Insurers that do not respond to the Ogden rate change “will become unprofitable quite quickly,” the leader of
AXA’s commercial broker business has told Insurance Business.
“Clearly the changes to the discount rate, they have a material impact, they will affect the profitability of every insurer’s business,” Jon Walker, commercial intermediary MD at the insurer, said in an interview.
Calling the rate change, “a challenge for everyone,” Walker said that AXA’s reaction to the announcement was to firstly explain internally what the move meant for its own people, and then to set about educating brokers on “why it was appropriate to apply more rate to certain types of business that is likely to be most directly affected by that change.”
“The thing we recognise is that it’s been a long time in the market since brokers have had to talk to clients about increases in rate,” he said. “In fact, the younger, up-and-coming people in broking businesses will potentially never have had to have done that.”
The increase is likely to create additional work for brokers in some cases, as clients may well respond to rate increases by asking brokers to go back to the market and check that the price remains competitive.
The task of educating brokers is still ongoing, and the insurer’s work has included creating documentation as well as webinars and face-to-face training, which Walker said has received good feedback from the broking community.
But while Ogden is undeniably a challenge, Walker stressed he didn’t ultimately see the rate change as an excuse for poor financial results.
“For us, we’re really clear that we will not sit and blame Ogden for a set of trading results,” he explained.
“It is what it is, we’ve taken clear and decisive action, and we believe we’re starting to see the results of that coming through already. We are starting to carry the rate increases that will protect profitability moving forward, and everyone has to make it [business as usual].”
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