Income protection market: Dutch consultants call on insurers to raise the bar

By Insurance, News, Pensions

The Dutch collective income market is booming – its social relevance is greater than ever and margins are improving. Foreign insurers enter the market and several Dutch insurers make strategic acquisitions throughout the value chain. At the same time, consultants and insurers are increasingly at odds. IG&H spoke to several parties in the market to determine how they can break the tension and join forces to work on effective customer solutions together.

There is a strong consolidation in the income protection market. In 2018, for example, the 50 largest consultancies accounted for half of the total production – 60% without sick leave insurance. All insurers are fully committed to this leading group and are improving their services. Nevertheless, they don’t always hit the right note: insurers’ average NPS among income consultants is -15 in mid 2019. The average performance score is 7.1.

Gradually, the consequences are becoming clear. For instance, >5% of the total WIA/WGA premium is placed with foreign insurers, elipsLife being the main example. Their success primarily results from ample underwriting capacity, sharp pricing, and an equality-based collaboration model with room for services offered by the consultant. In addition, we’ve observed a development we’re familiar with in the non-life market: substantial growth of mandated brokers. By now, 35% of the sick leave portfolio has been placed with mandated brokers (2016: 25%) – with service providers (including Felison, Nedasco, and Mandaat) making a name for themselves. Often, they turn out to be the go-to solution in the SME segment: they offer administrative convenience and quickly arrive at a market-wide price comparison. Between 2016 and 2018, their portfolio grew by more than 50%, and their market share in the intermediary sick leave market has increased to as much as 12%.

We believe insurers can improve their services on three axes:

1.    Mismatch between customer demand and product offer

Sustainable employability is high on employers’ agendas: absenteeism costs are rising, and in this difficult labor market, all attention goes to being a good employer. At the same time, income issues are growing more complex, and customer needs increasingly diverge.

A common observation is that many insurers opt for standardization – which, of course, results in simplicity and lower costs. But it also leads to a limited response to sector-specific needs and a lack of product innovations. Furthermore, consultants believe predictive data are still underused. For example, they are open to a model in which investments in sustainable employability lead to lower premiums. After all, it improves the risk profile, which means the insurer can benefit from a decreasing claims ratio. Finally, they indicate that the risk appetite of Dutch insurers seems to wane, making it difficult to insure a growing part of the market.

2.    A lack of digital innovation

As a result of consultants’ professionalization and cost pressure from the market, they place increased demands on digitalization. A much-heard adage is, ‘Stagnation means regression’ – which concerns administrative processes, among other things. Requesting information during quotation processes is often time-consuming, and the lead time for customized quotations increases. Furthermore, consultants expect more digital insight into customer and risk data so it can support their consultancy and serve as an additional service for employers.

3.    Declining trust due to conflicts of interest

Both consultants and insurers support employers in improving sustainable employability through consultancy and various prevention & reintegration services. This often leads to conflicts of interest with consultants and insurers ‘competing’ for access to the customer and the associated revenue. To many consultants, recent acquisitions by Aegon, a.s.r. and NN also fit into this picture. They fear that insurers will become competitors in an increasingly important part of their business model. Therefore, their message is clear: actively seek collaboration so the customer ends up getting the best solution.

In-depth solution guidelines

Our conversations yielded more than a problem analysis. In fact, they’ve provided concrete tools for a better collaboration between consultants and insurers. Curious? We’ll explain them in our next three blogs.

Written by: Bob van Opstal (Manager Pensions) and Idriss Abdelmoula (Consultant Pensions).
For more information, contact Bob: bob.vanopstal@igh.com

Foreign insurers spread their wings on the Dutch non-life market

By IGH, Insurance, News

In the past three years, foreign insurers have managed to increase their premium volume to more than 10% of the Dutch non-life market, according to a study conducted by IG&H. More and more foreign risk bearers enter the Dutch insurance market without reporting to DNB, helped by a mismatch between customer demand and offer, rising premiums, harmonizing legislation, and consultants who professionalize.

The newspapers are full of press releases about foreign risk bearers that enter the Dutch market, but exact figures on their size are difficult to find because new entrants don’t report to DNB. Now, it’s possible through a combination of interviews as well as public and IG&H data.

Whereas Dutch risk bearers have grown by barely 3% a year in recent years, foreign risk bearers have managed to record an annual growth of more than 10% up to approximately €1.6 billion GWP in 2018. This means they now hold more than 10% of the Dutch non-life market (note: this 10% concerns foreign risk bearers that have never reported in the Netherlands and therefore don’t include Allianz and Amlin, for example). The premium volume is still highly concentrated – approximately 80% of this premium volume is still provided by risk bearers that have been active in the Netherlands for a long time (e.g. Chubb, AIG, and Lloyd’s). However, this division is expected to become less concentrated in the coming years.

New players such as Starstone, China Taiping, and CNA Hardy expand the number of mandated brokers step by step, focusing primarily on corporate non-life insurances at the larger, professional consulting firms and service providers. In doing so, they indicate their specific desire to grow as well as their assiduous search for larger limits. Furthermore, interviews point out that risk bearers organize themselves with the long term in mind – by implementing Dutch management with market experience, among other things.

Impact on the Dutch insurance landscape

This expansion of foreign risk bearers has a major impact on the Dutch insurance landscape. Traditional full-service insurers are coming under further pressure. Whereas in the past, successful and profitable activities could be realized in the Dutch non-life market through one of the three value chain roles (full-service insurer, mandated broker, consultant), the mere role of underwriter has been successfully established now, too.

This means insurers are now being attacked in a part of the value chain where they used to operate relatively unopposed. On top of that, foreign parties can reap the benefits of international diversification and a position that’s often stronger in financial terms, which means they hold strong cards for this position.

This doesn’t directly sideline traditional full-service insurers. In the search for distinction, though, many Dutch insurers will be forced to delve deeper into specific target groups and risks. While doing so, it’s important that they truly provide added value through an in-depth understanding of local customer needs, through (data-driven) expertise, and by expanding the offer with related services. Instead of mere insurances, they should offer complete solutions, which provide a distinctiveness that is difficult to match for foreign competitors. For foreign risk bearers, the Dutch market represents a relatively small share in the total portfolio, and they often lack specific (target group-related) knowledge about the Netherlands.

If you want to read the full paper in Dutch, please find it here.

Written by: Jan Pieter van der Helm (director insurance), Jeroen Enthoven (consultant insurance) and Remon Balster (consultant insurance)

Mismatch leads to visible decline in the business claims market

By Insurance, News

More and more occupational groups are (temporarily) uninsurable. The business claims market is going through major developments and is looking for a new balance. Due to a sharply reduced supply and increasingly complex needs, a mismatch is increasingly arising. One that will not be solved for the time being. This is shown by the IG&H Performance and Distribution Monitor.

Since the big blow in the sector ten years ago, insurers in the business claims market have been struggling with their positioning. Which target group do they want to serve and, for example, do they work with authorised agents or not? Until there is clarity about the price, the supply side is strongly standardized to limit risks. As a result, our monitor shows, the sector is effectively standing still in its development.

Conflicting developments

The sector is faced with a mismatch between supply and demand. On the one hand, the complexity of customer demands increases. What used to be a simple risk is changing into a complex risk due to demographic, ecological and technological developments.

At the same time, the range of products offered by insurers is shrinking and even more standardized, among other things through new data solutions which should exclude risks. Although these can have a positive impact on financial performance, they also increase the number of uninsurable groups. This resulted, among other things, in reports in the news about taxi drivers and waste processors. The monitor also shows that, for the first time in a long period of time, independent advisers are not as good at assessing the services provided by insurers in the commercial property-casualty market.

Finding balance is not possible without a fight

Insurers will have to break this trend. In the future, the market will have to move back to a new balance in which customer and insurers share the risks. IG&H sees three different options; hyper focus on niche specialisation, an increase in scale or expansion of the service. Finding a new balance will be gradual, but it will be tricky, since certain professional groups are (temporarily) difficult to insure.

Share of independent insurance advisors increases further

By Insurance, News

The share of independent advisers in the distribution is increasing, but the evaluation of insurers’ services is deteriorating, according to the Performance and Distribution Monitor of IG&H. Are insurers properly pre-sorted?

Last year we reported that the independent consultant was on a strong rise. The most recent data show that this growth continues. With the exception of the life market, the share of independent consultant remains at least equal. In the commercial insurance market, individual income market and mortgage market, the share of independent consultant even increased. Due to the strong positioning of the advisor for advice requirements regarding mortgages, occupational disability and (new) business risks, this growth is expected to continue.

Tension field of interest advisers and insurers
However, the evaluation of independent consultants’ insurance services is declining. Historically, insurers in private sub-markets were better assessed than those in business submarkets. In the last measurements, this difference was reduced because the performance in private submarkets deteriorated. This is partly due to the need to realize cost savings.

The market is clearly in motion. Insurers are rearranging their processes and improving solvency, agitated and under pressure from shareholders and regulators. In the search for a new balance, the emphasis is now on cost reduction and risk reduction. That is why they make strong choices in the areas of products, processes, pricing and remuneration. In some cases in the non-life insurance market, this even leads to uninsurability within certain branches.

Together with a declining performance, this all forms a breeding ground for a lower NPS. Given the prominent and often even increasing importance of advisers in distribution, this creates a tension field.

Jan Pieter van der Helm
Director Insurance at IG&H
j.vanderhelm@IGH.NL

Granular share of wallet data for all major product lines for truly data-driven sales management

By Analytics, Insurance, Uncategorized

What they wanted
Make data-driven choices in the broker market: that is what leading Dutch omnichannel insurers want to be able to do. Key questions are: Who are today and tomorrow’s leading brokers? Where do we stand in terms of both volume and NPS? How do we enhance our position to realize sustainable growth? To this end, they wanted to gather in-depth data on volume, movements, share of wallet, and NPS. Read More