UK Commercial Insurance Distribution 2009

Content

• Overview
• Catalyst
• Summary
  • Executive Summary
  • Large national brokers continue to dominate commercial insurance distribution
  • Independent insurance intermediaries of all types retain their leading market share in 2008
  • A significant proportion of respondents were contacted by a consolidator but do not intend to sell their business
  • Almost 5% of respondents stated that they planned to close or sell their business
  • 41.5% of respondents have been approached by a broker consolidator over the last 18 months
  • Acquisitions between brokers continued in 2008, albeit at a slower pace
  • AXA has continued to increase its presence in the UK commercial insurance market through its broking arm Bluefin
  • Cullum Capital Ventures continued with its acquisition strategy in 2008
  • The broker network space is becoming increasingly overcrowded
  • A number of players have launched their own broker networks and clubs in a bid to generate extra revenue
  • Table of figures
  • Table of tables
• Market Context
  • Introduction
  • Total UK general insurance GWP grew by an estimated 2.0% in 2008
  • Premium income in the motor insurance market increased to an estimated 13.5 billion in 2008
  • The property insurance market recorded an increase in premium income in 2008
  • The accident and health market increased by an estimated 3.5% to 6.0 billion in GWP in 2008
  • The pecuniary loss market grew by an estimated 2.0% in 2008
  • The general liability market contracted by an estimated 3.8% in 2008
  • The group accident and health sector achieved the strongest growth in the commercial insurance market in 2008
  • There are a total of 4.8m businesses operating in the UK, the majority of which are SMEs
  • The number of UK enterprises grew by 4.7% to 4.8m
  • More than 99% of UK companies are small businesses
• Distribution Dynamics
  • Introduction
  • Large national brokers continue to dominate commercial insurance distribution
  • Independent insurance intermediaries of all types retain their leading market share in 2008
  • Direct players account for a small but growing portion of the commercial general insurance market
  • Corporate partnerships have maintained only a small presence in the commercial insurance market
  • Banks and building societies distribute negligible amounts of commercial general insurance
  • A significant proportion of brokers will pursue organic growth and target new customer groups
  • More than half of brokers intend to pursue organic growth
  • Consolidation within the intermediary channel is likely to slow in the next 18 months
  • Increasing premium income is the primary driver behind broker acquisitions
  • Almost a fifth of brokers had made an acquisition in the past 18 months
  • A significant proportion of respondents were contacted by a consolidator but do not intend to sell their business
  • Almost 5% of respondents stated that they planned to close or sell their business
  • 41.5% of respondents have been approached by a broker consolidator over the last 18 months
  • Swinton had approached nearly half of the respondents with an offer for their business
  • One third of brokers belong to a broker network, however a significant proportion of brokers do not intend to join one
  • One third of brokers have already joined a broker network
  • Most brokers joined a network in order to increase the size of their panel
  • The majority of brokers who were not already in a broker network did not intend to join one
• Customer Focus
  • Introduction
  • The broker channel continues to dominate the market with retention levels remaining high
  • Brokers remained the dominant distribution channel to target SMEs in H1 2008
  • The internet is the least common platform for SMEs purchasing commercial insurance
  • The majority of SMEs remain satisfied with their insurance provider
  • Long standing relationships are important to SMEs purchasing commercial insurance
  • SMEs purchasing their insurance through a bank or a broker value advice from their insurance providers the most
  • SMEs purchasing their insurance through a bank or a broker value advice from their insurance providers the most
  • Price is important to many SMEs choosing an insurance provider
  • A large proportion of SMEs are unlikely to switch to a new provider
  • Only 22% of SMEs have switched to a new provider over the last two years
  • SMEs belonging to the wholesale, retail trade and repairs sector are more likely to switch providers
  • Just over 10% of SMEs are planning to change providers over the next 12 months
  • SMEs that have been with their insurance providers for less than two years are more likely to switch providers in the next 12 months
  • SMEs switching to a new provider do so on the basis of price
  • A significant proportion of SMEs are willing to purchase insurance from a bank or direct in a bid to save money
  • Over 40% of SMEs stated that they would consider purchasing insurance from a bank or building society
  • The majority of SMEs surveyed will not consider a purchase from a bancassurer
  • The majority of SMEs remain open to purchasing their insurance direct from insurers
  • SMEs satisfaction with their current insurance providers prevents many from going direct
  • SMEs value previous experience and referrals when choosing an insurance provider
  • A significant proportion of SMEs are open to purchasing their insurance via the internet or phone
  • The convenience factor of the phone is appealing to many SMEs considering a telephone purchase
  • Many SMEs are unwilling to purchase their insurance over the telephone
  • Over a third of SMEs would consider a purchase online
  • Employers' liability and public liability were the most likely products to buy via alternative platforms
• Competitive Dynamics
  • Introduction
  • Acquisitions between brokers continued in 2008, albeit at a slower pace
  • AXA has continued to increase its presence in the UK commercial insurance market through its broking arm Bluefin
  • Giles acquired numerous commercial brokers in 2008
  • Oval achieved a strong performance across its businesses in 2008
  • Cullum Capital Ventures continued with its acquisition strategy in 2008
  • Towergate announced a 13% increase in its income in 2008
  • The direct channel, the internet and aggregators are changing the distribution landscape of commercial insurance
  • The internet can be an effective means to distribute commercial insurance to SMEs
  • Coverzones, an internet only commercial broker, launched into the commercial insurance market in 2008
  • JLT launched Insurantz.com, an online trading platform, in 2008
  • Simply Business has a strong presence in the aggregator space
  • Moorhouse extended its online insurance comparison site Constructaquote.com
  • Endsleigh and Kwik Fit have launched online SME propositions
  • A number of insurers offer commercial insurance direct
  • Direct Line for Business reported strong growth in 2008 and has maintained its price competitiveness
  • Norwich Union withdrew its direct commercial proposition in August 2008
  • Many insurers have strengthened their non-direct propositions in a bid to win SME business
  • LV= launched three new policies for pubs and hotels though its broker distribution arm, ABC Insurance
  • Fortis joined the Budget van insurance panel
  • MMA has continued to expand its presence in the SME market
  • The broker network space is becoming increasingly overcrowded
  • A number of players have launched their own broker networks and clubs in a bid to generate extra revenue
  • Marsh launched its ProBroker network in March 2009 in a bid to target the SME market
  • Jelf's Purple Partnership reported strong growth for 2008
  • HSBC Insurance Brokers launched Labyrinth Club in an effort to support small regional brokers
  • Norwich Union launched the Broker Independence Group in March 2009
  • Broker owned MGAs have become a common feature in the commercial insurance market
  • Insurers are scrutinizing the costs imposed by broker networks and MGAs as economic pressures mount
  • Norwich Union's Club 110 is well positioned to compete in the broker network space
  • Multinational brokers continue to hold a large share of the UK commercial insurance market
  • Marsh had the largest market share in terms of client turnover in Q1 2009
  • The top five brokers control more than 90% of the large corporate sector
  • The market share of the top five brokers increases among companies with a larger turnover
  • More than 90% of large companies with a turnover greater than 1 billion are covered by the top five brokers
  • Multinational brokers continued to acquire smaller brokers in 2008
  • Aon launched a credit insurance service to SMEs and acquired the specialist broker Supercover
  • Willis announced eight new members to its broker network
  • JLT acquired HWS in 2008 and announced a 12% increase in turnover from its UK and European operations
• The Future Decoded
  • Introduction
  • The direct channel's share is expected to grow, while the broker channel is forecast to contract
  • The market share of the broker channel is forecasted to decline to 78% by 2013
  • Direct players account for a small but growing portion of the commercial general insurance market
  • Corporate partnerships have a small presence in the commercial insurance market and are forecasted to grow to 3% in 2013
  • Banks and building societies are expected to retain their market share at the same level until 2013
  • Company staff and other agents are forecasted to remain static
• APPENDIX
  • Definitions
  • Premium income measures
  • Gross premium
  • Written premiums
  • Distribution definitions
  • Banks/building societies
  • Brokers
  • Company staff
  • Direct
  • 'Other' company agents
  • Utilities/retailers/affinity groups
  • Methodology
  • Datamonitor's SME Insurance Survey
  • Further reading
  • Ask the analyst
  • Datamonitor consulting
  • Disclaimer
• List of Tables
  • Table 1: Total general insurance GWP by line of business, 2004-08e (m)
  • Table 2: Commercial general insurance market GWP by sector and year-on-year growth, 2004-08e (m)
  • Table 3: Profile of UK enterprise by volume, employee numbers and turnover, 2007
  • Table 4: Market share of distribution channels in the commercial general insurance market, 2004-08e
  • Table 5: Q: "How important is it to receive advice on an ongoing basis from your insurance provider?"
  • Table 6: Key data on broker networks operating in the UK commercial insurance market
  • Table 7: Top five brokers by turnover of clients, Q1 2009 (m)
  • Table 8: Market share of the top five brokers in terms of clients' turnover by client employee band, Q1 2009 (%)
  • Table 9: Market share of top five brokers by client turnover, Q1 2009 (%)
  • Table 10: Forecast market share of distribution channels in the commercial general insurance market, 2006-13f (%)
  • Table 11: Q: "What business sector are you involved in?"
  • Table 12: Q: "How large is your company in terms of number of employees?"
  • Table 13: Q: "How large is your company in terms of turnover?"
• List of Figures
  • Figure 1: Brokers are the dominant route to market for commercial insurers in the UK
  • Figure 2: The general liability market witnessed a significant contraction in 2008
  • Figure 3: The group accident and health insurance market achieved strong growth in 2008
  • Figure 4: The number of UK enterprises reached 4.8m in 2007
  • Figure 5: Almost three quarters of UK companies have no employees
  • Figure 6: Brokers are the dominant route to market for commercial insurers in the UK
  • Figure 7: Organic growth and targeting new customer groups are the key ways that brokers are seeking to grow their business
  • Figure 8: The majority of respondents do not intend to make an acquisition in the next 18 months
  • Figure 9: Many brokers plan to pursue acquisitions to grow their premium income
  • Figure 10: Almost a fifth of brokers had made an acquisition over the last 18 months
  • Figure 11: Almost 5% of respondents indicated that they plan to close or sell their business
  • Figure 12: 41.5% of respondents have been approached by a broker consolidator over the last 18 months
  • Figure 13: A significant proportion of brokers were approached by Swinton and Towergate
  • Figure 14: One third of brokers cited that they belonged to a broker network
  • Figure 15: Access to a larger panel of insurers is the main motivation for joining a broker network
  • Figure 16: The majority of brokers are not willing to join a network in the next 18 months
  • Figure 17: Most SMEs purchase their commercial insurance through the broker channel
  • Figure 18: Most SMEs purchase their insurance through face to face contact with their insurance provider
  • Figure 19: Most SMEs are satisfied with the service they have received from their insurance providers
  • Figure 20: A large proportion of SMEs have been with their insurance provider for more than 10 years
  • Figure 21: Receiving ongoing advice from their insurance provider is important to most SMEs
  • Figure 22: Many SMEs consider the price of an insurance premium to be an important factor when choosing a commercial insurance provider
  • Figure 23: Most SMEs surveyed in 2008 have been with their insurance provider for more than 10 years
  • Figure 24: Respondents belonging to the wholesale and retail trade and repairs sector are more likely to switch providers
  • Figure 25: The majority of SMEs plan to remain with their current insurance provider over the next 12 months
  • Figure 26: SMEs that have been with their insurance providers for two years or less are twice as likely to switch to a new provider
  • Figure 27: Price is a key motivator to SMEs switching providers
  • Figure 28: SMEs may consider a purchase from a bancassurer in a bid to save money
  • Figure 29: A significant proportion of SMEs believe that banks lack specialist expertise
  • Figure 30: Price remains central to SMEs considering a purchase from a direct insurer
  • Figure 31: Most SMEs are content with their current providers and therefore would not consider going direct
  • Figure 32: Previous experience is an important source of information to SMEs choosing an insurance provider
  • Figure 33: The convenience factor appeals to many SMEs prepared to purchase insurance over the phone
  • Figure 34: A significant proportion of SMEs would not consider a telephone purchase because they simply prefer face to face
  • Figure 35: A significant proportion of SMEs would consider a purchase online in a bid to save money
  • Figure 36: SMEs show a greater inclination to purchase employers' liability and public liability via the telephone and internet
  • Figure 37: A timeline of major events in the broker network arena, 1994-2009
  • Figure 38: Norwich Union's Club 110 is in a good position to compete with more established networks
  • Figure 39: Marsh and Aon held the largest share of client turnover in Q1 2009
  • Figure 40: Willis has the largest market share in the SME market in terms of total client turnover
  • Figure 41: The top five brokers held the largest share of turnover among those firms within the largest turnover band
  • Figure 42: The direct channel is expected to grow its share in the UK commercial insurance market