Barbara's blog: Don't believe the hype

Watching TV the other day, I was assailed by insurance adverts, all of which seemed to claim enormous numbers of the population as customers. One said that 1,000-plus customers were "joining every day".

Ignoring that particular company’s existing portfolio, this seems to be an amazing achievement in grasping market share but, perhaps, they have a special way of counting. It'll be interesting to see whether their claims are sustainable in the medium (let alone longer) term!

And they are not alone. Others claim millions of customers - but are they really customers or just people applying for quotes? I suspect the latter, but for many such organisations these are indeed customers as the company can make a fortune from selling-on the quote data that’s been collected.

In the Sunday Telegraph (24 July) there was an article about Admiral, which reported on the £142m profit they make from ancillary sales, including "acceptance fees" for passing on customers’ data to accident management companies.

If one did a quick tot-up of the advertised claims to market share and deducted 24 million or so households - somewhere there has to be some duplication, perhaps!

Anyway, inevitably it makes me think of insurance brokers and the proportion of personal lines business they still control despite this media advertising hype. And, while it has dropped over the last 20 years it is still a significant amount. Insurance brokers do control the vast majority of the commercial market - starting with SME business.

It seems that every man and his dog has recognised that there is more money and stability (estimated at £5.4bn premium: Insurance Times 23 June) in the SME market than there ever was in the motor market – even despite the recession.

But my bug-bear is that over the years these new strategies don’t seem to amount to a bag of beans. The media and the marketing hype that surrounds any launch are, to some, enervating, but a year on where are the results, where is the fanfare of trumpets that targets have been reached and several thousand of SMEs are fully paid up and satisfied members of that insurers' portfolio?

I am concerned that many SME risks are still complex despite their size or revenue and that many of the new wunderkind insurance products are trying to over-simplify (commoditise if you like) in the interests of keeping costs down and encouraging internet sales. Many of the issues underlying this concern will not come home to roost, of course, until the claims come rolling in.

Going back to the point made earlier regarding selling on of data, any SME business will be able to expect hundreds of approaches from suppliers of all shapes and sizes the moment they have applied online for a quote. Perhaps that is the real motive for seeking to conquer a market segment like the SME sector and it has nothing to do with actually writing profitable and loyal business?

Apart from mixing my metaphors with some regularity in this blog, I hope that this nagging feeling of insurers being in a business that happens to be data transfer is wrong and that they really are in the business of providing long-term protection and security.

If I had a £1 for every time an insurer has announced a new strategy to win the hearts, minds and business of any newly identified and, therefore, inherently profitable sector of the commercial or personal lines market, I would be going to every Formula 1 event worldwide and going first class too. Okay, it is a bit more expensive than that, but you get my drift!

Barbara Bradshaw is chief executive of The Institute of Insurance Brokers (IIB).