‘Affinity Schemes’ Achieving Growth in UK Commercial Lines: Finaccord Report

August 11, 2015

A new report from UK-based financial marketing and consulting firm Finaccord concludes that “affinity schemes for commercial lines insurance in the UK are on the rise as brokers and underwriters strive to grow market share and profitability in a tough market.”

Finaccord arrived at that conclusion after surveying “1,280 actual and potential partner organizations for commercial lines affinity schemes including both professional and trade associations plus other types of partner such as financial institutions and sports organizations.

“It found that 42.0 percent of these offered at least one type of commercial non-life insurance to their members or customers. Moreover, among professional associations, the rate of involvement reached 63.1 percent while 45.8 percent of trade associations had at least one scheme up and running.”

Finaccord Consultant Claire Fetherstonhaugh commented: “These results indicate that commercial lines affinity programs are continuing to expand. The previous equivalent research issued in the first quarter of 2013 had found that 40.5 percent of all actual and potential partner entities were involved in this arena, including 53.2 percent of professional associations and 43.3 percent of trade associations. As such, the metrics have ticked up somewhat since then, especially among professional associations, over 140 of which were investigated for the latest study.”

The report also noted that “brokers are instrumental in setting up and operating the vast majority of these commercial affinity schemes. The survey “that only 8.0 percent of the total number of product initiatives identified – which numbered over 1,300 in the latest research – were being run on a direct basis by an insurance underwriter. Rather, the preferred operating model among partner organizations is for commercial lines insurance products to be arranged in conjunction with a single, external broker.”

Some brokers are more involved than others. Finaccord’s report cited Towergate as the “most active broker, given that it had a share of 9.4 percent of these relationships including deals with organizations with a substantial number of members such as the British Association for Counselling and Psychotherapy, the British Psychological Society, the Educational Institute of Scotland and the Federation of Small Businesses. It was followed by Arthur J. Gallagher with a 7.7 percent share and Jelf with 5.5 percent but with the remaining 77.4 percent of initiatives then spread thinly across over 200 different brokers.”

Insurance company underwriters are also active in setting up affinity schemes for UK commercial lines insurance. The report said that where it “was possible to identify scheme underwriters, including those involved in both brokered and directly underwritten programs, Hiscox emerged as the most prolific provider with a 25.7 percent share of product relationships, followed by RSA with 10.2 percent and AXA with 7.3 percent.”

Fetherstonhaugh explained that “Hiscox performs well in this analysis because it seems to have a particular focus on the commercial affinity market. In fact, it appears to have strengthened its hand considerably since the preceding investigation when its share of product relationships had been measured at 11.5 percent, placing it second behind RSA. Given the fierce competition across the UK commercial lines market, this should be an advantageous position as affinity schemes provide the opportunity for brokers and underwriters to secure large numbers of relatively homogeneous risks in a potentially cost-effective manner.”

Source: Finaccord

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