Initiating growth to move up a weight class
Over the past two years, the South African insurance industry has seen its fair share of companies who have gone on a major acquisition drive in order to try and offer added value to customers.
One such company has been Centriq. While not going on an acquisition drive in the traditional sense by buying out companies, the company has entered into a number of strategic partnerships with underwriting management agencies (UMAs) in order to build capacity to take on some of the industry’s biggest role players.
The driver to volume
In the past year, Centriq has partnered with property UMA First Property Acceptances, hospitality, commercial and agriculture UMA Alternative Commercial Acceptances, and executive and collectable motor UMA Vantage amongst others. FAnews spoke with Gareth Beaver, CEO of Centriq, to find out more about the company’s strategic partnerships and the reasoning behind their formulation.
One of the major drivers has been increasing the company’s strength in numbers. “Strength in numbers is an advantage in that it allows companies to take on more risk, it allows them to be more bold in terms of acquisitions, it allows them to invest in new talent and technology and it also allows them to invest in promoting their brand. In addition, scale advantages are also achieved through better procurement deals,” says Beaver.
While regulation has been a driver towards companies increasing their capacity, Beaver says that this has not been the case for Centriq up to now. “We expect that the full ramifications of Solvency Assessment Management, Treating Customers Fairly and the Retail Distribution Review will play a bigger role in driving consolidation across the industry and at every level,” says Beaver.
End of days?
With a lot of companies increasing their volume, this may point to the fact that the days of a specialised stand-alone short-term insurer may be numbered. However, Beaver does not believe that this is the case.
“I don’t think so. If your exclusive offering represents a value proposition to the client, the client will want it. Customers are discerning, and we are used to cherry picking the best solutions from where-ever they come. The convenience factors offered by a one stop shop financial solutions provider when buying a complex financial service products versus buying your monthly groceries at one shop is not comparable” says Beaver.
He adds that this is the core job of the intermediary. Their value proposition is knowing where to find the best solutions from the market place and then accessing those solutions on behalf of their customers.
Punching with the heavyweights
Another advantage of having significant volume behind you is that there are opportunities for you to ring fence certain sections of the market and outmuscle the opposition because of the sheer size of your company. The ambition of Centriq to punch with the heavyweights is something that interests Beaver.
“Centriq’s UMA business portfolio should achieve a gross written premium (GWP) of around R1.3 billion in 2015, which represents our market share in the conventional short-term insurance market. We are still some way off some of the industry heavyweights when looking simply at top line GWP in total. But yes, we have a goal and ambition to position ourselves amongst the industry heavyweights,” says Beaver.
Because of this ambition, we can expect some more growth from Centriq in the future. “We are currently working on a number of new UMA prospects; and during the remaining months of 2015, we expect to announce the addition of some new UMAs into our portfolio. This may even include the acquisition of certain equity stakes in some of these UMAs,” says Beaver.
Editor’s Thoughts:
Building Capacity in a competitive industry can be a daunting task. Strategic partnerships with key insurers offer the benefits of bespoke solutions and the products that your clients need to offer them protection. What are your views on these types of partnerships? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
