Briefing: Soft market should steer commercial brokers towards growth and efficiency focused road maps

Recent history for the UK general insurance (UKGI) market has certainly been its most eventful that I can recall – the latest going ons in the White House courtesy of Donald Trump have only reinforced this view.

So, what is the outlook for 2025 and how are global events affecting the UK’s commercial insurance sector?

The insurance industry has always been a reliable weathervane for the UK economy and politicians would be well advised to plug in to our profession to understand what is actually happening.

Commercial brokers, in particular, have the benefit of speaking with businesses in detail about their current level of trading, as well as their plans and level of confidence. This is reflected in the risks these businesses insure and their forecasts on trading outlook.

Although professional services firm KPMG predicted in January that the UK economy could rebound by 1.7% in 2025, some of the data The Clear Group is seeing could be interpreted as being more pessimistic.

All too often, clients are seeking to limit their premiums.

In part, this is due to confidence around their level of trading. Increasingly, however, this tactic is a result of cost management, coming alongside the associated danger of heightened risk exposure.

With the weathervane analogy in mind, it is positive to see the insurance industry being represented at the political top table.

For example, broking trade body Biba launched its new manifesto in the Houses of Parliament in January 2025 and Aviva boss Amanda Blanc is one example of senior leadership representing our profession in high level political circles – she is a member of the government’s National Wealth Fund Taskforce.

Softening market

Some of the natural tailwinds the commercial insurance sector typically enjoys have been pared back since entering a softening market at the back end of 2024.

Just a few years ago, I would have said that across all sectors, rate increases were averaging about 7% to 8%. Now? These numbers are probably more like 2% to 3%.

When any broker looks at the premium growth on its renewal book, this is affected by two key influences.

Firstly, in a positive economic and trading environment, the majority of a broker’s clients are continuing to grow, which impacts their risk exposure and premium. Also, during the year, these clients will undertake a healthy rate of mid-term adjustments (MTAs) as they adapt to changing requirements and opportunities, which drives adjusted premiums.

This activity often offsets the impact of softening rates. The challenge for many brokers now is we have a softening cycle, which is coinciding with challenging economic conditions.

From one perspective, this is positive. The last thing any client needs right now is huge premium increases.

But at the same time, it also means the natural tailwinds UK brokers and insurers have experienced in the past are not there. In fact, we face a double whammy of reduced premium uplift through natural trading growth, as well as a softening market.

Where do commercial brokers go from here?

In these tough times, businesses need to focus on a very clear road map concentrated on efficiency and growth.

Brokers, therefore, should assess their own model and cost to serve by sector and channel. This could uncover a need for increased emphasis on digitisation, process efficiency and integration of automation and artificial intelligence to help drive productivity.

To action digitisation successfully requires significant investment in systems, data and data enrichment, as well as training. Done well, these investments can then free up advisors to spend time more productively.

Done poorly or not at all, there is a danger of simply ‘processing’ a renewal rather than really understanding clients’ needs.

Against this digital drive for efficiency is the increasing competition to retain existing clients and secure new ones.

Brokers’ right to win customers needs to be based on a personal, value add service and standout capabilities. This may appear at odds with the drive for efficiency, but managed intelligently, this does not have to be the case.

Proposition differentiation is key

Understanding clients’ needs and providing a holistic service across a range of products requires a level of capability, knowledge and engagement that does not come from merely processing the client’s risk.

Now more than ever, account handlers and executives need to fully understand clients’ requirements, plans and risks to provide appropriate advice and cover.

Brokers that can drive efficiency while retaining that close relationship and deep understanding of a client’s needs will stand out. Treading the right path through these potentially conflicting aims – and using technology to add value – will likely determine which brokers succeed in the current economic climate.

Through another lens on this issue, the UK broker market has historically been a safe haven for private equity investment due to its consistent cash flow and growth returns.

However, feedback from analysts indicate that private equity players are increasing focused on and differentiate between what they deem as ‘quality’ brokers.

Investors are increasingly looking for signs of strong alignment and integration, good data, revenue and scale synergies. In other words, a well managed business that is optimising its trading growth rather than relying on rating and premium uplift.

To wrap up on an amusing note, I recently came across a US research agency’s assessment of the UK commercial insurance market, published in January 2025.

The report included a regional analysis that included the south east England. This stated: “The south east region, including cities like Manchester, Birmingham and Bristol, has a robust business environment.”

I’ll end by welcoming those cities to the south east of England.