A fresh chapter for the motor market

With the growth of aggregators, the broker personal lines motor market has been a tough space for insurers in recent years. But the acquisition of Zenith and recruitment of the QBE team, shows at least one insurer has faith in the space.

It is news that personal lines brokers will welcome, especially following the drainage of capacity once HSBC Corinthians went into run-off.

But there are still question marks over the profitability of the intermediated personal lines motor market, which is continually squeezed by customers opting for aggregators or going direct.

Naeem Ali, of consultancy EMB, can't see anything behind stormy waters for the industry during the next few years.

Ali said: “The business model is going to face tremendous challenges over the next few years. It is one of the reasons it is where it is.

“The only way they (insurers and brokers) can really make money is through a very good selection of risk.”

Another challenge for 2010, is that brokers face a tough time on making money from referrals.

Ali said: “Given where we are in the cycle, what insurer will tolerate referrals? They are trying to be more interventionist in terms of short-circuiting third party referrals.”

On the bright side, intermediaries will continue to pull in revenue by placing their business on aggregator sites.

The Defaqto report, released last month, says this is especially fruitful for brokers placing niche brokers.

So perhaps the magic cocktail for both insurers and brokers is appropriate risk selection, improved underwriting and maximising the potential of the price comparison sites. The balance is tricky, especially as price-orientated customers might be scared off to aggregators.

In the wake of the QBE and HSBC run offs, as well as the Zenith sale, it’s clearly something the industry has not been doing well enough.

Markerstudy seems to have done more than keep its head above the water judging by its assault on the personal lines motor market.

One thing is for certain, if the Gibraltan-based insurer can prosper, it will provide inspiration for the rest of the market.

See story: Markerstudy scoops QBE team