Davey's Blog: Two decades later...

Every once in a while circumstance conspires to lift us out of the melee of everyday life and afford us some perspective on the goings on we have been so wrapped up in.

I recently enjoyed such a moment when I had to provide a summary of my career as part of the FSA application for Keychoice Underwriting. Looking at the black and white paragraph, I was hit by the length of time I have been involved in the industry, having now chalked up 20 years. In that time there have been some monumental changes and only in taking a moment to really think about them did I get an idea of their sheer scale.

Look for instance at the metamorphosis that the insurance sector went through in the 1990/2000s. Companies like General Accident, Sun Alliance, Royal Insurance, London and Edinburgh, GRE, GAN, Commercial Union and Provincial were merged or acquired and their brands deceased.

The broking fraternity has also changed dramatically and nowhere more so than on the high street. It wasn’t so long ago that the AA, Budget, Colonnade, Equity, Endsleigh and Hill House Hammond were staples in town and city centres across the country, but they have all largely disappeared from our streets.

In recent years the regional independent brokers have been acquisition targets for consolidators. These consolidators changed the traditional dynamic of the relationship with insurers and by controlling such large swathes of the market were able to secure higher commission rates.

Indeed, in the face of this rising tide of commission, insurers themselves have sought to buy into the broking market and secure their own distribution.

So the sands upon which this marketplace operates continue to shift. Of all the changes I have witnessed over the last 20 years, the most striking has been that made by the aggregators. Their success in harnessing technology to capture and secure such a strong position in the personal lines market has been startling and has created a level of competition that hasn’t been seen before.

The small commercial market looks set to follow. A growing number of SMEs are willing to buy online and direct writers, telebrokers and aggregators are already gaining momentum in this sector. As products in this area become more commoditised and the technology available becomes more sophisticated, the slice of commercial business that can be packaged, rated and sold online will increase.

This is either a threat or an opportunity for smaller brokers, depending on how they want to play it. Indeed, the technology is available and there is a growing range of service and relationship focused insurers willing to work in partnership to give them the opportunity to maintain their control of the commercial arena.

How they seek to secure their present and future position remains to be seen, but I’m sure the changes we see will be at least as dramatic as those we have witnessed over the last 20 years. This in itself should prompt brokers wishing to remain effective into reassessing their proposition.

Jonathan Davey is managing director of Keychoice Underwriting.