It’s great news for schemes, trustees, employers and, most importantly, members.
More insurers participating in competitive processes
Over the last 12 months brokers have had to work hard to attract insurers to participate in competitive processes at the sub £50m end of the market, particularly if the scheme has any features making it more complex for insurers, such as unusual benefits. However, times are changing and we are already seeing the impact of the new entrants.
As always, the relationship between brokers and insurers is key to obtaining insurer participation in a competitive process – this is true now more than ever. It was great to see this in practice on a recent project where we had five insurers, including two new entrants, quote on a c.£40m scheme with some benefit complexities. This is great news as historically we may have only expected 2 or 3 insurers to participate.
And it’s not just about price
With greater competition, and processes driving tighter pricing across the market, the impact of non-pricing factors is becoming more important. In addition, the fact that so many schemes find themselves in surplus to buyout also makes price not the driving force it once was. Whilst new entrants are developing their offerings with a clear focus on delivering for members (as it should be), there is increased attention on administration capabilities and getting schemes efficiently and effectively through to buy-out (see our
last blog for our thoughts on this).
We’ve also seen established insurers building on their propositions to improve member service. The new entrants are driving wider choice in non-price areas, for example a number of new entrants choosing to build in-house administration capabilities or choosing TPAs not used by any other insurers. When it comes to non-price factors, after administration, there are other areas such as price locks, contractual flexibility and ESG and sustainability that are often mentioned.
Opportunities for schemes with specific circumstances
We are seeing new entrants looking to make their mark and to have clear USPs. This means that schemes that might be less attractive to insurers seeing more options. For example:
- Very small schemes, for example ones with less than £10m of assets. We recently secured two quotes on a c. £2m asset scheme
- Unusual benefits, for example, on a recent scheme we advised with Irish beneficiaries paid in Euros and linked to Irish inflation we received competitive pricing
Preparation and approach is key (as always)
Bringing insurers to the table in a competitive process requires planning, it doesn’t just happen. In our view the key ingredients are:
- Regular communication with insurers – there are several parts to this:
- sharing information on cases that are in the pipeline to help assess potential interest and plan resourcing early,
- in an evolving market where insurers are continually developing their propositions it’s important to keep up to date and build this into the planning, and
- in relation to the new entrants, understanding their plans and timings for being able to transact.
- Flexibility on timing – in a busy market timing is critical. Sometimes it can be as simple as extending the deadline for a quotation by a couple of weeks that will make the difference between an insurer quoting or not.
- Usual preparations on data, benefits, investments and ensuring there are no surprises on the financials of the transaction. There’s no change here – no cases should be taken to market without these areas being covered off in advance. The consequences of getting it wrong are considerable – not only in relation to the time and cost of a failed process, but also in terms of reputation in the market and being able to transact in the future.
- Strong project management – to co-ordinate the different stakeholders and workstreams (legal, investment, actuarial, administration) effective project management and teamwork is crucial to ensuring a successful outcome.
It’s a really exciting and interesting time to be a broker in this market – it’s fast evolving with the prospect of more participants to come and all insurers developing their propositions. For us there is a clear need to be nimble and to have bespoke processes to take advantage of the opportunities available. We’re looking forward to seeing what the next few months bring!
John Mayer – Senior Actuarial Consultant, K3 Advisory
