Slowly does it

The long-prophesied migration of commercial insurance onto the internet has proven to be more of an orderly canter than a stampede. But while electronic trading in commercial insurance has not come close to matching the overwhelming success of online trading in personal lines, the launch of platforms such as imarket, Acturis, Broker Direct, iprism and Towergate’s PowerPlace are testimony to the way that the market believes trade is moving.

And if, at the end of the journey, small and medium-sized businesses purchase their insurance via the internet, there will be deep repercussions for brokers.

A recent report by Defaqto on commercial SME insurance reveals that almost a quarter of the products available in the office and retailers markets can now be found online. For the most part, the increase is at the small end of the SME market but, as software systems become more sophisticated, it’s likely that larger SMEs will be able to follow their colleagues online.

There are many obstacles, not least of which is whether the insurance industry can come up with commercial products that can be easily accessed online. Although the Defaqto report shows that two-thirds of the top 20 financial price comparison websites now provide access to business insurance, either as introducers to online providers or by providing quotations through a limited panel of insurers, the systems are not as sophisticated as those used in personal lines.

Mindful of the way technology has progressed in the past 10 years, some brokers, particularly the smaller firms, are looking at alternative revenue streams to mitigate the impact of large chunks of their business moving online.

But right now brokers want online trading platforms to provide faster access to underwriters for complex risk policies and more flexible question sets to ensure they can best serve their clients’ needs. IT

Small broker

Macbeth Insurance Brokers sales director, Tony Gibbs, uses most of the online trading platforms, including iprism, Acturis and company extranet sites.

“The most effective are the ones where you can input the risk details. If it’s a book standard risk, it will quote it then and there. You press the button and you get your documents. However, if it doesn’t tick all the right boxes … you can refer the risk to the underwriters and they open up a dialogue with you. Those are the ones we like the best because you can put on the things that aren’t standard risk.”

To this end, Gibbs’ favourite trading platform is iprism. “It has one policy wording but you’re getting quotes from a range of different companies. It’s fantastic for run-of-the-mill risks because it’s simple to use and, from a compliance perspective, it enables you to show that you’ve done a fair analysis of the market. The premiums are competitive too.

“In terms of our smaller per capita liability stuff, which was spread all over the place, we’ve consolidated that and, where we can, put everything through iprism. The only downside is it doesn’t integrate directly into your back-office system. But even though you have to duplicate entering data, its merits outweigh the downside.”

Like many brokers, Gibbs has been unimpressed with the industry’s flagship platform, imarket. “Going onto the imarket network used to be a nightmare. The passwords expired right away – you tore your hair out using it,” he says.

Gibbs is acutely aware of the threat that online trading poses, especially as question sets and software improve.

“It’s one of the reasons we are looking more at niche markets, areas where direct insurers won’t be able to threaten us – at least for a while – such as larger commercial risk and more complex liability risk. Basically, we’re trying to stay one step ahead of the direct insurers.”

But while wary of the threat, Gibbs adds that insurers and clients need to realise that the current software is still neither sophisticated nor flexible enough to accommodate all commercial lines business.

“There’s a lot of onus on clients to put the correct information into the system. I’ve had a case where I quoted a roofing contractor for a liability policy and he told me he got it online for a quarter of the price because he had described himself as a building contractor rather than a roofer. You’ve got to be very careful about how you enter the information or you’ll find that your claims won’t be paid.”

Regional broker

Northern Ireland-based broker Hughes Insurance uses Open GI – the software system used by almost half of UK brokers – for all its personal lines business. “We find their range of solutions are a really good fit for our business,” chief executive Gareth Brady says. “They’ve been an effective partner in driving efficiencies in our processes and delivering growth.”

But when it comes to commercial cover, Hughes’ preference is to use company extranet sites, primarily Fast Trade (Aviva’s extranet site), QuoteMac (Anglo Pacific Consultants), IQuote (This Insurance), Semploy Extra (Fortis), Zurich Commercial, UK General, Travelers and Chartis.

Brady had originally registered to use imarket but says that “technical issues with the site and problems with insurers” forced him to abandon the platform.

“We’re awaiting implementation of PowerPlace; that is our preferable route now due to the connection with Open GI and the efficiency savings for letter and document issue that will be available,” he says. For Brady, extranet sites provide speed and convenience, with Anglo Pacific’s QuoteMac coming top. “QuoteMac’s best points are its extensive range of products,” he says. “It has a good referral process to underwriters too.”

He says sites are often unavailable because of technical problems, but his main bugbear is the need to multi-key information for various quotations.

The biggest benefit is the potential for increased efficiency. “It reduces turnaround time for quotations. If sites are able to provide a platform for multiple quotations, it will help to increase efficiency more. In the long term, the expectation is that small and medium-sized business clients will purchase insurance via this source.”

With that in mind, there’s a good chance that regional brokers such as Hughes could find themselves surplus to requirements as systems become more sophisticated.

Brady concedes that it’s a risk but is optimistic that there will always be a need for professional advice for the bespoke requirements of business cover. “I think the expectation is that the more complex commercial risks will continue to use the expertise provided by a broker.”

Large national broker

Bluefin SME broking manager, Mark Davies, also looks to insurer extranet sites. “Insurers’ sites have all the information readily available for a broker to have confidence in making an informed selection, such as policy summaries, endorsement wordings, policy wordings and the like. The platforms operated by Zurich, Aviva, AXA, Allianz and NIG are by far the most user-friendly platforms. Other insurers such as Markel, Groupama and MMA are comparable, but in terms of a slick and steadfast operation, they are a close second.”

In common with his smaller peers, Davies also finds little to recommend imarket. “The over-complication of presentation-driven platforms, such as imarket, have historically made them difficult and clumsy to use,” he says.

What he needs most from an online platform, he says, is knowing that a “decision maker” is available if a risk he is seeking cover for doesn’t tick all the boxes in the rigid online format. “It could be the most crucial development of online trading,” he says.

For him, the biggest single difference online trading has made is the speed of transactions. “Product comparisons and quotations can be gained in minutes. It’s by no means the finished article, but with insurers and brokers continually seeking to be one step ahead of their competition, a user-friendly system that’s slick and understandable, that supplies the essential information when it’s needed, and gives a route for direct access to a decision-making underwriter will win the confidence of those in the broking market that are reluctant or uninformed. Online trading will continue to change and shape the way that business is transacted.”

But with that in mind, does Davies fear that even large brokers such as Bluefin will become surplus to requirements as systems become sophisticated enough to do more complex commercial insurance?

“Online trading versus the need for a broker is an age-old argument. When online trading systems first became prevalent, there was a panic that the broker would become obsolete. The very same panic swamped the industry when direct insurers asked the consumer to ‘cut out the middleman’. We, the broker, are still very much here. Insurers and consumers understand the benefit of the technical advice that a broker can offer,” he says.