John Ritchie of Ellipse notes the beginning of the end for price matching.
The group risk sector is one of the few areas of the insurance industry to have withstood the forces of change. In many ways keeping hold of its traditions is something to be admired - group risk successfully delivers lots of cover to lots of people.
But some conventions are really just (very) bad habits. Perhaps the one that bugs me most is the practice for incumbent insurers to match on price. Recently, however, I've seen evidence that we might finally be seeing a new dawn.
It's a dyed in the wool habit: the holding insurer always gets last go quoting on price, sometimes with full details of their competitor's offer.
This is irrespective of whether they have done a good job for the adviser and the client - and indeed whether they have been giving the client a fair price in the preceding period of cover.
If you get to match even when your levels of services have been poor, why would you ever feel the urge to change?
On the other hand, if the industry can break its habit of asking holder insurer to match, we might then see the insurers investing in their processes and taking proper steps to improve service levels.
Although I'm an outspoken critic of this bad habit, I do empathise with the holding insurer's position to a degree and I can see that they may be in a difficult place. When you defend on a price derived from a competitor's basis, it's fair to think there may not be much margin from which to build and invest to develop better systems.
But thankfully the bad old habit may be on its way out. We're finding that advisers, including the major employee benefit consultants, are no longer routinely disclosing the best rate to allow the incumbent insurer to match at the last stage.
Indeed, some are telling the incumbents that the business will be placed on the basis of the best terms offered first time around and that they expect the holding party to quote on time according to what's been agreed with the client.
Advisers tell us that this break from the past means they are getting all insurers - and particularly the incumbents - to quote earlier and aggressively by reference to their own pricing basis rather than matching somebody else's. As a result of this change, advisers are enjoying various benefits:
- a faster review process,
- more control in their own processes,
- lower costs,
- easier to meet their deadlines with clients
- easier to prepare their reports more reliably and professionally.
Advisers are getting better prices from insurers overall too and even some of the big incumbent insurers are finding that the change could be for the better in the long-term.
After all, if you price relative to your own basis then your control of your book and analysis of your business can take a leap forward.
So, I'm optimistic that the habit is slowly being broken and it will deliver benefits for all parties, not least a standard of service that for years was pretty much absent from the group risk market.
John Ritchie is chief executive of Ellipse
