Abstract
Introduction
This report gives a comprehensive analysis of distribution in the UK
commercial insurance market. It explores a range of issues including the
growth of the direct channel and the slowdown of acquisitions occurring
between commercial insurance brokers. The report also includes the latest data
and insight on SMEs' purchasing behavior, product innovation and broker
consolidation.
Scope of this research
- Insight into the latest issues affecting the commercial insurance market
and the impact these are having on distribution.
- The latest data on SMEs' purchasing behavior and broker consolidation in
the UK commercial insurance market.
- The latest data on the size of the commercial insurance market and GWP
splits by distribution channel.
- Forecasts up to 2013 of the market share of different channels in the UK
commercial insurance space.
Research and analysis highlights
A number of insurance providers have partnered with aggregators in a bid to
increase their presence in the SME market, including Simply Business,
Premierline Direct, Autonet Business Insurance and Iprism. Among these
insurance providers, Simply Business, a subsidiary of Xbridge, features
heavily in the aggregator space.
Since 2008, a number of commercial insurance providers have launched their own
broker networks and clubs in a bid to increase their revenue stream, including
Marsh which launched ProBroker, HSBC which launched Labyrinth and Norwich
Union which launched Club 110 and more recently the Broker Independence Group.
The proportion of brokers that belong to a broker network has remained
unchanged since the last edition of Datamonitor' s commercial insurance broker
survey. Of the brokers surveyed by Datamonitor, a third stated that they
belonged to a broker network, such as Cobra.
Key reasons to purchase this research
- Understand the latest issues affecting the commercial insurance market and
analyze SMEs' attitudes towards switching and channel preference.
- Understand the future level of consolidation in the sector and the
companies which are most likely to drive this consolidation.
- Gain insight into the prevalence of the broker network model, the factors
driving the model and its future potential.
Table of Contents
OVERVIEW
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
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 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 remain open to purchasing their insurance direct
from insurers
- 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
- 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
- A number of insurers offer commercial insurance direct
- Many insurers have strengthened their non-direct propositions in a bid to
win SME business
- LV= launched three new policies for pubs and hotels through 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
- 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 market share of the top five brokers increases among companies with
a larger turnover
- 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
- Distribution definitions
- Methodology
- Datamonitor' s SME Insurance Survey
- Further reading
- Ask the analyst
- Datamonitor consulting
- Disclaimer
TABLES
- Table: Total general insurance GWP by line of business, 2004 - 08e
(£m)
- Table: Commercial general insurance market GWP by sector and year-on-year
growth, 2004 - 08e (£m)
- Table: Profile of UK enterprise by volume, employee numbers and turnover,
2007
- Table: Market share of distribution channels in the commercial general
insurance market, 2004 - 08e
- Table: Q: “How important is it to receive advice on an ongoing basis
from your insurance provider?”
- Table: Key data on broker networks operating in the UK commercial
insurance market
- Table: Top five brokers by turnover of clients, Q1 2009 (£m)
- Table: Market share of the top five brokers in terms of clients' turnover
by client employee band, Q1 2009 (%)
- Table: Market share of top five brokers by client turnover, Q1 2009 (%)
- Table: Forecast market share of distribution channels in the commercial
general insurance market, 2006 - 13f (%)
- Table: Q: "What business sector are you involved in?"
- Table: Q: “How large is your company in terms of number of
employees?”
- Table: Q: “How large is your company in terms of turnover?”
FIGURES
- Figure: Brokers are the dominant route to market for commercial insurers
in the UK
- Figure: The general liability market witnessed a significant contraction
in 2008
- Figure: The group accident and health insurance market achieved strong
growth in 2008
- Figure: The number of UK enterprises reached 4.8m in 2007
- Figure: Almost three quarters of UK companies have no employees
- Figure: Brokers are the dominant route to market for commercial insurers
in the UK
- Figure: Organic growth and targeting new customer groups are the key ways
that brokers are seeking to grow their business
- Figure: The majority of respondents do not intend to make an acquisition
in the next 18 months
- Figure: Many brokers plan to pursue acquisitions to grow their premium
income
- Figure: Almost a fifth of brokers had made an acquisition over the last 18
months
- Figure: Almost 5% of respondents indicated that they plan to close or sell
their business
- Figure: 41.5% of respondents have been approached by a broker consolidator
over the last 18 months
- Figure: A significant proportion of brokers were approached by Swinton and
Towergate
- Figure: One third of brokers cited that they belonged to a broker network
- Figure: Access to a larger panel of insurers is the main motivation for
joining a broker network
- Figure: The majority of brokers are not willing to join a network in the
next 18 months
- Figure: Most SMEs purchase their commercial insurance through the broker
channel
- Figure: Most SMEs purchase their insurance through face to face contact
with their insurance provider
- Figure: Most SMEs are satisfied with the service they have received from
their insurance providers
- Figure: A large proportion of SMEs have been with their insurance provider
for more than 10 years
- Figure: Receiving ongoing advice from their insurance provider is
important to most SMEs
- Figure: Many SMEs consider the price of an insurance premium to be an
important factor when choosing a commercial insurance provider
- Figure: Most SMEs surveyed in 2008 have been with their insurance provider
for more than 10 years
- Figure: Respondents belonging to the wholesale and retail trade and
repairs sector are more likely to switch providers
- Figure: The majority of SMEs plan to remain with their current insurance
provider over the next 12 months
- Figure: SMEs that have been with their insurance providers for two years
or less are twice as likely to switch to a new provider
- Figure: Price is a key motivator to SMEs switching providers
- Figure: SMEs may consider a purchase from a bancassurer in a bid to save
money
- Figure: A significant proportion of SMEs believe that banks lack
specialist expertise
- Figure: Price remains central to SMEs considering a purchase from a direct
insurer
- Figure: Most SMEs are content with their current providers and therefore
would not consider going direct
- Figure: Previous experience is an important source of information to SMEs
choosing an insurance provider
- Figure: The convenience factor appeals to many SMEs prepared to purchase
insurance over the phone
- Figure: A significant proportion of SMEs would not consider a telephone
purchase because they simply prefer face to face
- Figure: A significant proportion of SMEs would consider a purchase online
in a bid to save money
- Figure: SMEs show a greater inclination to purchase employers' liability
and public liability via the telephone and internet
- Figure: A timeline of major events in the broker network arena, 1994 - 2009
- Figure: Norwich Union' s Club 110 is in a good position to compete with
more established networks
- Figure: Marsh and Aon held the largest share of client turnover in Q1 2009
- Figure: Willis has the largest market share in the SME market in terms of
total client turnover
- Figure: The top five brokers held the largest share of turnover among
those firms within the largest turnover band
- Figure: The direct channel is expected to grow its share in the UK
commercial insurance market
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