“[The insurance cycle clock] doesn’t work anymore”

Ausure chief executive Scott McCarthy (pictured), whose insurance experience spans more than three decades, is no stranger to hard insurance markets. Here the industry veteran talks about “really difficult” times and what his camp is doing to address capacity woes.

“At my age, I’ve been through two or three of these [hard markets],” McCarthy told Insurance Business. “The one that I remember that was really difficult was in 2001 to 2003. This [current] one is probably more difficult than that because it’s affecting more classes of business. It’s basically affecting all classes of insurance, from an underwriting appetite perspective and pricing-wise. Virtually every conversation with clients is talking about difficulties with their insurances or the pricing of it.

“I don’t think the cycle will be like what we’ve been used to in the past where it’s always been depicted by a circle or a clock. I don’t think it will be like that anymore. [The insurance cycle clock] doesn’t work anymore. Things might become easier, but I don’t think we’ll go back to a situation where mainstream insurers are really hungry for business. They’ll have a lot more governance about their underwriting approaches and their pricing.”

According to the Ausure boss, traditional major markets are doing well when it comes to business that goes straight through platforms. Beyond that, though, challenges abound for insurers.

McCarthy, who leads a professional network of around 240 insurance brokers, asserted: “I think all brokers in Australia know all too well that traditional major markets are decreasingly offering the solutions that we need. Traditional major markets are doing well in the platform space, but anything other than that they’re currently challenged.

“It’s not getting any easier, that’s for sure. The insurers are going through such a large amount of change, and that change is compliance and governance; that is taking up an enormous amount of their resources to get right. They’re going through issues with loss ratios and return to shareholders. They’re going through issues of employees working remotely, and their service levels are affected by that as well.”

Given the challenges, the CEO said business is increasingly flowing to non-traditional markets. By that he means underwriting agencies that are filling a certain void. “If you look at Ausure’s portfolio, the movement of business away from traditional or major markets to agency markets in the last 24 months is quite an eye-opener,” highlighted McCarthy.

That is why Ausure recently made changes to its own agency, Fortem Underwriting, which is only available to the Brisbane-headquartered authorised representative group. A four-year-old, $15 million GWP (gross written premium) agency, Fortem is set to expand beyond SME business and trades insurance.

“It’s been a smaller part of what we do in the past,” noted McCarthy, who said finding capacity wasn’t as big a problem before. “It has been operating under Hollard’s insurance license; that’s about to change. We’ve created a new license for our underwriting business, and it’s going to operate under that in the next four weeks or so and is essentially the beginning of our own underwriting group of companies.

“Over the last four years, it has become quite an important solution for us, or tool for the brokers to utilise. When Fortem started, the market wasn’t as difficult as it is now. But, in the long term, we saw then the growing need for alternate providers. We obviously didn’t predict it was going to get this bad.”

Tasked with taking the underwriting business to “the next level” is Ausure operations general manager Mick O’Bree, whose remit has been expanded to general manager – operations and underwriting. The main objective, said McCarthy, is to provide more solutions to Ausure and its clients. He added that the most likely areas the internal underwriting agency would expand into first are liability and personal accident.

Meanwhile, the CEO told Insurance Business: “Brokers are working two and three times harder on every client to try and get the best outcome possible. It’s a hard slog. Over time that part will improve and will become a bit easier, but brokers are going to have to continually improve the experience they give. So, the level of advice and the experience their customers have are going to have to increase year after year after year and just continually improve.”