We caught up with Sue Coffey, Personal Lines Director at Covéa Insurance to see what is happening with Personal Lines Capacity.
Sue, are brokers right to be concerned about reduced capacity in the personal lines market?
Sue: “I totally understand broker concern about capacity leaving the market. The market has seen some insurers pulling out altogether, others reducing their underwriting footprint or narrowing their risk appetite. This is affecting all personal lines, but it’s most prevalent in the motor market. I think brokers understand the reasons; the pandemic starting the snowball effect which has gathered momentum with Brexit, new pricing regulations, the war in Ukraine, and the cost-of-living crisis which, all combined, have pushed the sector into a loss-making situation.
You might say there have been losses in the past, but what’s different this time is challenges are affecting all classes, so you don’t get the balancing effect you usually see between different accounts. For example, if home has a bad year with weather events, then you’d have motor performance balancing it. This time, cost pressures have affected all personal lines business classes taking away any wiggle room. Motor has been worst hit because of the rise in complexity of vehicle repairs which has been compounded by all the other cost and supply chain issues.
But capacity reductions are happening across all personal lines, and I think we may not have seen the last. Having said that, I think brokers understand change is needed and we’ve certainly found our broker partners to be incredibly supportive of us. They say we need and want you to be here and are working with us as we introduce changes to support a return to profit.
They’re less interested in battling to get lower rates and more interested in retaining capacity.”
What’s Covéa’s focus and how have you adapted your personal lines strategy?
Sue: “We’ve looked to simplify our business with a clear strategy to walk back to profit. We’re certainly not alone in making changes but where I think we’ve been different is that we’ve been very open and communicated with our brokers about what we’re doing and why.
Essentially, we’ve simplified our Personal Lines range to four key products – Household, High Net Worth, Private Car, Commercial Vehicles. Plus we retain a sizeable Pet account.
In terms of distribution, we remain committed to our broker partners. We’re concentrating on working with brokers where we can add mutual value and yes, we have walked away from a small number where that wasn’t happening. We’re making more use of data and Insurer Hosted Pricing (IHP) to deliver competitive real-time pricing that is responsive to customer behaviour. We have increased rates, but we’ve tried to be targeted about it. We’ve also de-risked our book – we’ve not walked away from any big chunks of business but there were small pockets that were unprofitable that were affecting the overall account performance. Examples are cars with more than six seats and Land Rovers which are a high theft risk.
“We’ve stayed true to our core belief that has always been our USP – our unwavering commitment to customers and our claims service. We won’t compromise on that.”
Crucially, we’ve stayed true to our core belief that has always been our USP – our unwavering commitment to customers and our claims service. We won’t compromise on that. We’re also leaving no stone unturned in finding more cost-effective ways of working, reducing our overheads and expenses, for example, eliminating premium leakage, tightening controls, and improving our systems. We aren’t firefighting, these are changes that will set us up for the long term.”
What do you think is the biggest challenge for PL brokers right now?
Sue: “I think having a strong offering for their customers – first they must be able to place the risk and second, they must do it competitively. It’s really tricky for them right now because prices have gone up so much, finding a price that’s acceptable to customers is not easy. Some of this is about educating customers about the reasons why premiums are going up and we’re working with brokers to do that.”
What are you (Covéa) doing to help brokers struggling with this?
Sue: “ We’re trying to ensure we remain a market for brokers in a way that’s sustainable. To do this we need to charge the right rate for the risk, using data that’s up to the minute and really accurate. That’s why we’re continuing to invest in data and IHP and we’re really keen to work with brokers who have their own data that we can use to enhance the accuracy of our pricing for them. We’re not compromising on offering products with value and we’re not cutting costs to the detriment of customers. We know we must deliver on our promise and be there when the customer needs us.
The other big thing we’ve done is stay visible, which I don’t think all insurers have. It started in the pandemic where we kept lines open and continued to keep brokers in the loop.
We’ve probably got more touchpoints now with brokers than we’ve ever had, for example, we hold regular broker networking events, bringing everyone together and hosting experts to share knowledge. We’re trying to facilitate conversations and work collaboratively so that we can solve problems together.”
What do you think is the biggest opportunity for brokers?
Sue: “Because customers are having a difficult time in finding cover at competitive prices right now, brokers offering an advised service have a great opportunity to demonstrate their value.
For non-advised sales, it’s about customer choice and the ability to keep offering customers choice and different cover levels.
In such a challenging market you really want to speak to a broker. I know my insurance is coming up shortly and I’ll certainly be talking to my broker to place it.
“Because customers are having a difficult time in finding cover at competitive prices right now.”
I think the other thing is, brokers have the inside track with insurers and know through experience which insurers will be there to help customers at the claim stage, so they can place the business on more than just price. If you are unlucky and have a claim, they can also work with the insurer to facilitate the claims process.”
What do you think sets Covéa apart in the market?
Sue: “We have a very clear strategy, which we communicate clearly. We’ve stayed visible in the market and kept up broker engagement, even when things have been difficult, hosting events and bringing experts to the table to discuss hot topics like inflation and the cost of living. We’ve owned our financial results, explaining to our brokers what we’re doing to get back to profit, staying true to our partnership approach.
“We’ve owned our financial results, explaining to our brokers what we’re doing to get back to profit.”
We’re investing in areas that will improve performance in the long term. We haven’t cut back on our view that the customer is central, and we’ve maintained our strong customer focus; I’m not saying it hasn’t been a challenge, but we’ve done it. Our claims service remains strong and we’re delivering on that promise.
We’re also working with more small and medium brokers, alongside the volume brokers, helping to extract maximum value for example, by using their data to give them a better rate. We’re building strong relationships with customer focus, collaborating with honesty and transparency.
“We will not be distracted.”
Heading into 2024, we’re in a much stronger position than we were. 2023 has been challenging with lots of changes and the challenge isn’t over yet; there’s lots as an industry we need to recover from. But at Covéa we are in much better shape, we have a laser focus on our strategy, and we won’t be distracted.
I’m pleased to say our business is on track to return to profit by the end of 2024, provided there’s not another war, major weather event or pandemic, but that’s insurance.
For more information contact:
Paul Rountree
Senior Distribution Manager
07732 402699
Steve Cowley
Senior Distribution Manager
07515 575608