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‘In transition’: CGU explains changing SME appetite 

Trading platforms are altering the way insurers approach SME business, CEO CGU and WFI Jarrod Hill says. 

Responding to recent broker comments about reduced insurer appetite for “non-vanilla” risks, Mr Hill says the industry is “potentially in a bit of a transition period”. 

He says most SME business is now done via a trading platform. 

“You’re trying to deliver a highly efficient model, so then you can quote competitively on a digitalised platform. 

“And with that, then you have a tighter risk appetite, because you don’t necessarily want to handle manual referrals.  

“Therefore, you tend to kick out probably more than what you would if it was an entirely manual process where each slip was coming in, and you could spend more time understanding the risk. 

“I do understand why brokers will be saying that it appears appetite has narrowed across the market, particularly in that SME space, where there is a lot of volume.  

“But as we get clearer about how we’re underwriting, we will look to provide solutions, not necessarily for the most extreme examples that brokers will give, but certainly have a very well understood appetite in a multitude of areas.” 

Mr Hill also says a decision earlier this year to reduce crop commissions to zero was specific to that product. 

He says crop has historically been unprofitable, and rather than withdraw from the market CGU decided to price the product on “a net basis” and leave it to the broker to charge their client a fee. 

“We thought that was a far better option than the other of withdrawing from the market,” Mr Hill said. 

“And it's still going to be a challenging product for us to make the margin on.” 

Asked whether the same approach could apply to other lines, Mr Hill says the decision was “specific to crop”. 

“Most large account business now is traded on a net basis and a fee charged,” he says. 

“It's probably more a question for the brokers. How they want to engage with a customer and the level of transparency they want for the fee for service, and for the advice that they’re giving. 

“At the end of the day, an underwriter will simply add on the acquisition cost to the risk cost that they're charging.” 

As has reported, CGU has launched a Broker Love strategy, as part of its ongoing turnaround plan. The insurer hopes to build broker relationships by taking greater accountability and encouraging staff to use “phone first” and not “hide behind computer screens”.