David Nichols reflects on Zurich's personal lines pivot
Zurich UK’s head of retail David Nichols recalls why Zurich felt the need to exit the brokered personal lines business, and how it has fared by focussing on partnerships and high-net-worth insurance
Back in July 2023, Zurich announced plans to refocus its personal lines home and motor business to concentrate on high-net-worth, through Zurich Private Clients, alongside its MGA and partnership channels.
Speaking to Insurance Post, Nichols revealed that 31st December 2023 saw the switch-off of the last personal lines broker customer. Now, over a year later, Nichols has given an insight into the thinking behind the exit.
He said: “If I particularly look at personal lines, you have to have a really strong customer base that you can leverage for insight, that you can leverage for performance, and therefore price effectively where it makes a difference to you.
“When I look at the personal lines broker portfolio that we had, it was actually a really small scale of capability.
“It had been in place for years, and in the cold light of day, you would look at it and say: ‘I’m not sure we can do much with this’, based on the scale that we had.”
He said the proposition was not to the standard he hoped it to be, but he did not want to lose relationships with brokers if Zurich were to exit.
“The core thing you’re then wrestling with are the key broker relationships that are going to be tied up in a book like that.
“Ultimately, it was a decision based on: ‘Could we do anything with it?’ My conclusion was ‘no, not to substantially grow out in the place that we operated’.
“Secondly, were we putting the best proposition out for our brokers? Probably not based on that scale.”
Nichols clarifies that the proposition was not to Zurich’s standard, though that was not necessarily the feedback from the market.
“We have a standard that we want to uphold. When we do something, we want it to be a really high-end offering. I didn’t feel that what that portfolio represented was in line with the high-end offering we wanted to put out to the market.”
But then it was a case of keeping those broker relationships.
Nichols continued: “Thirdly, would it interrupt any of our key broker relationships? Having discussed it with them and found solutions to support the runoff, my conclusion was ‘no’.”
After speaking to brokers, Nichols said the logical conclusion was to exit.
Partnerships
Instead of distributing personal lines through brokers, Zurich has focussed on distributing its underwriting through various capacity deals and partnerships.
Notable deals in this bracket include Sky Protect for home, KGM for motor and AllClear for travel.
“Non-standard home, non-standard motor, non-standard travel. But they’re all propositions that are distinctly different, and they are propositions that require the partner to understand their marketplace deeply,” Nichols said.
He believes these partnerships allow Zurich to “leverage the skills” of what it wants to be known for, with an underwriting-led set of capabilities.
“In that non-standard space, my view is it plays fantastically well to our strengths as an organisation,” he added.
“It also plays to some of the strengths in the partners that we’ve selected, which is all around the deep-rooted knowledge that they have of the sectors that they play in, which are not your standard mass market sectors.”
AllClear targets customers with pre-existing conditions, KGM operates in the non-standard motor arena, while Sky Protect provides security and leak detecting equipment as part of its insurance offering.
High net worth
Nichols highlighted how, as well as opportunities lay the non-standard space, Zurich saw a “natural affinity” with the high-net-worth part of the business.
He explained: “We case underwrite our private clients business. They are not e-trade solutions.
“We have a team of absolute experts in the private client space. And again, it’s a different sector of the market where we can bring our underwriting expertise into that personal lines sector to offer a superbly strong proposition.”
The HNW sector has seen a number of notable exits in the last few years. In addition to this, there has been some consolidation in the market, with Aviva buying two businesses in quick succession: Azur and Axa XL’s private clients’ businesses.
This led to a lot of business coming to the market, with Nichols saying that Zurich did very well out of this.
“Last year was a really good year for us in terms of growth because there have been a number of exits from the market.
“My assumption is that it has all been placed amongst the players that still exist because we certainly saw a good volume.”
The likes of GJW and Aurum had only been in operation for a small number of years, but to last in the HNW business, Nichols said you must understand the market.
“To do private clients well, you’ve got to understand your risks. You’ve got to understand your underwriting appetite, and you’ve got to understand your pricing strategies.
“This is why it is a case underwritten business for us. It’s not an e-trade business because our proposition is to understand the risk deeply and put forward the right solution for the customer.”
“There could well be room for new players to enter that market,” Nichols said, but with a warning.
“In reality, premiums are higher, which may, on the surface, make it look like an attractive market to go into. But because the premiums are higher, the claims are higher.
“That’s why I go back to my point that you must understand your market. You have to understand the customer need in that particular space, and you have to understand the risks that you’re underwriting.”
Nichols states that Zurich has been in the HNW space for around 20 years now and that it knows what part of that market it wants to operate in.
“There are a number of sectors with overall high net worth. Because mid-net worth tends to get clubbed together with high net worth, I think we position ourselves as truly high net worth.
“We don’t play in the more mid net worth area of the private clients proposition. We’ve been doing HNW for 20 plus years and have grown out the operation over that time.”
Earlier this month, Zurich also announced it had made a raft of policy enhancements in motor and home wordings.
Kevin Morton, head of Zurich Private Clients, told sister publication Insurance Age that ZPC’s move “demonstrates a commitment to this market moving forward”.
Moving forward
So what is the plan for the next 12 months? Nichols said he expects the partnerships Zurich already has to grow, as they already have in the last 12 months.
“What’s been really nice to see over the last 12 months is that we’ve deepened our relationships with each of those partners, and continue to see growth in those partnerships.
“I have every expectation that they will continue to grow and deepen. That will be a continuation over the next 12 months.”
On whether there is the possibility of new partnerships, Nichols kept tight-lipped.
“It’s just about understanding opportunities as they emerge,” he said.
“There will always be opportunities that are presented across our entire landscape, not just in the non-standard personal lines space.
“We are a really credible partner because of the way we work, because of our ability to onboard quickly, because of the underwriting capability that we have.”
He also steered clear of putting a number on how much he wants the business to grow, stating it “always depends on what the market does, where the customer base is, what the opportunities are”.
He concluded: “Sometimes it’s difficult to stand back and put a number to that.”
