Towergate:: the price of being "more corporate"!?

It is a rare occasion when I praise Aviva for their strategic decision-making but this is one such occasion! However, I was immediately reminded of the spat of a few years ago that saw Towergate and Zurich “agree to disagree” over respective strategies.

tripWhilst BIBA attempt to appease the most blinkered of their membership by “wasting” money on a Deloitte review and a declaration that they intend to fight an EU move toward hard [commission] disclosure, the reality of a badly broken model is glaringly obvious…

A source claimed that the network decided to disengage after it had become frustrated at Aviva’s lack of understanding of the model and the value it offered the provider: somehow I doubt it is a failure to understand the model and more to do with a lack of faith in the ability of the model &/or Towergate to adapt to survive a turbulent economy and in the future FS landscape.

Unsurprisingly there is no mention of the “value” that is LOST to customers through the network’s “central charge” and unsustainable commission rates! Both of which impact their (Aviva’s) ability to achieve underwriting profit or to offer, reduced, sustainable rating at a time when the customers’ needs far outstrip this, or any other network’s demands: driven by their need to keep on selling in an attempt to outrun the tail of their own making…it didn’t work for the banks and it may not work for them for exactly the same reasons.

A spokesperson for Aviva responded: “Our decision is based on our commitment to build strong, local relationships with our brokers to ensure that they get the best deals with Aviva.

Aviva confident of retaining broker network business Insurance Age.

 The mistake of misinterpreting inertia and apathy as loyalty…

Although I admire the Aviva stance, I think they are severely over-estimating the nature of the relationships they have with many regional brokers. After all why should these brokers trust them? They abandoned them in favour of supporting Consolidators and networks; engage in dual pricing (for both Commercial and Personal lines); relentlessly pursue direct business; have, over many years, ranked (with Axa) at the bottom of the pile for service; given authority to repair networks based on insurer cost NOT customer satisfaction; treated staff appallingly and, generally, only been consistent in their inconsistency! Perhaps if they had worked as hard at serving customers/brokers as they did at making sure their, more creative, competitors couldn’t eat into their market share they could be more confident about the immediate future!

Aviva have to pay more to their broker distribution channels because it is so expensive for brokers to deal with them! Transparency, technology and making themselves, tangibly, BETTER and easier to do business with is Aviva’s best hope.

All in all I wouldn’t want to rely upon broker goodwill, nor would I underestimate the pressure upon Towergate/BN to find an alternative insurer (source of central charges) as a matter of great urgency…I just wonder which insurer(s) will be foolish/greedy/short-sighted enough to take on a, no doubt, massive book of risks despite the likelihood that they:

are under-priced, with

unpriced limits/extensions, and

inadequate/incomplete underwriting information – unknown risks

are “loyal” to price before broker or insurer

fragile (due to economic conditions)

at a time, in the economic cycle, when claims and fraud increase

I’m loathe to say that we are seeing “the beginning of the end” for the current model but the cracks (that I have been banging on about over many years) are widening and the end game has definitely begun.

This is COMPLEXITY, risk and uncertainty at work in the real world of the Digital Age! This time, size or market share will be no match for agility and adaptability! Aviva may not have ensured either their survival or demise BUT will, at least, be able to say they took a stand. Others will be left to defend commission levels and charges that, significantly impact the price a customer pays…I know which camp I would rather be in when Regulators, OFT, customers, etc. start asking really tough questions!!!

This article from 2009:

 I have consistently warned of the consequences of NU’s “strategy”. The reputational damage done. Their feeble attempts to provide anything resembling service to longstanding, stable and profitable relationships amounted to “lip service.” Instead they promoted and sought out relationships (sic) that could provide turnover (nwp) because, if NU secured market share, others couldn’t. 

A cunning plan in many sectors but not one with a “tail”…ask any underwriter.

2 Responses to Towergate:: the price of being "more corporate"!?

  1. “The rating downgrade reflects the continued significant levels of financial indebtedness of the Towergate Group and limited Ebitda earnings coverage which have not significantly improved in recent years, on a comparable basis.”

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    Insurance Age – Serving the broker community.
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  2. “Towergate can confirm that it has launched a further bond offering to investors.
    “It is intended that the bond issuance, if successful, will be utilised in the refinancing of certain existing debt instruments.”
    It understood that Towergate Finance hopes to secure two bond notes, both worth some £200m, which will mature in February 2018.

    Read more:
    Insurance Age – Serving the broker community.
    Claim your free subscriptions today.

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