6th highest used.

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The graphs opposite represent the degree of usage of Zurich in addressing the needs of our Clients in regard to each class of Insurance.

Example: 52% of our Member Brokers use Zurich for the placement of Commercial Motor Insurance policies. This ranks them as No. 5 out of the eight Strategic Relationship Insurers in regard to the degree of usage.



Zuri

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Overall Satisfaction Year on Year – Zurich

Overall Satisfaction has increased, both year on year and against last wave. A particular improvement is seen in ISR when taking into account the declines experienced between Nov 16 and May 17.


This provides a more granular view of the change in Overall Performance of Zurich.

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Overall Competitiveness Year on Year - Zurich

The aggregate score for Competitiveness is on par with levels at the same time last year. ISR is the only aspect which has improved overall within the last year, as Liability and Commercial Mother’s improvements in the latest wave is overshadowed by larger declines in the prior wave.

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Claims Satisfaction Year on Year – Zurich

Claims Satisfaction has improved against the last two waves, particularly for Liability insurance.

SECOND TIER INSURERS

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Financial CommentaryWe are unable to provide financial commentary in regard to the following operations in Australia; as they are not publicly listed companies in Australia whose data can be accessed.

CHUBB Overview

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Product Summary Usage – CHUBB

Management Liability and Cyber Insurance rated second highest in terms of usage, while all other product types ranked either lowest or second from the bottom.

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Product Satisfaction Summary – CHUBB

ISR and Home Insurance rated similarly, with the former leading in top 3 score and the latter outranking in the mean. Cyber Insurance rated comparatively lowest, though still obtained a decent mean score of 7.4.

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This is the first time that Chubb have been included in the survey on a Comprehensive basis.

Hence we do not have historic survey results and as such are unable to produce the degree of comparative data that is available on the 5 Major Insurers.

As further surveys are conducted and we begin to build historic survey results for Chubb; the depth of analysis on the Chubb portfolio and their participation with AIMS will expand.

This progression will be seen in the next version of Brokers View.

DUAL Overview

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Product Summary Usage – DUAL

Management Liability is DUAL’s most used product, and also most used amongst other insurers along with

Cyber Insurance. Liability was however the least used amongst all insurers.

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Product Satisfaction Summary - DUAL

Over 1 in 2 gave Liability a top 3 box score (54%) and its mean was also highest at 7.6. Management

Liability and Cyber Insurance was only marginally lower across both scores.

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This is the first time that Dual have been included in the survey on a Comprehensive basis.


As further surveys are conducted and we begin to build historic survey results for Dual; the depth of analysis on the Dual portfolio and their participation with AIMS will expand.


GT Overview

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Product Summary Usage – GT

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Nearly 2 in 3 (62%) of the brokers had dealt with GT’s Commercial Motor, which was third highest.

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GT are a specialist Insurer focused on providing Commercial Motor and Heavy Fleet Insurance coverage.

This is the first time that GT have been included in the survey on a Comprehensive basis.


As further surveys are conducted and we begin to build historic survey results for GT; the depth of analysis on the GT portfolio and their participation with AIMS will expand.


NTI Overview

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Product Summary Usage – NTI

Commercial Motor is the only product offered by NTI, and is used by 62% of AIMS respondents, making it the second highest used out of the 8 insurers that offer Commercial Motor.

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NTI are a specialist Insurer focused on providing Commercial Motor and Heavy Fleet Insurance coverage.

This is the first time that NTI have been included in the survey on a Comprehensive basis.


As further surveys are conducted and we begin to build historic survey results for NTI; the depth of analysis on the NTI portfolio and their participation with AIMS will expand.


SURA Overview

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Product Summary Usage – SURA

Half of the brokers had dealt with Sura’s Business Pack, though this ranked second from last in terms of usage compared to other insurers. Liability’s usage was also one above lowest, with all others at the bottom.

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Overall Competitiveness Year on Year - SURA

Product Satisfaction is relatively consistent across most products, although Management Liability possessed a slightly smaller top 3 box, despite a higher mean.

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SURA are a specialist Underwriting Agency focused on specific lines of Insurance risk.

This is the first time that SURA have been included in the survey on a Comprehensive basis.


As further surveys are conducted and we begin to build historic survey results for SURA; the depth of analysis on the SURA portfolio and their participation with AIMS will expand.


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Macquarie. The Insurance Brokers Bank

With over 30 years’ experience working in the insurance broking industry, wehave developed a unique understanding of what really matters to our clients –and what will help them grow. We have developed strong working relationshipswith AIMS members to support them achieve their business goals - whetheryou’re focused on organic growth, premium funding, acquisition or successionplanning.

We can unlock new opportunities for your business, with our proven trackrecord of creating tailored banking solutions with tangible benefits. And thatstarts with analysing your current cash management and payment processes tofind a more efficient solution.

Our technical expertise in the Insurance broking industry stems from years ofexperience, investment in staff, technology and processes. We have honed ouroffering through close working relationships with our clients, centred on thecommon goal of simplifying and enhancing the broker and client experience.Today, we are the most recognised and called upon bank in the Australianinsurance broking market.

We offer market leading payments technology and customised bankingsolutions to help make life simpler for you, your team and your clients.

Contact a relationship managerTo find out how we could help your business grow, please contact Eoghan Trehy,National Head of Insurance Broking on 0437 367 908 or [email protected]

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Top 3 Box Scoring

Top 3 box scoring refers to the top 3 boxes in a survey result i.e. ratings 8, 9 and 10. See below diagram for further clarification. These scores then get aggregated for further analysis usage.

10 Excellent

9

8 Good

7

6

5 Neutral

4

3 Poor

2

1 Very Poor

Top 3 box scoring

Bottom 3 box scoring

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strategy, action and innovation.

AIMS (A&I Member Services), is the member services provider to Austbrokers and IBNA. AIMS is a joint venture between the two, and works for the collective benefit of the member brokers.

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