There have been plenty of calls for the insurance industry to get its act together when it comes to digitalising businesses and embracing technology – but when that message is spelt out loud and clear from one of the biggest names in the industry, it carries just that little bit more impact.
“Insurance brokery is in the Stone Age in terms of digital,” was the message from
Aviva CEO Mark Wilson on the company’s group earnings conference call. “How would I characterise
Aviva? I’d say we’ve got the wheel, we’ve discovered fire, we’ve all the right tools and let’s see what we can build.
“We believe we have 30% lower costs on our digital products, which means we are offering about 20% lower costs to our existing MyAviva customers. This is a compelling proposition that gives us a key competitive advantage.
“Digital is transforming our business, it’s our future, we want to own the space in the UK. Why? Because for us it has much higher margins. We have the products, we have the systems and it turns out we’re starting to get quite good at it.”
Yesterday, Aviva reported a strong earnings performance (as reported
here) and Wilson was bullish about the company’s ability to deal with a low interest rate environment in comments that were made just hours before the Bank of England’s interest rate reduction (as reported
here).
“A lot of people think that because we are a large financial company we must be sensitive to interest rates,” he said. “Let me make it very clear – we are not. Frankly that’s like saying that all cars perform the same in wet weather – it just isn’t the case. Aviva’s performing very well in wet weather – or at least with the rain clouds looming.
“We have structured ourselves so that we aren’t particularly sensitive to rates and our capital position and our numbers reflect that.”
However, what about brokers’ ability to adapt in this environment? Could they lose business if more insurers look to go direct to reduce their expenses?
Insurance Business UK put this question to Wilson and Aviva chairman of global general insurance Maurice Tulloch.
“The customer chooses,” commented Tulloch. “We’re channel agnostic - 35% of our business comes through the digital channel, 45% from the brokers and the rest from other partners. Brokers over time have proven to be a fairly resilient group and I am sure they will adapt as they have done over the last 10 years.”
“We’re trying to support the brokers with digital as well,” continued Wilson. “We’ve put a lot of money into digital – we’re very much channel agnostic. We are a multi-distribution company but it’s a definite fact that there are some segments of the market that will want to go through digital and our digital business has become a meaningful contributor already. We put out figures that show £111 million profit in the first six months. That’s meaningful and we’d expect that channel to continue to grow and we do have a strategic advantage – we can package our products together and give customers a better rate and that’s pretty helpful.”
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