'We want to find those niches': Hutch says strata just the start

Sydney-based Hutch Underwriting plans to build a suite of products on Sunrise Exchange, with construction to be added after its residential strata offer was launched last week.

The Hutch strata offer is focused on “the volume end of the market” up to $10 million building sum insured, with liability limits up to $30 million for residential, with up to 20% commercial. It also offers body corporates protection from cybercrime and is the only strata product on the Sunrise platform.

“It’s great to see brokers putting risks through the system on our first day, after six months of building the system,” said founder and CEO Robin Johnson, who was formerly local CEO at Axa XL.

Mr Johnson tells insuranceNEWS.com.au strata is a market with “great fundamentals” fuelled by demographics and planning growth, and is “just ripe for a new player”.

“It’s a market that’s almost doubled in size in the last six years, driven by construction, inflation and rate, and that will continue to grow indefinitely as cities are only going to get denser. At the same time, you’ve seen a bunch of insurers withdraw from the market leaving almost no independent players.

“We felt we could come in and use our independence to offer something different.”

AIG announced it would withdraw from strata in December, and three other major insurers did so since 2015, according to research last month by Macquarie, which says CHU has been one of the main beneficiaries of market consolidation.

Hutch was co-founded by Chief Underwriting Officer Dominique Vagi. Strata Underwriting Manager Melodi Emadi joined last Hutch month. She formerly held positions at Longitude Insurance and Hollard.

Mr Johnson has a background in technology and says Hutch is bringing process improvements and is aiming for 90% automation, allowing brokers to quote and bind within four minutes.

Unlike a typical “very manual” MGA, Hutch has invested significantly in technology, integrating third party data sources including geocoding and real time perils data to be able to automate underwriting.

“Brokers tell me is that it’s actually quite hard to get quotes, even from the big strata players, just because everybody seems to be overwhelmed with volume. Your average premium is only $3000-4000 and there’s hundreds of thousands.

“So being able to cope with that volume requires either a lot of staff or some really good tech. We’ve gone for that latter one. With a four-minute turnaround, we should improve service for them.”

The strata market size was $1.4 billion last year excluding commercial property, and Macquarie forecasts this will grow 22% over the next two years. At around 15% the size of the Australian home insurance market, it is one of Australia’s largest insurance products.

Macquarie says 84% of GWP related to residential risks in the year to June and estimates strata makes up 2.7% of QBE’s Group GWP, and around 1.1% at IAG and 0.5% at Suncorp.

The rate environment is very different from what it was a decade ago, Mr Johnson says, with rates going up double digit most years and the average rate in the market now “pretty attractive”. Hutch Head of Actuarial Tom Ko, former Pricing Director at RSA UK, is spearheading an “ambitious” data strategy, he says.

“We’re building self-learning pricing optimization algorithms to capitalize on the wealth of data coming through the platform.” Mr Johnson said. “It’s how we use that data that’s going to predict our long-term results”.

The team also plans its roll out of more products on Sunrise soon, starting with construction sometime next year.

“Then we’ll just keep expanding. We want to find those niches where brokers are underserved,” he said.