Insurers going back to basics on schemes - BLW's Brett Sainty

Earlier this month, SchemeServe released a report which revealed that there had been a considerable drop across the board on scheme numbers with the biggest falls being in cyber.

Cyber had been one of the best performing schemes since the start of the pandemic, but in the last six months cyber volumes fell 24% and total commission income fell 28%. The second highest earning scheme for brokers back in March 2022 was combined liability, jbut ust six months later volumes have fallen by 24% and commissions earnings by 26%.

According to Sainty, pictured, around 20 years ago, schemes were mostly in niche areas and covering very specific risks. Furthermore, many schemes included trade association partners and the market was soft.

He added: “I think the acceptance criteria [for schemes] was broadened by insurers. As an industry, we started calling things schemes that perhaps weren’t schemes previously. It was the ability to give the broker more authority and to write more premium.

“So, what we are seeing now is the insurer taking more control and going back to basics. Insurance companies are losing money and are noticing certain schemes, that would never have been a scheme previously, are not performing well and not making an underwriting profit.”

Scheme success

According to Sainty, a factor that makes a scheme a success is a strong membership base. A trade association would be included in this, which the market has strayed from.

Sainty said insurers are going back to this and realising that they cannot put their trust in brokers who start insurance schemes just because they work with ‘a couple stores’ in the same market.

He continued: “Trade associations are important because what you get is buying power. They are all committed, they’ve got common interests and knowledge.

“We will see insurer appetite leaning towards whether a broker has a trade association on their side. They want to be able to put the association’s badge on the policy wording. A broker needs to be able to deliver that confidence.”

Expertise in the market is key, according to head of schemes at Aston Lark, Lee Scott.

He added: “As a schemes broker you have got to be asking the right questions, and you’ve got to have a level of expertise in that marketplace. You’ve also got to be able to convince the insurer around your decision.”

Research

Understanding the market includes researching what schemes already exist and providing the insurer with enough reason as to why your scheme will perform well.

Account executive at Marsh Commercial, Trevor Allsopp, commented: “There is no point on trying to launch a scheme and there already being ten exact schemes available, for a small number of clients. You need to have a scheme which is unique and something that the market is ready for.”

From the insurer’s side, director of mid-market, schemes and regional specialty in commercial lines at Aviva, Michael Yabantu noted what is already successful.

He concluded: “We know that successful schemes tend to be those offering a specialism across distribution, product, technical capability or a combination of these areas. To support our schemes ambition, we are also aligning broker development managers to identify and pursue opportunities in new markets.”

However, it is not all doom and gloom for schemes, as SchemeServe’s report detailed that motor trade volumes have increased by 10% in the last six months. On top of this, contractors all risks’ volumes were up 5% and commissions were up 10%.

Adam Bishop, CEO of SchemeServe, insisted that this could indicate opportunity for growth in commercial combined and contractors all risks.

The next set of data, which will be released in March 2023, will be one to watch to see if the number of schemes and commission levels continue to drop.

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