Despite a wealth of uncertainty throughout the insurance industry, AXA was able to report positive results yesterday with a 4% rise in net profit for the group overall (as reported
here) and an 8% profit rise for its UK and Ireland business.
However, while this set of results may have been positive they covered the period ending on June 30 – just one week after the shock Brexit vote, which is widely expected to negatively impact the industry. So can we expect a challenging environment ahead for insurers and brokers alike? Amanda Blanc, chief executive of AXA UK and Ireland, spoke exclusively to
Insurance Business UK about her vision of this uncertain future.
“It’s hard to predict especially as we don’t actually know what the consequences of Brexit are yet,” she remarked. “If we look at what Brexit could do to the economy and what it could do to the confidence of businesses and individuals then perhaps you’re looking at an environment where growth is not going to be as good as it has been for the last couple of years – and as an insurer there are consequences because if our customers are not growing, then we’re not growing.
“Then there is the other impact of low interest rates and low investment returns and we’ll just have to wait and see how that plays out – we have the Bank of England releasing its interest rate announcement and then we’ve got a new government in place with its economic policies still to be seen.
“However, in every environment there is opportunity and for those insurers that are agile and are quick to respond and diversify then there are definitely opportunities. But it is going to be challenging. As our CEO said, we should focus on the things we can control and we can change rather than the things that are outside of our control.”
According to Blanc such a set of circumstances won’t just impact major insurers such as AXA – it will trickle down to brokers too. Though she doesn’t anticipate insurers looking to cut brokers out with increased emphasis on their direct models, she does feel it’s vital that brokers don’t become complacent and instead make sure they are innovating just as much as the insurers they work with.
“The move to a direct model has already been made – that’s old news,” she said. “For those insurers that have done that and done that well, it complements their business model – they have multi-channel distribution and the best of both worlds.
“The challenge for brokers is: are they innovating? Are they doing all the things that we, as insurers, have to do and that other businesses have to do? Some are, some aren’t. They have to think about how they are going to respond to an environment of low interest rates and low economic growth and a world where transparency is expected. They need to think about how they’re going to adapt their business models to make sure they are going to survive in the future.
“Fundamentally, if you don’t change your business model you will get eaten. Getting eaten isn’t something that takes a long time. In my view once you’re behind, once the enemy has caught you, they eat you very quickly. You only have to look at retail empires that have been destroyed – it’s been a fast process - from hero to zero very quickly.”
While there is no resting on laurels at AXA, Blanc is highly satisfied with the company’s current performance, reflected in its earnings report.
“We think it’s a really strong set of results – the highlight being that we’ve been able to secure really good growth across the business and across the market while maintaining our profitability,” she said. “In the outside world it’s a challenging investment environment so therefore to be producing profit, that’s something we’re really proud of.
“We’ve made great progress in our health business, led by the acquisition of SimplyHealth last year. It’s a very innovative business, it’s very creative, it’s focused on its members and has high levels of customer satisfaction. In other parts of the business we have seen good growth too – the direct business for example is really becoming market leading in terms of how it approaches customer journeys.
“We’re also a strong SME player in commercial lines and we stated last year that we wanted to move into mid-market. So what you’re starting to see is that strategy bearing some success. We’ve also seen strong growth in our Connect business where we are interacting with brokers digitally and we’re able to respond immediately to any queries they may have in terms of buying cover and so on. That has made a really big difference.”
There was some caution however, with Blanc noting that the personal lines broker market is currently challenging for the business – but she believes that brokers will soon reap the rewards of the company’s investments.
“When I look at the direct motor book and the broker motor book, they are very different,” she said.
“The direct motor book is much bigger, even though five years ago it wasn’t in a good place. We invested very heavily to fix that business and as a result it’s really, excuse the pun, motoring. The intermediate business had lacked investment but we’ve now corrected that and invested in insurer hosted pricing, data enrichment and more. So we have invested in those areas but we did it later than with the direct business so it will just take longer for that to feed through. But the results will come.”
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