Is this the future for SME brokers or has even Towergate bitten off more than it can chew?
For years, there have been concerns that SME broking is under threat from price comparison sites.
With the arrival of Towergate on Comparethemarket, perhaps a watershed moment has been reached.
Insurers offer their own direct VSME offering – such as RSA’s More Th>n or Direct Line for Business – and also aggregators have their own commercial insurance section, but this is the first time a big broker has got involved.
Towergate has accepted the power of price comparisons sites, and is gunning for £100m GWP in just two years on Comparethemarket.
So could this herald the start of brokers using aggregators to place their SME products?
Matter of scale
For the larger brokers, it’s a potential opportunity. In personal lines, for example, Swinton and Kwik-Fit, have adapted their business to successfully place their products online.
Larger commercial brokers may not have the brand name, but they’ve certainly got the scale and technology to emulate what Swinton and Kwik Fit have achieved.
Towergate, Giles and even professional indemnity specialists like First City are suited to the aggregators.
Professional Insurance Agents director Graham Hearsey is well positioned to give a unique view as his business installs an online SME facility on brokers’ websites that local customers can access directly.
Many different types of insurance can be put online, he says – cargo, professional indemnity, directors and officers, office and even the hardest of the lot, commercial combined.
Serious volume
The opportunities are great but the dangers are high, Hearsey warns. “In terms of SME, and the large brokers like Towergate, it could make an awful lot of difference to their premium volume by doing this. So it’s certainly an opportunity for these large brokers.
“What Towergate is going to have to do well is handle that sort of volume. It is going to need some sort of call centre to deal with that. Even the mighty Towergate doesn’t perhaps quite know what it's let itself in for.
“On a smaller scale, we are doing 4,000 to 5,000 request every month and have 65 brokers using the system. There’s a lot of service involved with online people ringing up and wanting all sorts of problems answered.
“So you have to ask if Towergate is really set up for this kind of SME stuff. Only time will tell.”
Moving on to smaller brokers, they have demonstrated that they can successfully profit using aggregators to place niche products in personal lines.
Customer will get it wrong
So is there an opportunity in commercial or is it just another erosion of their market?
The first point to make is that many brokers have doubts it will really take off, stressing that customers will get their fingers burnt.
Chief executive of BG Insurance, David Harvey, says: “I’m not sure it will take off. The problem with SME, I think, is that the consumer will get it wrong.
“Fraud will come into it. Also, the customer will get a lot wrong because they do not understand things like public liability and employers’ liability insurance.
“They won’t know what value to attribute to their business and will underinsure their stock. I think it’s going to be an awful mess.
“But I suppose if it did really take off, I have to take the attitude of ‘if you can’t beat them, join them’."
Smits says relax
Other brokers believe there always be a place for the human touch, regardless of what happens with VSME aggregation.
Peter Smits, chief executive of Ashborne Insurance, says: “I don’t really think using the aggregators would fit using my business model, which is all about rapport and relationships.
“We spend most of our time telling the insurers that. I think it might work for bigger brokers in a larger call centre type arrangement.
“Overall, I am quite relaxed about it really. My biggest concern is the shrinking market and insurers merging and then disappearing. What people like Towergate do, doesn’t concern me.”
Beat 'em or join 'em
In conclusion, Towergate and the brokers that follow could boost premium, but they face huge operational challenges. Are they up to it?
For the smaller broker, if the VSME aggregations takes off, they will survive and adapt like they always have, by either joining the aggregators or working smarter and harder with the personal touch.
Brokers have shown over the last 20 years that they are innovators and survivors. That’s not likely to change.
