Andrew Holt looks at research that states that insurers will not own a large proportion of brokers by 2012
If you had to predict the percentage of brokers in the SME market that will be owned by insurers by 2012 what figure would you arrive at? The figure today is on the 5% mark. Will this double, triple, or even quadruple?
Today, Andy Baldwin, a partner at Ernst & Young revealed at the CII’s Underwriting & Distribution conference that preliminary research among the industry believed the figure will stand at 9%
This is surprisingly low based on the activity that has occurred in this area of the market. What it is suggesting, is that Axa’s purchasing of brokers will be the main driver in the market with hardly anybody else jumping on board. Axa has, after all, cited a £1bn figure it aims to clinch in owning brokers.
But surely Axa’s move will push other insurers into the ring, as appears to already be happening, creating more competition among insurers to buy brokers? Creating in turn a greater percentage of insurers owning brokers? Therefore the figure of 9% would increase probably substantially.
“Given the competitive nature of the market I think that the figure of nine per cent will be higher,” says Baldwin.
At the same time the view is that consolidators will double their share of this SME market over the same period from 15% to 30% which is highly significant for the smaller broker market. Large regionals will hardly move - seeing a one per cent rise from 10% to 11% - as is the same with nationals, increasing only one per cent from 12% to 13%. Bancassurance, once hailed as the future of the insurance distribution model, will only increase slightly from 8% to 11%.
Interestingly for brokers, the direct route in the SME market is predicted to double from 6% to 12%. “The SME market, especially at the lower end, is beginning to follow the trend of the personal lines market, with consumers checking prices and coverage on the internet for example,” says Baldwin. The holy grail of the SME market always being a cash cow for brokers looks set to be tested over the coming years.
This is all speculation of course. None of it is inevitable. It is up to brokers how they respond to all this as to whether the market reflects anything like the predictions made here. Brokers have it in their power to make their own history.
