In 2005 the NSW Government ordered a radical change to the workers compensation scheme admitting two new non insurer agents and forcing existing agents to give up a proportion of their market shares to the new players. The new entrants were guaranteed a 15% combined market share of policies. Policy numbers are based on 367,000 policyholders and the latest available market shares of policies (30.6.04). The Vero* portfolio was transferred to Cambridge under the new arrangements.
|
Agent |
2004 % |
2004 # |
2006 % |
2006 # |
# Change |
| GIO |
28.8 |
105,696 |
24 |
88,080 |
(17,616) |
| CGU |
25.1 |
92,117 |
21 |
77,070 |
(15,047) |
| Allianz |
16 |
58,720 |
13 |
47,710 |
(11,010) |
| QBE |
23.6 |
86,612 |
21 |
77,070 |
(9,542) |
| EML |
4.9 |
17,983 |
6 |
22,020 |
4,037 |
| Cambridge | – | – |
6 |
22,020 |
22,020 |
| G.B. Servs | – | – |
9 |
33,030 |
33,030 |
| Vero* |
1.6 |
5,872 |
– | – | – |
Note that:
- 92% of all employer’s policies generate $10,000 or less in premiums i.e. 337,600 policies.
- 7.5% of policies generate between $10,000 and $500,000 in premiums i.e. 27,500 policies.
- 0.5% of policies generate more than $500,000 in premiums i.e. 1,800 policies.
- The new grouping provisions introduced on 30.6.06 may change the complexion of the higher premium paying policies causing a minor shift between those policies with premiums currently under $500,000 but over $100,000 to policies over $500,000 as they consolidate.
A comparison of policy numbers with the market share of premiums, shows that GIO has a large number of SME clients, whereas Allianz is strongly represented in the larger employer market with 13% of policy number but 22% of premiums. With the advent of the changes introduced in 2005, the WCA froze any movement of SME policies other than those it directed, until 30 June 2006. The rationale for this freezing of policy movement was that it allowed for the transfer of policies and for the new entrants to “settle in”.
The changes in 2005 created a “double jeopardy” for the pre existing agents. Not only have they been forced to reduce their market share, they now face added competition.
There is still some scope for consolidation in the insurance market with at least 2 participants viewed as possible take over targets. Whilst both of these companies hold agencies with WCA, their purchase by a competitor is unlikely to destabilise the market.
It is unlikely that any new agents will be appointed, the changes in 2005 only elicited two genuine new responses. A new business marketing thrust was launched by some agents when the policy movement freeze lifted. The scope of the policy coverage is legislated and the price is fixed so differentiation was difficult, particularly where the employer had little or no need for the services (i.e. has no claims).
In June 2006, QBE was generally regarded as being the big winner.
The major issue most agents will need to continually confront is the poor levels of service they traditionally provide.