Advocating industry alliance

As head of broker development, Colin Calder spends most of his time travelling between Axa's offices and its broker agency offices across the UK. Rather than regarding himself as a manager, Calder sees his role as being more akin to business-to-business marketing.

Calder says: "We don't simply deal with brokers on the basis of price but are their business partners. My job is to find ways to work together and help each other."

Axa has built up a wide range of support facilities for brokers to help them develop their accounts. This includes help with marketing and sourcing new business leads, access to special deals and IT consultancy and advice on regulation by the Financial Services Authority.

In addition to working with brokers, Calder maintains contact with the trade press and with trade organisations such as the British Insurance Brokers' Association and the FSA. He is also a director of Polaris and is actively following the launch of imarket.

He continues: "Working together as an industry might sound cosy but it is a commercial reality. We need to work as an alliance rather than as adversaries to bring more efficiency and reduce costs - helping insurers, brokers and the end-customer."

Broker relationships

Calder believes that Axa stands out from other insurers because of the intimacy of its broker relationships.

"We are more intimate in terms of our knowledge and understanding and work closely with the majority of our brokers in contrast to some of our competitors," he declares.

However, Calder criticises both brokers and insurers for failing to keep each other and the customer informed. He adds: "In the past insurers haven't been very good at dealing direct with the customer and remembering to keep the broker involved and, as a result, there has been a lack of trust.

"Brokers have always protested they are close to their customers but this is not what customer feedback indicates. The customer and small to medium-sized enterprises value knowing who the insurer is. For example, we receive a lot more requests from brokers on behalf of their clients for statements on our financial strength. This is an example of how we should work together."

According to Calder, there are a number of questions that need to be addressed by the industry such as where does the broker add value? where does the insurer add value? where can customers do things for themselves? and should brokers have a role to play in straightforward claims?

He continues: "Many brokers are happy for the customer to deal direct with the insurer. The key for the insurers is to keep the broker informed of the claim and of any problems that arise. However, some brokers insist everything goes through them and this is a debate that the industry needs to have - I question whether this is the most efficient way of doing things."

Calder argues the role of a broker could be more like that of solicitors and accountants, where they are available when needed but not involved in everything that happens on a day-to-day basis.

Axa recently reported a fall in adjusted earnings for UK business of £27m to £72m in 2003. Globally, the Axa Group reported a strong performance last year with adjusted earnings up 7% to £934m.

The net combined ratio for Axa UK property and casualty advanced strongly to 100.5%, from 106.4% in 2002 and is expected to be reduced to about 100% this year.

Calder says: "The progress that we have made since Axa came together has been significant. We are not quite there yet as the operating ratio needs to be at 100% and we are still some points off achieving this - but are well on the way."

Axa made good progress in general insurance activities with an improvement (excluding discontinued business) of £137m against that of 2002. Axa Insurance's commercial intermediary business was up by £126m and total commercial gross written premium was just over £1bn.

He says: "The improved results are down to an underwriting discipline, a distribution discipline, reduced expenses and significant investment in IT."

According to Calder, the market is more competitive than ever, despite there being fewer insurers and brokers. However, he tries to avoid using such terms as 'softening' and the 'hard market' as this drives unnecessary behaviour.

"The insurance market has always been competitive. Problems occur because we are too slow to react when prices go up or down. Advances and investment in IT and the internet will facilitate the exchange of information and should have the added benefit of helping us react faster as we will be able to see what is going on across the industry. IT will make a huge difference to the industry, creating greater transparency and trust."

Efficiency through investment

Axa has pledged to drive efficiencies through continued investment in technology in 2004. Calder argues that Axa has already made significant achievements. He says: "When Axa came together with Provincial and Guardian there were a number of IT systems. A priority was the creation of a single IT platform. There is now a single platform for commercial lines and a single platform for personal lines, which has been achieved on time and within budget, which is unusual for an IT-related project."

Axa now intends to focus on making the claims process more transparent by building technology into the front-end. So, when the company processes a claim, it can determine exactly where the customer is in the claims process.

Axa hopes to move to full-cycle end-to-end connectivity and process, building on the work done last year to integrate systems and build trading systems.

It is aiming to have half of its commercial business e-enabled by the end of 2004 and is aiming to e-enable 100% of its commercial business by the end of 2006.

Calder argues that the use of technology will not mean that the industry will become less of a people business. He says: "It means we will be confident that routine administration will flow back and forth between insurers and brokers so we will be free to do business, not sorting problems. It will change the topics that take up our time. At the moment a lot of the time is spent pinpointing and sorting out errors.

"imarket is progressing satisfactorily with its phased roll-out and will be a success," says Calder.

"The process of signing up brokers is complicated because of security issues, which are time consuming, but imarket is on track. Insurers are getting their products ready and it is on target to produce a single sign-on, secure trading environment for a wide range of products and services."

Notice of renewals

Brokers expressed anger after the FSA scrapped the proposal to force commercial insurers to give 21 days' notice of renewal terms with the release of its final rules for general insurance.

However, Axa has announced plans to provide brokers using its own platform with twice as much notice on some commercial risks. Axa Business Risk, which will be rolled out later this year, is a modernised version of businessrisk.com, which was acquired following the collapse of Independent Insurance. ABR is in the process of piloting a renewals and mid-term adjustment functionality, which means brokers will be able to get their renewals online ahead of the 21-day period.

Calder adds: "We have also signed up with an industry initiative to provide notice of renewals 21 days before the renewal date, which gives the broker a chance to get terms to the customer, look at alternatives and get back to the insurer prior to the renewal date. If a case proves more difficult, for example where a survey is needed, then we will agree to extend the cover if necessary."

When Calder first started in insurance 40 years ago, all functions were performed manually using a paper and pen. Even today there is a reliance on paperwork, he says.

"You can do business by paper if you like, but the paper mountain that will very quickly emerge is not worth contemplating. The use of technology will be critical in the future."

Axa Business Risk is the internet-enabled way of doing business he says, adding: "It is a key way in which we will be able to help both ourselves and brokers to do business more efficiently by reducing error rates. It will also provide much of the tracking and recording facilities that the FSA will require."

Calder believes the FSA has taken the right steps to ensure that there is a viable distribution mechanism. He predicts the vast majority of brokers will apply for authorisation. However, Calder warns that the true impact of the FSA capital requirements are yet to be felt and, in some cases, is yet to be fully understood by brokers.

However, he adds: "A lot of brokers that want to be part of the market will be able to. When the FSA first started, the feeling was that there would be a massive reduction in the number of brokers, but now this looks unlikely."

Axa aims to write more business through its premier and prime brokers. However, Calder denies rumours that it plans to cull its smaller agencies.

"We have been enquiring as to whether brokers are taking steps towards authorisation as required by the FSA, but we have no plans to cut agencies. Smaller brokers shouldn't be worried that we are about to cancel their agencies. We can continue to work with them as we have a separate unit and approach to looking after their needs."

Calder believes that networks will be an attractive option for many small to medium-sized brokers. He says: "Networks are an inevitable consequence of moving from the cottage industry to the plc world as they enable a more corporate structure to be introduced and bring many group benefits."

Although Axa is French-owned, Calder believes its UK business will not go the way of its parent with tied agents.

He says: "The market in the UK is completely different. We believe independent brokers are a critical part of general insurance."

In fact, Calder believes there is a huge opportunity for UK brokers to become more than insurance intermediaries.

"A lot of successful brokers recognise that the insurance policy provides only so much protection of a company's balance sheet. There is opportunity to go into non-insurance products such as disaster planning, risk management and health and safety. The brokers that work nine-to-five and close for lunch will not have a future, but those that respond to the demands of the customer and offer add-ons will be the winners."

He concludes: "While brokers should be looking at what add-ons they can offer, the prevailing thought should be how simple is it for the insurers, brokers and the customer to do business. We must work together and make use of technology to drive efficiencies to the benefit of all parties."