Where next for networks?

Aviva UK & Ireland chief executive David McMillan was quick to reassure Broker Network brokers that Aviva was still supporting them, after causing a stir in the market by leaving the Broker Network panel.

McMillan is confident that the insurer will keep growing its business through regional brokers and added that Broker Network brokers could still deal with Aviva.

But Aviva is playing a dangerous game. Just hours after yesterday’s news made the headlines, brokers reported that their phones were “ringing off the hook” with calls from other insurers trying to poach Aviva business.

So could history end up repeating itself? In 2009 Aviva tried to fight back against the level of commission charged by consolidators, but got badly burnt. Former chief executive Igal Mayer led the charge by trying to get the mega-brokers to accept commission cuts, but Aviva ended up losing nearly £1bn in premium income.

Aviva lost out in 2009 because no other insurers followed it, and its rivals were happy to swoop in and steal its business. Today there is no sign of a mass insurer exodus from Broker Network or networks generally, but insurers are definitely questioning where networks add value and the networks know it.

Brokerbility chairman Ashwin Mistry said last week that many insurers were likely to “pull up the drawbridge” on networks if they thought it was simpler and cheaper to approach brokers directly. Other broker network bosses have expressed the same views.

Networks do a good job in helping smaller brokers, but they have a tough time on their hands to convince insurers that they are still relevant and worth the extra commission. They will be hoping that the Aviva decision isn’t the start of things to come.