Home advantage

New national agency Castle aims to keep brokers’ household cover options open

By John Deex

Intermediated home and contents cover has its challenges, with insurers struggling to make satisfactory profits, broker commission levels under scrutiny, and increased compliance requirements.

But customer demand for advice is rising. For many Australians, securing cover for their homes is much more complicated – and expensive – than it used to be, and brokers say growing numbers are asking for their help.

Against this backdrop, it’s vital that intermediaries have stable and affordable options for their clients, and rumours of insurers potentially exiting the market – as seen with Vero’s approach in 2021 – caused concern.

The reality, revealed by one major insurer in July, was very different and much more positive.

Since October 1, QBE no longer offers domestic householders’ insurance directly through brokers but instead provides capacity and backing for regional Queensland underwriting agency Sure Insurance, and its new national brand Castle Insurance, to offer those products.

QBE underwrites all of the Castle portfolio and 20% of Sure’s portfolio.

Sure and Castle managing director Bradley Heath believes QBE deserves credit for not taking the easier option, and says brokers are optimistic about Castle.

“Many brokers would probably see home insurance as a diminishing space. It’s not just the number of underwriters, it’s the reach,” he tells Insurance News.

“QBE’s had the fortitude to try and stay in it and make it work, and they should be commended for that.

“We’ve been excited by the feedback and we’ve spoken with a lot of front-line brokers who are keen to see Castle succeed.

“Brokers are very keen to get more capacity out there and to have other options for their customers.”

In a segment where others have faltered, how can Castle succeed? It’s a critical question, but former RACQ Insurance chief Mr Heath points to the success of Sure since its launch in 2019.

It has become an important home and strata cover provider in regional Queensland, with a reputation for delivering significant premium savings – in part by recognising mitigation measures.

Sure works because it is a specialist, and now it is taking that model national through Castle.

“We get our processes right, our systems right, our people right – and put the three together,” Mr Heath says.

Castle will use its own pricing mechanism, which Mr Heath believes will bring a sharper, site-based rating focus.

“We’ve got modern pricing engines, which enable us to be more granular, more selective and more reactive. We can make changes quickly where it makes sense.”

Mr Heath acknowledges there are issues with home insurance, and Castle cannot fix them all. But it is set up to make a positive impact.

“We can’t fix the supply chain or the skills shortage, but we can always manage it better,” he says.

Castle will not cover the most extreme flood risks, but Mr Heath estimates this equates to less than 1% of Australian properties.

“I’m talking very extreme flood risks. We won’t be in a position to offer that. But the focus is on how we can be relevant to the other 99%, to make sure we can give them the best possible deal.

“We’ve long advocated for a high-risk flood pool, and we are seeing promising signs that this might now be on the federal government agenda. Some low-cost changes to the cyclone pool around duration of cover to 168 hours would also have a positive effect on premiums and availability of cover.”

Mr Heath believes customers are increasingly turning to brokers for home insurance advice, but he stresses the product must be sustainable for all parties.

Castle will launch with a 17.5% commission, but it’s an area that will be under scrutiny after some competitors moved to a lower rate.

“We will look at that as we go along, and clearly the market, in percentage terms, is moving downwards,” Mr Heath says. “But we want to try to give brokers the right notice, the right trajectory for that, because they’re running a business too.”

He believes Castle can remove some of the frictional cost for brokers, which would make any change to commissions “more palatable”.

“There’s a lot of people in the value chain. So we have to respond to that and make everyone’s life easier. We have to deliver something back to the market. How do we make that frictional cost less for brokers? How do we get them to take out the business and renew the business a lot more simply, with fewer referrals?

“It’s not a matter of just cutting commission and walking away. There needs to be better systems, better processes for everyone.”

Castle’s claims and loss adjusting will be managed in-house, as they are at Sure, and there could be significant developments in this area in future. The business has claims and loss adjusting teams in Brisbane, Perth and around regional Victoria and Queensland already, and as scale grows so will the in-house teams’ national footprint.

Mr Heath believes the traditional “back and forth” claims model might have had its day, and there could be a better way.

“We’ve got some theories that we’re going to test drive soon. We’ve got some ideas about how we can be more responsive to our customers in a project management sense.

“Let’s listen to what the customers are saying in the various commissions of inquiry. Let’s listen and say, ‘How do we organise ourselves to respond directly and as a specialist?’ We should be able to do that.”

Steadfast acquired a 70% stake in Sure in 2023, but Mr Heath says Castle will remain “platform agnostic”.

It launched on Ebix’s Sunrise Exchange and will join the Steadfast Client Trading Platform and Envest’s Marketplace in “phase two” as a priority.

“We wanted to get something to market quickly and most of the QBE book was on Sunrise.

“We knew we could work with Steadfast because it was the right business model, and they’ve been true to their word.

“We have a good governance structure and it is expected that we operate in a competitive environment and run our own strategy, and the board oversees that.”

While Sure provides insurance direct to consumers as well as through brokers, Mr Heath says Castle will remain focused on the intermediated market, and there are no immediate plans to expand its product suite.

“I’d never say never, but our approach initially has been very much to work with the broker market, and that’s how we’ve structured the product and the systems.

“And the broker market is big, and a growing proportion of the market. We want to service that properly, and provide the best possible outcome there.

“We’ve got some great relationships, particularly with authorised representative networks, which are much closer to the consumer, on average. So we will be working closely with all types of brokers, but particularly with the various AR networks.”

Mr Heath does not underestimate the scale of the challenge, but says his team have risen to it.

“We all take our responsibility to QBE seriously, because this is not something you want to get wrong, given the scale of it.

“We’re going from covering probably 10% of the country to almost 100%. Our people are really enjoying the process. We’re delighted to provide another option and I’m committed to getting this right for brokers, consumers and for all the stakeholders.”