Affinity and Partnership Marketing in UK Commercial Non-Life Insurance

Claire Fetherstonhaugh, Consultant at Finaccord.

The penetration of commercial lines affinity schemes continues to grow, especially among professional associations: Towergate and Hiscox are the most prolific providers.

A new report from Finaccord shows that affinity schemes for commercial lines insurance in the UK are on the rise as brokers and underwriters strive for grow market share and profitability in a tough market. For this research, Finaccord investigated 1,280 actual and potential partner organisations for commercial lines affinity schemes including both professional and trade associations plus other types of partner such as financial institutions and sports organisations. It found that 42.0% of these offered at least one type of commercial non-life insurance to their members or customers. Moreover, among professional associations, the rate of involvement reached 63.1% while 45.8% of trade associations had at least one scheme up and running.

“These results indicate that commercial lines affinity programs are continuing to expand”, commented Claire Fetherstonhaugh, Consultant at Finaccord. “The previous equivalent research issued in the first quarter of 2013 had found that 40.5% of all actual and potential partner entities were involved in this arena, including 53.2% of professional associations and 43.3% of trade associations. As such, the metrics have ticked up somewhat since then, especially among professional associations, over 140 of which were investigated for the latest study.”

That brokers are instrumental in setting up and operating the vast majority of these commercial affinity schemes is clear from the fact that only 8.0% of the total number of product initiatives identified – which numbered over 1,300 in the latest research – were being run on a direct basis by an insurance underwriter. Rather, the preferred operating model among partner organisations is for commercial lines insurance products to be arranged in conjunction with a single, external broker.

Across the total number of product relationships with broker involvement, Towergate was found to be the most active broker given that it had a share of 9.4% of these relationships including deals with organisations with a substantial number of members such as the British Association for Counselling and Psychotherapy, the British Psychological Society, the Educational Institute of Scotland and the Federation of Small Businesses. It was followed by Arthur J. Gallagher with a 7.7% share and Jelf with 5.5% but with the remaining 77.4% of initiatives then spread thinly across over 200 different brokers.

Meanwhile, where it was possible to identify scheme underwriters, including those involved in both brokered and directly underwritten programs, Hiscox emerged as the most prolific provider with a 25.7% share of product relationships, followed by RSA with 10.2% and AXA with 7.3%.

“Hiscox performs well in this analysis because it seems to have a particular focus on the commercial affinity market”, continued Claire Fetherstonhaugh. “In fact, it appears to have strengthened its hand considerably since the preceding investigation when its share of product relationships had been measured at 11.5%, placing it second behind RSA. Given the fierce competition across the UK commercial lines market, this should be an advantageous position as affinity schemes provide the opportunity for brokers and underwriters to secure large numbers of relatively homogeneous risks in a potentially cost-effective manner.”