What’s happening in the affinity insurance sector?

An insatiable appetite for innovation, endless energy and a commitment to creating an internal team that reflects the rich diversity of the market they serve. These are the main ingredients in the recipe for developing a successful affinity insurance proposition, according to Phil Hobson (pictured), international affinity leader at Marsh and a long-standing advocate for the role of affinity products in augmenting customers’ experience of insurance.

When Hobson stepped into his current role in January 2021 – which meant moving his family from Hong Kong to the UK in the thick of the COVID crisis – his first port of call was to establish the broking giant’s affinity strategy which is focused on two core pillars. The first is the ambition to do a few things very well by taking a “narrow and deep” approach to building out the business.

“Narrow is our focus on our four core sectors of the business – automotive, equipment and consumer electronics, sharing economy and traditional sponsored programmes – and deep is the drivers that make us successful,” he said. “For us, those drivers are our talent, our technology, and our sales and marketing and placement.

“The second pillar of how we restructured our business was by looking at the very human capital heavy elements of our proposition and asking what we could do to digitise and how we could deliver our offering differently. So, that was my focus. I assumed the international role in 2021 which now includes 65 countries, seven regions and about 1,300 people across a very flat structure where everybody in the business is encouraged to be part of our affinity journey.”

What’s happening in the affinity insurance sector?

Assessing the lay of the affinity insurance landscape as it stands today, Hobson emphasised that “consolidation” is the word on the lips of many across the market. However, he noted that when discussing affinity, it’s important to be aligned on what that actually entails. Often, when people talk about becoming an affinity broker or carrier, they’re pursuing a one-to-one sales model. Real consolidation is where a client is tapping into a wider ecosystem to help acquire and retain its end customers.

How embedded insurance has evolved

Embedded insurance is lending itself naturally to these conversations, he said, and the discussion around embedded cover is changing as there’s increasing consideration about how it can be delivered as part of an ecosystem solution. Take, for example, an automotive manufacturer that supports a subscription base, who would have thought that people now automatically accept that this subscription includes insurance?

“There are so many examples of innovation across the consolidation model that I’m seeing in affinity business,” he said. “We’re looking at moving away from one-to-one acquisition and far more towards that embedded ecosystem solution. One-to-one acquisition still has its place because there are still products that require and support that model, with professional liability being one example.”

The consolidation currently happening in the market is taking place through carriers who can be truly global, he said, of which there aren’t all that many in the market. Clients are looking for a consistent customer experience across their embedded ecosystem and most carriers tend to be strong in one region, so it’s hard for them to deliver that consistency on a global basis. Meanwhile, many brokers are facing the same struggle.

Increasing engagement with service providers and partners

“The other thing I’m seeing, for us, is a lot more engagement in our ecosystem with service providers and partners,” he said. “That’s specialist technology providers, specialist education services, risk management services – and partnerships within our own organisation that allow us to tap into the wonderful insights and capabilities delivered by Oliver Wyman and Guy Carpenter.

“Another theme I’m seeing come through is the requirements of our core client – the affinity aggregator. They’re looking for far more than just remuneration, they’re looking for client retention and data insights. They’re looking for data. Data accessibility has been a challenge for them not just due to regulatory considerations but also just the way it has been collected in the past which has led to significant challenges around quality.”

Finally, he said, there’s a marked increase across the market for innovation. It’s easy to fall into the default position of conflating innovation with technology but, in reality, technology is just one piece of the innovation puzzle and serves as an enabler rather than the end goal.

“But that presents a wonderful challenge going forward and the opportunity for a lot of innovation,” he said. “For example, we’ve got products labs, we’ve started to invest in automotive engineers, data scientists and in more people with digital customer experience. And the way we’ve started to leverage that talent piece is by finding people from industry as opposed to finding people from the insurance industry.

“I’ve employed a lot of consultants and project managers and customer service people and people from sharing economy platforms and from the automotive sector. Because these are the people who can challenge the ‘norms’ in insurance and bring our product suite and capabilities far nearer to our clients’ ecosystems.”

What’s top of the agenda for Hobson and his team?

Looking across the full remit of the Marsh McLennan offering, Hobson said he feels “really blessed” to be part of an organisation with such incredibly diverse and endlessly accessible capabilities. It’s this which allows his team to really deliver innovation, he said, because there are always examples from other businesses to lean on and learn from – and to leverage for the benefit of clients.

With the year stretching ahead, he noted that there are several pressing items at the top of his agenda for 2024. First is firmly establishing what the team want the future of embedded insurance to be within Marsh, he said, because it represents such a huge opportunity – and that delineation will be critical going forward.

Secondly, is ensuring that the affinity team continues to really deliver on the data insights piece so critical to their clients. That’s especially important, he said, because the more and better quality data they get, the more it supports their insurance buying decisions and their risk management decisions – which is an element that should be considered by the industry more broadly.

“And finally, the third focus for me is always the same,” he said. “It’s about getting my brilliant team to the end of the year and making sure they have some fun and celebrate the great work they’re doing along the way.”