Brokers back calls to ban aggregators from SME market

Brokers are backing calls to ban aggregators from offering construction and buildings insurance to small firms. 

They claim the move would help tackle underinsurance in the SME market, and combat fraud.

Robert Marshall, chief executive of Trident Insurance, says it is impossible for aggregators to fully explain to each individual customer the level of cover they will require.

He says only a broker can do this, and that aggregators should be banned from selling all but the most “bog standard” policies.

Marshall said: “As a supplier there is an obligation to inform the customer.

“The whole thing is about making an informed judgement, but you can’t make an informed judgement if you’re going through an aggregator site only interested in getting people to agree quickly.

“The people that are buying it are too conceited to admit they really don’t understand and they’ve been sucked into this play of looking at meerkats and opera singers thinking that’s all insurance is about.

“They are buying insurance as a grudge purchase. They are going to see little from it and they hope not to see anything at all. Therefore, the cheapest they can get it is all that counts.”

Construction Insure managing director Mark Herbert got the ball rolling last month when he wrote to the government urging it to ban aggregators from offering construction and buildings insurance to small firms.

He argued that firms were purchasing cheap deals from aggregator sites that left them underinsured with policies “not worth the paper they’re written on”.

Herbert estimated half of all UK contractors do not have adequate insurance in place, and he puts the blame squarely at the feet of aggregators.

“These policies are cheap for a reason,” he said. “The small print is filled with caveats and usually, they only provide a minimal level of cover, often not adequate for the work the contractor does every day.

“A commercial broker on the other hand really gets under the skin of his or her clients. They find out exactly the nature of the work undertaken and are able to offer a policy which genuinely protects the contractor.

“The use of price comparison websites may seem to be convenient but nothing is more inconvenient than having a crisis and discovering your insurance policy isn’t fit for purpose.”

Low-level fraud

Other brokers agree there is a serious problem.

A LexisNexis white paper released this month found 70% of people find it acceptable manipulating their answers to questions on price comparison sites for cheaper motor insurance quotes.

And Jon Newall, chief executive of Lockyer Insurance, said what the aggregators were doing amounted to no less than facilitating low-level fraud.

He said: “People are looking at quotes and thinking ‘I know where I can get that cheaper’ and they go to a price comparison site. It’s easier because they don’t need to lie to a human.

“For small businesses buying online on an unadvised basis there should be a warning, and the aggregators should be asking very blunt questions in the same way as a broker does.

Newall doesn’t think a ban could be imposed on aggregators because there is too much money involved and they are too firmly entrenched in the industry.

But he says steps need to be taken to educate those purchasing the insurance of the cover they require and the dangers posed by buying unadvised through an aggregator.

He added: “There needs to be more education so contractors are able to check documents properly, because at the moment it’s a tick box exercise by people who know nothing about insurance.

“There’s no deeper validation, and the only time that will fall over is when there’s a claim.

“That can expose the contractor and for a lot of these smaller firms it could be enough to make them bankrupt.”

Insurance taken seriously

But Alan Thomas, chief commercial officer at Simply Business, which provides GoCompare’s business insurance service, disagrees that customers are using aggregator sites to choose minimal cover based on price.

He says his firm give small business owners the opportunity to make informed decisions on cover and that customers take their insurance purchasing seriously.

He added: “As an insurance provider, we offer consumers the choice and options to match these differences, so they can decide what’s best for their business.

“And working with comparison sites and aggregators creates this choice for a broad range of sole traders and SMEs.

“But choice alone isn’t enough. Small business owners need flexibility, simplicity, and a level of tailoring that means they have the insurance that’s right for their needs.

“Additionally it is our responsibility to present the cover options clearly to ensure customers understand what they are buying. 

“This is all central to Simply Business’s proposition, and from customer research to first-hand data, we’re confident that this meets what our audience both wants and needs.”

Customer responsibility

And Be Wiser chirman Mark Bower-Dyke agrees that aggregators cannot take all the blame if customers do underinsure themselves.

He says inputting data on the internet to receive a cheaper quote is done at the customer’s own risk and that customers could just as easily give false information to a broker verbally.

He said: ”People who run businesses, be they big or small, are people who have the intellect to do it. So, if they can’t answer a question properly, or they decide to lie and cheat in what they fill in, that’s their choice. 

“It’s not the responsibility of whoever is collecting that data to call the customer a lier.”

But Bower-Dyke said where there are grey areas in filling out data online, that the policy should always favour the customer in the event of a claim.

He added: “The emphasis has to be that the customer must take the effort to ensure they are filling in the correct information as best as they can, and then they will get the correct insurance and the correct price.”