There has been a major development in the insurance industry with Underwriting Agencies of Australia (UAA) and MECON Insurance (MECON) announcing that the two businesses have agreed to merge.
Glenn Ross, Chief Executive Officer MECON, Michael ‘Murf’ Murphy, UAA Group chief executive officer, and George Grasso, UAA chief claims and service officer, sat down with Cranes and Lifting magazine to explain the benefits clients in the plant and equipment and construction industries can expect from the merger.
Ross provides some background to the merger.
“MECON is short for Mechanical and Construction and, as an insurance business, we have been operating in the plant and equipment space for 18 years. We have been a competitor of UAA, although both business are under the Steadfast Group umbrella,” he said.
“Generally speaking, MECON has been operating in the SME spectrum of the plant and equipment industry and the reason we maintained the two business models and brands for plant and equipment was to provide our client base with an alternative insurer to UAA. Each business evolved at different rates and for different reasons. More recently it became very practical for us to merge the businesses.
“The merger is also the result of market pressures, Steadfast Group’s business strategy, and our own business philosophies. We agreed that the alignment and timing was right and so we brought the two groups together. Obviously, we’ve been working on this development for some time, and I am pleased to say the fit feels right and we are all comfortable with everything that is happening,” he said.
Ross goes on to discuss how the various markets serviced by UAA and MECON are going to benefit from the merger in terms of improved service and capabilities.
“The first major benefit to the market will be around pricing. In insurance terms, volume brings its rewards. Then there is the benefit of economies of scale in terms of the combined client base and also the combined, and ‘line-focused’ personnel resources we now have at our disposal,” he said.
“The opportunities are exponentially greater with the merger. As we move down the path of integration, we are increasingly seeing the efficiencies the businesses are bringing to each other. This will be very positive to our businesses and also to our clients,” said Ross.
Murphy discusses the benefits that clients of UAA and MECON will see following the merger.
“Although insurance can be a very complex business, the team at UAA likes to keep things nice and simple for our clients. In terms of the merger, we intend to maintain this ‘keep it simple’ approach. If you require plant and equipment insurance, you can come to UAA, if you want construction/contracts works insurance you can go to the best player in this market and that is MECON.
“Our philosophy behind the merger is ‘two brands, one family’. Why would we look at a merger? Well, imagine the amount of plant and equipment operating on construction sites on any given day across the country. There is plenty.
“MECON is by far the best contract works specialist underwriter in Australia and we like to think UAA is the best underwriter of plant and equipment. The power of bringing the two together is insurmountable.
“The message to our clients, the insurance brokers and also to our end users, is ‘two brands, one family’. Clients can now come to one ‘family’ for the best two products and receive the unparalleled service we are now capable of offering. In our opinion, the delivery mechanism is compelling,” said Murphy.
The claims teams within both UAA and MECON have been recognised for ‘excellence’ during the recent flooding disasters, he added.
“Recently, the Insurance Business Awards for Australia nominated the claims team at UAA for an award as the Best Claims Team and Jackie McCarthy of UAA has been nominated for Best Business Development Manager. In the same awards, MECON has been nominated for Best Agency,” he said.
Each year, for the past six years, MECON has also won the Best Construction Agency and the Best Annual Construction Policy Wording in the Insurance Business Awards, voted for by insurance brokers, he said.
“So, at the front end, there are compelling reasons to come to the ‘one family’ and, at the back end, we have the two best claims teams in the industry, delivering for our clients,” he said.
Although an official insurance industry announcement of the merger has not yet been released, feedback from insurance brokers who have learned of the merger through industry sources has been overwhelmingly positive, he said.
George Grasso explains there are a number of synergies within the two organisations.
“As Glenn and Murf have already highlighted, the key messages to the industry are that UAA will continue to be a specialist in mobile plant and machinery. The mobile plant and machinery book of business which exists within MECON will transfer across to UAA during the renewal process. MECON will retain its brand and integrity in terms of its expertise in contract works,” he said.
Construction/contract works has been an area of the industry UAA has considered targeting in the past.
“We always felt this sector would be a nice fit for UAA. It would provide clients operating as a principal contractor the opportunity to work with ‘one family’ and two specialised products. Now, with the merger, this has become a reality,” said Grasso.
“The merger will certainly improve efficiencies for our clients and with the brands working with an Australian security in QBE Insurance [and, for MECON, AIG also], each business will have far greater capacities. This is a huge plus for our brokers and for our direct clients as well.
“They now know our policies will continue to be managed in-house here in Australia. We don’t have to seek approval from securities outside of Australia. With the merger, the economy of scale has broadly increased, with UAA and MECON combined generating revenue in excess of $400 million globally,” he said.
“We are now able to leverage this scale and we will be able to pass on benefits to our clients in terms of the quality of the products we offer, the combined capacity we now have, and the continued quality of service we pride ourselves on,” said Grasso.
The merger means UAA and MECON will have a large market share in the construction insurance space at large. The combination of UAA’s strength in plant and machinery combined with MECON’s strength in construction means there is a high chance UAA will be managing the insurance for machinery and plant and MECON the insurance of the contract works facility.
“If we have two separate securities, that won’t be a problem,” said Murphy, “but if we can make things more fluid for the broker by working together without disenfranchising them, that is our goal.”
This is a situation MECON has been dealing with for quite some time says Ross.
“In this business, when you hear on the news that a crane has gone over, you sit on the edge of your chair and ask, ‘is it one of my clients?’. And, from a MECON perspective, the rest of the question is ‘has it damaged the buildings on a construction site?’ Not uncommonly, this has been the case.
“We had a recent incident where numerous buildings were impacted by an overturned crane. They were occupied and/or under construction when the crane went over. The merger of the businesses will provide us with the ability to deal with an incident like this holistically, but with a dual focus,” said Ross.
“Moreover, about the quality of the claims; bringing two groups together who are at the top of their individual games, you end up with the best of the best and that’s where our clients will receive the most benefit. The experience within the two groups of claims operatives is extensive and don’t forget that it is relatively unique for any agency to be entrusted with handling their own claims,” he said.
“Not only have we been entrusted with managing our own claims for a very long time, we are bringing together arguably the two most experienced teams in the market with the ability to handle all of their claims,” said Ross.
UAA conducts a ‘net promoter score’ (NPS) survey through the network of insurance brokers it works with and the most recent results have come back at plus 56. MECON also enjoys a high NPS, gauged through annual surveys with brokers.
“Most insurance and finance companies are happy to register a positive result. UAA’s results increased by 12 points compared to the previous survey. This is as a result of how the claims team performed during the recent flooding disasters. We challenged our team to be superstars during what was an extremely challenging period and they delivered,” said Murphy.