<p><strong>Speaker 0</strong>: <span>I'm joined now by Martin Holman, managing director of Holman Advisory Martin. I want to start with cost of living. We're hearing so much about that as a topic. Um, but as you're talking with insurance brokers, how is it affecting their consumer base and and them,</span></p> <p><strong>Speaker 1</strong>: <span>Um well, I think it I mean, it's unavoidable. It's out there. We all know you know that it's happening and that people are struggling. Um, I think it it it seems to fall into,</span></p> <p><strong>Speaker 1</strong>: <span>uh, a couple of of different categories, I think, on the private car insurance, Um, which, let's be honest, has always been a bit of a grudge purchase. You've got to have it. Um, it's people know they've got to take it out, but therefore are looking for, um, the best deal, shall we say, And, uh, I mean, I think motor has always been, um,</span></p> <p><strong>Speaker 1</strong>: <span>more price driven, probably than than any other cover. But I think that's even more so at the moment. Um, I think, uh, on, um, household, uh, again, the key there seems to be ensuring that premiums aren't going up. When when the real premium comes out, I think what most people seem to be seeing is that if they're going out with a price that was</span></p> <p><strong>Speaker 1</strong>: <span>equitable to last year, um, that they're finding their renewal. Retentions are holding up. I think, in commercial, the bigger concern, um, is going to be around, um, people maybe under insuring, um</span></p> <p><strong>Speaker 1</strong>: <span>uh, in a way to keep their premiums down. And I know, um, talking to,</span></p> <p><strong>Speaker 1</strong>: <span>uh, some of the guys that are that are in that space, the larger SME space is the unders insurance piece is a, uh is a serious concern for them as brokers. But, you know, they are obviously where they act. Um, on a fully advised basis, Um, clearly, you know, they are at least in a position to try and convince the, uh uh, the client that, um, you know, they they need the right levels of cover. Um, but I think as it as it continues to</span></p> <p><strong>Speaker 1</strong>: <span>bite, um, the pressure will come on that even more</span></p> <p><strong>Speaker 0</strong>: <span>does there have become a problem? If you're a broker between saying to a client, I know times are tough. Let's you know you can't have the same level of insurance cover that you might want, So let's be really sensible about what we pick and what levels and somebody coming back to you and saying, actually, you've been complicit in helping them to underinsure.</span></p> <p><strong>Speaker 1</strong>: <span>Yeah. I mean, it's a it's a big issue. And I and I think that, you know, the brokers really have got to play it with a completely straight bat. Um,</span></p> <p><strong>Speaker 1</strong>: <span>and, uh, clearly conversations. Then do, um, go on with clients around You know what they can do and whether that will be, you know, assisting them further in terms of, um, uh, spreading the payments Or, uh, you know,</span></p> <p><strong>Speaker 1</strong>: <span>coming up with a different type of, um, uh, methodology in terms of of, uh, paying the premiums, Uh, I think is probably where most people need to go. But But the reality is that, um if a client is saying, Well, actually, if I have to pay that insurance, I'm gonna go bust.</span></p> <p><strong>Speaker 1</strong>: <span>Um, then clearly, you know, different type of discussions need to take place, but But, you know, from a broken perspective, if you are, you know, doing your job and then representing the client into, um, the insurer partners, you've got to be absolutely straight.</span></p> <p><strong>Speaker 0</strong>: <span>And how is it is it to have a conversation around sort of cost versus value for money. I mean, you were mentioning there. It's been a bit of a race to the bottom in in car insurance for for example.</span></p> <p><strong>Speaker 1</strong>: <span>Yeah, I I think the, um the value for money argument, which again is something obviously that the f c I have been have picked up on and have brought in the fair value Uh, rules, etcetera, um, is something that within the market, um, maybe we should have been addressing, um,</span></p> <p><strong>Speaker 1</strong>: <span>previously. Um, and I think now that the the focus is on that in terms of, um, you know, really analysing what the what the lot ratios look like in terms of, um, uh, the overall impact on</span></p> <p><strong>Speaker 1</strong>: <span>you know how many claims are actually getting paid out? You know, um is that does that look fair value? If you're you're running a scheme that's got a loss ratio of 5% 1 would probably argue that maybe there there isn't value to the to the customer there. And I think that's what the the F. C A changes have brought brought into that realm. I think, um, in terms of private car insurance. Um,</span></p> <p><strong>Speaker 1</strong>: <span>it's a bit different because finding a private car insurer that's making, um, any money, let alone, uh, a lot of money. Um, you're gonna have to look a very long way. Uh, and in fact, probably still not find one. So I I think the value for money, um, argument on private car is is certainly, um not particularly relevant. Um, however, of course, you know, the focus is now on a lot of add-on type products. Um,</span></p> <p><strong>Speaker 1</strong>: <span>and and as to whether they are, uh, genuinely, um,</span></p> <p><strong>Speaker 1</strong>: <span>uh, in the client's best interests, um, you know, so I think that there has. There's an increased focus on it, undoubtedly.</span></p> <p><strong>Speaker 0</strong>: <span>Well, moving on from that to consumer duty because you describe I mean, I don't want to put words in your mouth, but since you've given me the impression of motor insurance, if you like has been quite transactional,</span></p> <p><strong>Speaker 0</strong>: <span>um, do you think in that in that if I'm right in that space, is there is consumer duty less likely to bite as hard as perhaps in some other areas where you really have to put together some quite bespoke cover for your client and have a a real sort of ongoing relationship. Yeah. I</span></p> <p><strong>Speaker 1</strong>: <span>mean, I I think that's a very far very fair point, Mark. And and, um, the big element of consumer duty in terms of of, uh, private car insurance is actually proving and being able to prove</span></p> <p><strong>Speaker 1</strong>: <span>that you have actually done the right things at the right time, Uh, and and fully understood your, um your customer, the vulnerabilities, et cetera, et cetera. And I think the the challenge in the private car sector is really all around the, um, uh, collating of that data the and and being able to, um, deliver that data on demand when the f c a. Want to see it,</span></p> <p><strong>Speaker 1</strong>: <span>Um, I think the that into the other, um, product areas. Um, but there, there very much is a, uh, building.</span></p> <p><strong>Speaker 1</strong>: <span>Um, the value package, uh, particularly around, um, add-on policies, et cetera, et cetera, are really where the brokers are needing to be, um, spending time fully understanding the clients. I mean, the the you know, for me, it's</span></p> <p><strong>Speaker 1</strong>: <span>brokers that were doing, uh, T c f Treating the customers fairly properly. Um, it is a stage further on, but but the foundation is already there. Um, but it's now about being able to demonstrate when required that you have indeed, Um, uh, acted in the in the correct way. And I think the, um, one of the one of the areas that, um,</span></p> <p><strong>Speaker 1</strong>: <span>is probably one of the bigger causes for concern is around the whole vulnerable customer classification. Uh, and how you are identifying them when you are identifying them and then actually coming up with a with a strategy and a methodology for dealing with them.</span></p> <p><strong>Speaker 0</strong>: <span>Well, on that, you mentioned, uh, t treaty customers fairly, Uh, and then consumer duty. How revolutionary does the f c a think all of this is And and does that align with how revolutionary the insurance industry thinks this is or should be?</span></p> <p><strong>Speaker 1</strong>: <span>Well, um, I can't really speak to the f c a, but I But I do think that that</span></p> <p><strong>Speaker 1</strong>: <span>they believe that this is a large step forward. Uh uh, in terms of, um, the way in which we interact with, uh, with customers. Uh, and whether that's through a broker or whether that's a direct, uh uh insurance offering. Um, So I think the, um,</span></p> <p><strong>Speaker 1</strong>: <span>the view in the market. Um, is that, um</span></p> <p><strong>Speaker 1</strong>: <span>if you've got t c f</span></p> <p><strong>Speaker 1</strong>: <span>properly nailed and you've been working with that for a number of years that that</span></p> <p><strong>Speaker 1</strong>: <span>the building blocks are there and that what we're now looking at around consumer duty is really, um, you know, taking that to the next level. Um, but as I say, I think that one of the bigger challenges is all around ensuring that you demonstrate that and And I think, you know, we're demonstrating T. C. F,</span></p> <p><strong>Speaker 1</strong>: <span>um, was is fairly ingrained. And people who you know have got that, and they can do it. I think demonstrating, um, consumer duty, uh, is is a tough ask, um, and, you know, and undoubtedly resource, a lot of resource has gone into that through the market, both from insurers and from brokers. Um, so, uh, revolutionary,</span></p> <p><strong>Speaker 1</strong>: <span>Maybe not. But I think it is just the next step of of the evolution. As I say, the challenge for me is, is more the specific challenges around the vulnerable customer element?</span></p> <p><strong>Speaker 0</strong>: <span>Well, on that, any any tips or things that you can think of that are are easy wins on identifying and mapping out a and recording what you're doing. Well,</span></p> <p><strong>Speaker 1</strong>: <span>I I I mean, I think this is the big challenge. It it it's about when you do that, um, you know, and and so obviously, you are collecting information from clients when they, um,</span></p> <p><strong>Speaker 1</strong>: <span>come to you for a quote. Um, you are then, you know, firming up on those details when they accept that quote, and you've got it. But actually picking from that, um, a specific vulnerability is is very, very difficult. Um, particularly in in a mass market, Um, such as motor insurance. Um, and you know, there will be key triggers. I mean, often, I think what we're finding now is that the, um</span></p> <p><strong>Speaker 1</strong>: <span>they're being identified more at a claim stage, Possibly when there is a discussion going on. Um, because there is genuine interaction between a client and an insurer, Um, uh, or indeed a broker. Whereas, of course, uh, you know, an application stage now where the majority of of particularly motor insurance and and again a lot of household as well is is, uh, transacted online. Um,</span></p> <p><strong>Speaker 1</strong>: <span>being able to build</span></p> <p><strong>Speaker 1</strong>: <span>algorithms in that will maybe identify, um somebody who? Who? You know, I mean clearly if somebody's disabled, that's declared anyway up front. So you you know you can pick that up. But when it comes to you know whether it's financial, uh, impairment and and as we've gone on, you know, mental health issues, um, arising.</span></p> <p><strong>Speaker 1</strong>: <span>It's very difficult, and often it will. It won't manifest itself until the claim stage, at which point, um, clearly, you know, both brokers and and insurers need to have a mechanism in place to deal with that.</span></p> <p><strong>Speaker 0</strong>: <span>Is there a danger at that claim stage, you could end up treating customers unfairly because the temptation might be to say, um, we think they're vulnerable. We're not sure how to play it. Be extra generous to them. And somebody might come back later and say, Well, just because I didn't have a vulnerability you've treated, you know, you've treated me unfairly</span></p> <p><strong>Speaker 1</strong>: <span>again. I mean, I it's a very fair point. I think it's, uh, it's tough. It's a tough balancing act. Um</span></p> <p><strong>Speaker 1</strong>: <span>uh, in the you know? Yeah, I It would be It would be rare over the years, I think, for insurers to have been too generous on claim settlements, But, um uh, but yeah, I mean, I think, you know, in terms of well, I mean, even not necessarily actually at the claim stage, but in terms of, um, the application stage and paying for the premium, etcetera, Um,</span></p> <p><strong>Speaker 1</strong>: <span>being able to be in a position where you actually say to somebody, Well, yeah, because you're struggling. We will allow you longer to pay this or or whatever. And then, you know, to the next person you say, Well, because you're not struggling, you can just, you know, pay it all upfront. Um,</span></p> <p><strong>Speaker 1</strong>: <span>it does bring in, I think the the whole question of of, uh, treating every customer fairly. And that's you know what it's there for. I do think the consumer duty focusing on vulnerable customers, um, has added definitely another layer of complexity to that.</span></p> <p><strong>Speaker 0</strong>: <span>Martin, we've got a couple of minutes left. I want to move on to to a couple of other issues. Um, I think it's fair to say there's less money about in the round, and the price of money is, uh, it has gone up of late. Um, how do you see that playing out in terms of capacity in the market and what those knock on effect for brokers are likely to be for the rest of this year.</span></p> <p><strong>Speaker 1</strong>: <span>Well, I I think in terms of capacity, um, in its in its purest form, coming through,</span></p> <p><strong>Speaker 1</strong>: <span>um, uh, insurers that that, you know, brokers and unable to, uh, sell out into the market. There's undoubtedly been a squeeze on that. Um, and, uh, a lot of that has been brought about because by the cost of of reinsurance and excess of loss covers. And I think you know, quite a number of of motor insurers, um, certainly are not running with the same, uh, level of capacity, uh, ability going through, um, this year, as maybe they did last year. And so,</span></p> <p><strong>Speaker 1</strong>: <span>you know, the knock ons there are, um, the, uh in terms of the amount of policies they're gonna be able to remove, particularly with rates going up mean that there is going to be, um, undoubtedly a lot of people shopping around for, um, uh, car insurance this year. Household insurance this year, Um, and potentially not finding,</span></p> <p><strong>Speaker 1</strong>: <span>um, as much of a, um, supply in the market. And so I think you know, we're we're certainly seeing rates increase now. Um, and I think that we will. We will see that continuing through certainly through the first half of the year, probably through Q three. And then maybe it will start coming back down. Um, when</span></p> <p><strong>Speaker 1</strong>: <span>the results Hopefully for motor insurers, um uh are showing an improvement</span></p> <p><strong>Speaker 1</strong>: <span>and that then meaning that obviously they they should be able to obtain their reinsurance and, um, excess of loss insurance, uh, at a lower premium when that cycle starts again at the end of the year. Um, but I think, um, it's it's not great news for the consumer at the moment, because I just think there's gonna be There is less supply out there.</span></p> <p><strong>Speaker 0</strong>: <span>And finally, we've seen a lot of consolidation People buying broker firms up in the last few years. Uh, again, in a world of higher rates, uh, what do you see happening to that trend?</span></p> <p><strong>Speaker 1</strong>: <span>Um, I think I mean, it's a It's probably almost like a perfect storm in that. A lot of what one would have regarded as as prized assets have already been</span></p> <p><strong>Speaker 1</strong>: <span>purchased, uh, and have have been moved into one of the consolidating, uh, vehicles. Um, there do remain out there. Some some good assets, uh, which will always attract, um, interest and and, you know, a a good level of, uh, a good level of multiple, uh, of, uh, um, if we want to.</span></p> <p><strong>Speaker 1</strong>: <span>You know, the phrase it in that way. Um, I think what we are seeing is that some of the consolidators are Well, certainly over the past year have started looking more, um, into, uh, foreign acquisition. Uh, a number of those started really in Ireland, but have now moved out into Continental Europe. Um, and I think we'll see that continuing. As for the UK market, um, I I think that</span></p> <p><strong>Speaker 1</strong>: <span>we potentially could be seeing, um, some slightly more mega type mergers. Um, but similar to the Aston Aston Lark. How</span></p> <p><strong>Speaker 1</strong>: <span>a plan? Um uh, scenario, Um and so I think you know, we we potentially, um we'll be seeing one or two of those potentially, uh, at the the bigger end, um, surface during this year. Um, but I think in terms of, um</span></p> <p><strong>Speaker 1</strong>: <span>uh, if you look at our don p i b um g r p. You know, if if the right asset comes available, I think you know they will still be in there to try and buy it. Um, and, uh, you know, they they've got, um, good quality, um, equity backers who who seem to still have a good flow of cash.</span></p> <p><strong>Speaker 0</strong>: <span>We have to do it there. Martin Holdman. Thank you for joining us. Thank</span></p> <p><strong>Speaker 1</strong>: <span>you, Mark.</span></p>