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: firstname.lastname@example.org