Market: Personal lines

Life is tough, as personal lines brokers know only too well. They are becoming a rare breed, as aggregators and direct writers are now firmly established in the market.

According to Datamonitor, nearly 50% of consumers now purchase their motor insurance over the internet, while more than half (52%) of new motor insurance business is generated through price comparison websites.

Meanwhile, 10% of new home insurance business is generated through price comparison websites, which is double 2008 levels.

But despite the gloomy outlook predicted by such data, personal lines brokers are bullish about the future. They say their high levels of customer service and well-trained staff mean that a significant number of consumers will continue to turn to them when seeking to purchase cover. Furthermore, insurers argue that the assistance brokers provide to policyholders when they want to make a claim is invaluable in helping them get back on their feet as quickly as possible.

The high street broker still has a role to play. Mark Hallam, head of marketing at Swinton, which reported 2008 brokerage of £278.9m, says it is the broker’s network of UK branches – in addition to its online presence – that has been integral to its success. “It’s our branch presence, our ‘clicks and bricks’ model, that has resulted in us competing well on aggregators,” he says.

“When cover is bought online, the information is passed over to a local branch and, within 24 hours, the branch will call to welcome the customer and explain where the branch is. Sometimes a customer can receive a call within 15 minutes of buying cover online.”

Hallam adds that Swinton’s research has shown that customers appreciate the gesture. “They say it was nice to receive the call and it was unexpected.” Offering additional services also plays a crucial role in retaining customers, he says. “We offer a wide range of add-ons, such as motor, home, pet, taxi and caravan cover.”

The logic behind this is that, according to Hallam, the more products a customer buys from you, the greater the chances of you retaining that customer. Cross-selling in this way also offers brokers a chance to top up their income in lines such as motor, where commissions tend to be low because of the fierce competition.

In a further effort to aid customer retention, Swinton has launched a scheme called Cashback Plus, which gives customers discounts on extra purchases. Hallam says: “Once you’ve secured a customer, the objective is creating customer loyalty.” Offering cover at a reasonable price is also important, however.

“Ultimately, new business is driven by price competitiveness,” Hallam says. “We’re competing well with major online brands, such as Swiftcover.”

Niche nous

Carole Nash commercial director Simon Jackson, whose firm tripled its profits over the past two years and reported brokerage of £24.9m for the year ending December 2008, says the broker’s success is attributable to a number of factors.

“It’s a combination of things: we’re a niche player, we were originally a classic bike insurer and we’re the dominant brand in the bike sector,” he says. “We keep in touch with our customers via shows and club events, some of which we sponsor. We also have strong relationships with our suppliers, and we take those relationships very seriously.”

Jackson says Carole Nash’s emphasis on trying to develop a personal relationship with its customers – as well as ensuring its staff are highly knowledgeable about bikes – has reaped rewards. “Our strategy is one of quality and service: though we have an online presence, we encourage people to talk to us,” he says.

“Our staff are trained in bikes, so when customers call us, they speak to people who understand bikes. If you went to a large volume player, you’d have one person on the phone who knew what they were talking about and one who didn’t, so they would then refer the enquiry, but most enquiries to us are dealt with on the first call.”

Jackson adds that Carole Nash’s proposals are “completely tailored” to meet the requirements of its customers, many of whom who are hobbyists that have customised their bikes and who would not be properly served by an aggregator. “The web can’t physically cater for all the questions, as most of the bikes will have some sort of modification,” he says. “Unlike private car insurance, these people are enthusiasts. This is their hobby and they don’t see insurance as a grudge purchase. They may go online to get a benchmark price, and then call us and make a decision based on the quality of the product – it’s not just about price.”

Broker RIAS’s managing director, Janet Connor, says its service for consumers aged over 50 has been key to its success. “We differentiate ourselves by focusing on three key areas: customer service excellence, product choices, and the ability to tailor cover to meet customer needs,” she says. “Our advisers take the time to understand the lives and needs of this age group, communicating with them with enthusiasm, warmth and empathy.”

Connor adds that RIAS gives its customers “as long as they need” to discuss their requirements. “Our UK-based call centres have some of the longest call timings in the over-50s market: 35% longer in duration than the over-50s insurance market average.”

The broker USP

But in this age of aggregators, are brokers still relevant in the personal lines market?

A spokesman for Kwik-Fit Insurance, which reported 2008 brokerage of £82.7m, says personal lines brokers still have a “hugely influential” role to play. “[Brokers] ensure pricing remains competitive and give the customer choice when it comes to purchasing. Personal lines brokers can also underwrite a wider range of risks while giving underwriters who don’t write direct business the opportunity to enter the marketplace.”

A number of insurers remain strongly supportive of personal lines brokers, which, they argue, provide important services for customers. Hiscox head of art and private client Austyn Tusler says: “Without question, we are committed to working with brokers at Hiscox. Brokers are critical to the personal lines sector, offering their clients value for money and expert advice in a way that’s easy for them to digest and helps them understand what they are buying.”

Tusler argues that consumers – particularly those who require insurance for unusual or rare artefacts – still rely heavily on advice provided by personal lines brokers. “It’s a busy marketplace and, despite the challenges of online aggregators, there will always be a role for brokers to play,” he says.

“In our experience, clients who value personal service or those who have specialist or complex needs – for example, requiring cover for fine art or valuable jewellery – really value guidance from their brokers.”

Hiscox has analysed the personal lines market and found that consumers put a lot of faith in brokers. “We regularly carry out market research, and recent findings revealed that many customers trust brokers to give them the best advice about the differences between insurance policies,” Tusler says.

So what are the other benefits of going to a broker to buy personal lines insurance? “It’s all about personal service, peace of mind, and support when you need it most,” he says. “In the first instance, a broker will help a client understand their insurance requirements, taking into consideration the things they want covered and their lifestyle. Crucially, this means getting to grips with the value of home contents or an art collection, or ensuring that a child is covered for their gap-year travel or while they’re at university.”

But, according to Tusler, of equal importance to customers is the help and guidance brokers can offer when a policyholder suffers a loss. “Should the worst happen, and they need to make a claim,” he says, “brokers can assist in preparing, submitting and negotiating the claim – helping the insurer get the client back on their feet as quickly as possible.”

Aviva’s director of broker personal lines, John Kennedy, points to the insurer’s investment in its Club 110 and Broker Independence Group (BIG) as evidence of its support for personal lines brokers. “A significant amount of personal lines business comes through brokers,” Kennedy says.

“There is still a high prominence of connected commercial business,” he explains. “That is, someone will go to a broker to buy a commercial policy and then go back to the broker for personal lines cover. Also, brokers help customers by reviewing the personal lines market to make sure they get the best price.”

Kennedy acknowledges that, in recent years, Aviva may not have been as supportive of personal lines brokers as it could have been. “Maybe we didn’t strike a balance between the Aviva direct business and the broker business,” he concedes. “We perhaps made it difficult for brokers to sell what were then Norwich Union products [sold directly by the insurer].”

But Kennedy adds that times have changed. Aviva, like other major insurers, is keen to work with brokers on personal lines. And those brokers that have differentiated themselves, stayed close to their customers and got smart with the selling of add-ons, are all set to reap the rewards. IT