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UK Commercial Insurance Distribution
2011

  • Publication Date:May 2011
  • Publisher:Datamonitor
  • Product Type: Report
  • Pages:94

UK Commercial Insurance Distribution 2011

Introduction

This report gives a comprehensive analysis of distribution in the UK commercial insurance market. It explores issues including the growth of direct insurers in commercial insurance and the acquisitions occurring between commercial insurance brokers. The report also includes data and insight into SME purchasing behavior, broker consolidation and the latest activity of the managing general agents.

Features and benefits

  • Insight into the latest issues affecting the commercial insurance market and the impact these are having on distribution.
  • The latest data on SMEs purchasing behaviour, managing general agents and broker consolidation in the UK commercial insurance market.

Highlights

Datamonitor's results indicate that SMEs are increasingly open to purchasing cover online fuelling an increase in insurance cover being provided directly to SMEs. However, there exists a clear correlation between the size of an SME and the propensity to purchase cover online, indicating the continued value assigned to brokers bespoke advice.

Consolidation in the market has been muted in comparison to previous years as brokers look to reduce net debt levels and capital funding in the market remains suppressed. Acquisitions have been increasingly targeted at increasing exposure in specialist or regional markets as opposed to increasing GWP volume.

Your key questions answered

  • What are the past and forecasted commercial insurance distribution trends in the UK?
  • What factors are influencing SMEs commercial insurance purchases?
  • What have been the chief issues affecting commercial insurance distribution and what factors will affect it going forward?
  • Executive Summary
    • The commercial insurance market experienced modest growth in 2009
      • General liability showed steady growth in 2009, while the pecuniary loss market rebounded from major declines last year to show strong growth
    • Distribution channels are expected to have stayed fairly constant in 2010
      • Brokers dominate distribution in the UK commercial market, with 82% market share by GWP
      • The proportion of policies written directly to insurers is expected to have increased by 1%
    • The broker channel is forecast to decline, while the direct channel will become more popular
      • The market share for brokers is forecast to decrease to 80% by 2015
      • Direct insurance providers are forecast to increase market share to 12%
  • OVERVIEW
    • Catalyst
    • Summary
  • MARKET CONTEXT
    • Introduction
    • The commercial insurance market experienced modest growth in 2009
      • General liability showed steady growth in 2009, while the pecuniary loss market rebounded from major declines last year to show strong growth
    • Growth in the number of small and medium-sized enterprises slowed in 2008 and 2009 as the recession impacted the number of new enterprises
      • The rate of growth in the number of UK enterprises halved in 2009
      • Small businesses account for 99% of all UK enterprises
  • DISTRIBUTION DYNAMICS
    • Introduction
    • Distribution channels are expected to have stayed fairly constant in 2010
      • Brokers dominate distribution in the UK commercial market, with 82% market share by GWP
      • The proportion of policies written directly to insurers is expected to have increased by 1%
      • Banks and building societies have only generated a small proportion of commercial insurance GWP
    • Brokers are looking to expand their business, although fewer are looking to consolidate
      • Targeting new customers was most frequently identified by brokers as the strategy they are following to grow their businesses over the next year
      • A third of brokers have been approached by a consolidator during the last 12 months
    • Many brokers joined a broker club or network in order to gain access to more insurers
      • 43% of brokers are part of a broker network or club
      • The most common reason for joining a broker network or club was to access a larger panel of insurers
      • Less than 10% of brokers are considering selling their business in the next year
  • CUSTOMER FOCUS
    • Introduction
    • Despite changes in technology, face-to-face brokerage is the most popular form of commercial insurance arrangement
      • Nearly three quarters of SMEs arrange their commercial insurance via a broker
      • Less than a quarter of commercial insurance policies are arranged through the Internet or by post
      • SMEs are most likely to trust an insurer based on a referral or prior experience
      • Information about direct insurers was most popularly sought on the Internet
      • Medium-sized enterprises are the least likely to stay with their provider for more than 10 years
      • Over a third of SMEs consider ongoing advice from their insurers to be "very important"
      • SMEs that arranged their commercial insurance through the broker channel were most likely to deem ongoing insurance advice as "not important"
      • Half of SMEs that arranged their commercial insurance by post found it "very important" to receive ongoing advice from their insurer
    • Price remains the most important factor in the choice of commercial insurance provider
      • Micro SMEs are the most concerned about price but the least concerned about service
      • SMEs that arranged their insurance over the phone are the most concerned about price
      • SMEs that purchased their policies through a broker were the most price conscious
    • More than a third of SMEs do not receive extra services from their commercial insurer
      • Risk management is the most commonly held extra service received from insurance providers
      • Micro SMEs were most likely to have no additional services as part of their insurance packages
      • None of the surveyed micro SMEs pays for their additional services
      • More than a third of SMEs do not want to receive any additional services from their insurance provider
      • Around two thirds of businesses that do not receive additional services from their provider have no desire to do so
    • Premium pricing is the main driver of provider-switching among SMEs
      • Most SMEs have been with their insurance provider for two to five years
      • More than a quarter of bank clients switched providers at their last renewal
      • Micro SMEs changed providers solely for pricing reasons
    • The number of SMEs that intend to change their provider has decreased since 2009
      • Fewer SMEs are considering changing provider compared to 2009
      • Most of the SMEs that intend to change their commercial insurer arranged their policies face-to-face
      • Price is the leading reason for SME insurance switching
    • An increasing proportion of SMEs are open to telephone or online policy arrangement
      • Call center-based insurance providers need to stress the convenience benefits they can offer
      • Micro SMEs are more likely than medium firms to arrange commercial insurance over the telephone
      • SMEs are attracted to the convenience of online commercial insurance arrangements
      • Nearly two fifths of micro SMEs would arrange their insurance online
    • The majority of SMEs that would not use the telephone or Internet retain the desire to arrange insurance face-to-face
      • A clear majority of SMEs would prefer not to use the telephone to arrange insurance
      • Three quarters of medium-sized companies would not purchase insurance over the telephone
      • Insurers might find it easier to persuade SMEs to arrange their cover over the Internet rather than on the telephone
      • Medium-sized enterprises were the most likely to reject the online arrangement platform in favor of the face-to-face method
    • Employers' liability insurance was the most likely to be arranged online or via the telephone
      • Employers' liability cover was significantly more likely to be arranged online than other commercial insurance products
      • Micro SMEs appear willing to arrange few products over the Internet
    • SMEs are considerably more inclined to purchase commercial insurance from a direct insurer rather than a bank or building society
      • Micro SMEs would be more likely to purchase bancassurance commercial policies due to price
      • A quarter of SMEs would consider arranging their insurance with a bank or building society
      • The majority of SMEs would consider buying commercial cover from a direct insurer
      • Micro enterprises would be most likely to buy insurance directly from a company due to price and ease of use considerations
    • Many SMEs are happy arranging their policies via brokers and will maintain this strategy
      • Three quarters of SMEs would currently not consider purchasing their commercial cover with a bank
      • Medium-sized enterprises are currently less likely to arrange their insurance through brokers than other SMEs
      • The most common reason for SMEs to resist buying commercial insurance directly was satisfaction with their existing broker relationship
      • Medium-sized SMEs were less concerned about the reputation of direct insurers
  • COMPETITIVE DYNAMICS
    • Introduction
    • Consolidation activity among brokers slowed in 2010 compared to previous years
      • Gallagher acquires Heath Lambert to create a top 10 broker
      • Towergate aims to grow organically and through acquisition following company re-financing
      • CCV maintains ambitious growth plans through acquisition
      • Bluefin experiences a drop in revenue for 2010
      • Giles Insurance Brokers makes its largest ever acquisition
      • Swinton continues expansion through acquisition
    • Insurers are continuingly improving their offerings in a bid to gain ground in the SME sector
      • RSA improves its e-trading website in line with a greater focus on the SME market
      • The National Insurance and Guarantee Corporation rebrands and increases its broker commission rate
      • Allianz Commercial found success with its Internet platform in 2010
      • Aviva extends its HSBC agreement and adds a direct distribution channel
      • Hiscox launched new commercial insurance initiatives
      • Atradius launches a trade credit insurance product for SMEs
    • Use of technology is starting to pick up steam as a means of facilitating distribution
      • Commercial aggregators are limited by demand for advice among SMEs
      • E-trading platforms are deemed useful among brokers
      • Comparethemarket.com adds Towergate to panel in an increased effort to target SMEs
      • Brightside Group plans the launch of a commercial aggregator
      • Applications are increasingly being used to aid brokers
    • Broker networks and MGAs have expanded their market share
      • Managing general agents remain a cost-effective and attractive way for insurers to gain access to niche markets
      • Broker networks continue to increase in popularity
    • Multinational brokers hold the lion's share of the UK commercial insurance market
      • Marsh has the largest share of the UK commercial insurance market
      • The market share of the top four brokers increases with client revenue
    • National brokers
      • Aon and CFC Underwriting launch a quote-and-buy facility
      • Willis experiences $170m drop in Q1 profits
      • JLT enjoys a £20m growth in profits
  • THE FUTURE DECODED
    • Introduction
    • The broker channel is forecast to decline, while the direct channel will become more popular
      • The market share for brokers is forecast to decrease to 80% by 2015
      • Direct insurance providers are forecast to increase market share to 12%
      • Banks and building societies are forecast to grow their position in the commercial insurance market
      • Other company agents are forecast to account for less distribution by 2013, while distribution through company staff will remain static
      • No change is expected for corporate partnerships during 2011-15
  • APPENDIX
    • Definitions
      • Premium income measures
      • Distribution definitions
    • Methodology
      • Datamonitor's SME Insurance Survey Q4 2010
      • Datamonitor's Insurance Broker Survey 2011
    • Further reading
    • References
    • Ask the analyst
    • Datamonitor consulting
    • Disclaimer
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