“Our DA partners [need to have] specific knowledge of a niche or specialty area,” he said.
“You hopefully come up with a product that really resonates with your customer base, that covers off some of the key exposures which they have, and which really speaks their language in terms of explaining how the insurance product works. Because at the end of the day, we want to ensure that customers get what they think they’re buying… so, clarity in that sales process and tailoring the cover to make sure it meets the customers’ needs is absolutely central to what we do.”
For Head and his team, the value proposition of a solid schemes programme is that it makes it easy for profitable DAs to do business, something that is not always easy to deliver. DA partners considering entering a schemes relationship with an insurer should be on the lookout for the expertise and value that the insurer can bring to the table. They must ensure that they’re getting good value out of the distribution chain and products that produce expected outcomes, for the benefit of insureds.
That’s top of the list, he said – to make sure that customers are at the heart of everything. In addition, the chemistry with a DA partner at the outset of any relationship is essential to the AXA team as these partnerships are essentially contracts of trust. It’s about the insurer trusting its partners to understand the underwriting side of the equation, and the importance of rate and indexation. Good DAs will be able to communicate rate changes to their customers in a sensible and timely manner, which comes from having a good understanding of the underwriting process as well as the expertise and networking distribution to get the products out to market.
“And then it’s about regular contact,” he said, “it’s about having an ongoing and continuous dialogue with your partner around performance, around new ideas to keep the product moving forward and to [explore] any opportunities to cross-sell products. They might start off in one area or one line, and then ultimately, they could have a comprehensive suite of products, which they’re selling to that customer segment.”
For those considering getting involved with such a partnership, Head noted that the DA market is one brimming with opportunity. If you look at the growth over the past 10 years, he said, it is apparent that it has been and continues to be very strong. More customers than ever are choosing this route to go to market and, if insureds are choosing this route to market, it is crucial they have the support and expertise of an experienced business behind them.
Head recommended that anybody coming into the market ‘fresh’, with no experience of running a delegated authority in the past, really grapple with the nuances of the sector. They should consult widely, he said, and make sure they understand the difference between a broker and a DA holder. A broker operates on behalf of the customer, providing advice and a review of the market to get that customer the best (albeit maybe not the cheapest) coverage at the best value.
But while the broker represents the client and approaches a number of different carriers in order to recommend that best deal, a DA holder is actually representing the insurer. A DA holder is the agent of the insurer and needs to be crystal clear about that with their customers and their distribution partners, he said. It’s a completely different angle, wherein the business needs to protect the best interests of their carrier as well as themselves, and that needs to be firmly understood before any partnership is formed.
“There have been lots of examples in the past of DA arrangements creating large and continuous losses,” he said, “and generally, that’s only going to end one way – the security of the insurance carrier is going to pull down the shutters and stop providing the capacity. So, I think it’s really important that they focus on day one on profitability, on the right underwriting technology and the right underwriting approach with solid rates, good risk management, and a really strong understanding of the underwriting side of the equation.
“So, I do think it’s a market full of opportunities? It really is. But it shouldn’t be underestimated in terms of the need to approach [the partnership] in the right way. Because I think if it’s just about volume, and it’s just about selling products to customers, then that tends not to ultimately be a success for either party.”