‘Feel the squeeze in personal lines’

The good times could be coming to an end for personal lines brokers. They have benefited two-fold in recent years: from the upsurge in motor premiums, and hence commissions; and from an insurer and consumer backlash against aggregators.

Insurers have realised that intermediaries in this space can offer more loyal customers and better protection against application fraud. Customers in their turn (at least, in some segments) have been coming to realise that advice is just as important as price.

So it’s been a happy couple of years, with rumours of the personal lines broker’s demise greatly exaggerated. But news this week hints that the wind is changing. Brightside chief executive Arron Banks echoed other parts of the industry with his suggestion that motor premiums will soon start to drop back down. Given the state intervention and media interest in the motor market, this seems all but inevitable.

Meanwhile, the FSA has given its clearest indication yet that add-ons are on its hit list. Very recently, getting profit out of the motor market was harder than getting blood out of a stone – but get-ahead personal lines brokers managed it through product innovation and old-fashioned salesmanship.

Many of these products are now coming under regulatory scrutiny. Following the PPI saga and ongoing referral fees scandal, the regulator is now asking of every product: is the customer being sold this because they need it, or because the vendor needs to sell it? This is a tough question in the add-on market.

So personal lines brokers are coming under pressure from both sides. Commission income is set to drop, as is the potential to compensate for this through product innovation. There’s only one bright spot on the horizon: these businesses have proved over and over their ability to adapt to survive. The time has come to do it again.