Trend to bespoke products drives AFL into Zodiac acquisition

A trend toward bespoke insurance products driven by available technology and data is one of the reasons why Lloyd’s broker AFL Insurance Brokers decided to acquire US-based Zodiac Insurance Services, AFL CEO Bob Finch, told Intelligent Insurer.

In September 2018, AFL acquired a majority stake in New Jersey-based Zodiac as it expands into the managing general agent (MGA) space.

Zodiac is a Lloyd’s MGA underwriting in excess of $10 million casualty lines business in the US. It specialises in professional, entertainment and event insurance.

“The drive for bespoke products from a client perspective is a symptom of the trend in insurance as a whole," Finch said. We’ve got so much technology and data coming into the underwriting process now that people are looking for more accurate pricing, more assistance with their claims experience and probably more bespoke, better fitted programmes,” he explained.

Zodiac was founded by president David Wash in 2011 and provides specialty products as an insurer, specialty broker and Lloyd’s coverholder licensed in 48 states.

Zodiac offers specialised professional and specialised general liability and it takes a lot of time and effort and energy to create specialist products in these areas, Wash said. Pointing to general liability, he said that “unless you take a lot of time to look at how things are engineered and you look at safety protocols and things of that nature you can’t underwrite it profitably”.

“We have invested significant time, money and personnel to study those product lines.  We match the product to the demand. We gravitate toward where underwriting is going to be quite a learning process rather than just looking at an individual account,” Wash explained.

“I think there are a lot of markets like that, a lot of untapped markets that need help and I think there are markets where there might be a product out there but if you take this approach to it I think you are going to be very successful beyond what generalists can provide,” he said.

Finch also sees “huge” growth potential for Zodiac. In order to help the business expand AFL is looking to enhance Zodiac’s offering with regards to their ability to use data analytics and interpret it to create better pricing, to reduce losses through Internet of Things (IoT), to improve customer interaction and claims experience, he explained.

“We have a real culture of innovation,” Finch said. “We have a lot of partnerships with insurtechs and with innovative carriers and tech entrepreneurs. We have our incubator unit where we try to learn as fast and as quickly and integrate the best things that we learn,” he explained.

The AFL Incubator supports insurtech startups and fosters technology innovation across industries, similar to what Lloyd’s is doing with its Lloyd’s Lab.

Following a global search for technology talent, the global insurance market’s new innovation accelerator in September 2018 selected 10 teams that will be offered a spot in the founding Lloyd’s Lab cohort.

While appreciating the work that Lloyd’s is doing with the Lloyd’s Lab, Finch noted that there is still resistance from areas of the London market that is clinging on to the way that insurance has always transacted. “That’s been a real barrier for London. That protectionist mindset has to change,” Finch said.

Technological enhancements may also change the way brokers operate.

“There is a real risk that any part of the chain, whether it’s a broker or and MGA or any other part of the chain, if they are not adding value then they will find themselves redundant,” Finch said.

But at the same time, Finch showed confidence in the broking model.

“I don’t see tech necessarily as disintermediating. I see it as improving parts of the chain, as enabling parts of the chain to work and transact in a more efficient fashion, whether that is through new systems, maybe a blockchain enabled system, maybe through better analytics of data,” he said.

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