What are the most profitable schemes for brokers emerging from the pandemic?

Professional indemnity (PI) schemes have netted insurance brokers the most income between 1 April and 31 September 2021, with commission earnings as a percentage of premium climbing by 272% over this reporting period, according to the Insurance Times Schemes Index.

Produced in association with software firm SchemeServe, the Schemes Index provides a snapshot of the most profitable schemes businesses for brokers.

Over the past six months, the index found that professional indemnity schemes have proven to be the most fruitful for brokers, despite being “previously unnoteworthy in previous indices”, said Adam Bishop, chief executive of SchemeServe.

First premiums for PI schemes, for example, grew by 726% between April and September this year, while renewal premiums improved by 28%. Overall, the volume of premiums for this type of scheme increased by 69% over the reporting period, with average premiums reaching £1,811.92.

Bishop continued: “The performance of PI schemes is not that surprising against the backdrop of the hard market. PI rates have skyrocketed - with increased new business and higher premiums comes higher commission earnings.”

Scheme success stories

Meanwhile, the second most successful scheme type for brokers between April and September 2021 was pubs and clubs, with commission earnings up 136% compared to the prior six-month period (October 2020 to March 2021).

This could be linked to July’s ‘Freedom Day’, when the UK’s lockdown restrictions – initially introduced to mitigate the spread of Covid-19 – were lifted by prime minister Boris Johnson.

Between October 2020 to March 2021, pubs and clubs schemes saw premium volumes nosedive by 40%, yet between April and September this year, the volume of premiums coming through these types of schemes rose by 71%. Premium prices have also grown 130%, with the average premium recorded at £4,636.45.

“The latest set of figures shows that pubs and clubs have clearly bounced back from the pandemic in terms of insurance,” Bishop noted.

Cyber schemes, meanwhile, “continue to grow and outpace many other schemes, albeit at a slower rate than in previous indices”, Bishop continued.

Ranking as the third most profitable scheme for brokers in the last six months, commission earnings as a percentage of premium for this line of business come close to 100%, with premium value up 37% and premium volume increasing 108%.

Although these figures are impressive, this period’s results are still a dip on the 208% increase in commission brokers saw for cyber schemes at the start of 2021.

However, “the fact remains that there’s a rising demand as more people understand the product and more brokers are comfortable selling it”, added Bishop.

Although not clocking up as much commission for brokers compared to these other high performing schemes – recording a 69% uptick in commission earnings over the last six months – caravan and trailer schemes have still benefited from the UK’s Covid-driven staycation boom.

The volume of premiums through these schemes increased by 129% between April and September this year, on top of a 100% growth between October 2020 and March 2021. This makes caravan and trailer schemes “the highest riser on volumes”, Bishop noted.

Premium prices for this type of scheme rose by 59% in the past six months to reach an average premium of £290.

Staying static

At the other end of the successful schemes scale is combined liability, where commissions have creeped up by just 15% over the last six months.

Likewise, contractors all risks schemes, which were “one of the best performers in 2019/20”, has seen brokers’ commission earnings drop by just under 10% between April and September this year.

“The high cost and scarcity of building materials, combined with the fact that many self-employed contractors would have still been eligible for furlough up until recently, could all have contributed to this,” Bishop added.

Employers’ liability also continues to perform badly according to SchemeServe’s data, with broker commissions falling by 44% in the past six months.

However, Bishop ringfenced commercial property owners’ schemes as a potential growth area that could follow the happy trajectory of pubs and clubs schemes.

In the last six months, the volume of premiums coming through commercial property owners’ schemes has only grown 10%, while premiums have improved just 3%. Brokers’ commission earnings for this type of scheme have increased 5% between April and September 2021 compared to the first six months of the year.

“With continued uncertainty and so much commercial property remaining empty, this is perhaps not so surprising,” Bishop said.

“However, looking at the bounce back performance of pubs and clubs [schemes], it would be worth brokers bearing in mind these new growth area opportunities post-pandemic.

“Good investors will be identifying commercial opportunities set to bounce back and brokers should be ready to capitalise in the right areas.”