Commissions must fall, QBE chief warns brokers
Reductions in broker commissions or disintermediation in some insurance classes may have to occur as insurers strive to run their businesses more efficiently, QBE Group CEO John Neal says.
He says brokers have an important role to play in the sale of commercial insurance products, but commissions higher than 25% will force insurers working in “a staggeringly competitive marketplace” to disintermediate some lines.
“For those of us running insurance businesses, the costs will have to be single-digit in my view,” he told an Australian and New Zealand Institute of Insurance and Finance conference last week.
Mr Neal suggests five key steps for insurers to survive the present market downturn:
- Identify what you do, what you're good at, what you enjoy doing and what you have to do.
- Create a market leadership position to be relevant, rather than trying to be in every country writing every product.
- Make tough choices.
- Look at what can destroy you. Examine your balance sheet, reserves and investment strategy, and make sure you have enough catastrophe reinsurance. “Those three factors could fundamentally destroy an insurance company if you don’t buy enough cat reinsurance.”
- Plan for the long term, even in a world that looks mostly to the short term. “And once you have committed to a strategy, it is imperative everyone is on the same page.”