UK Commercial Insurance Distribution 2016; An industry where adapting to the market is key

All the vital news, analysis, and commentary curated by our industry experts.

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Published: March 01, 2016 Report Code: VF0062IA-ST

Report Overview
Key Players
Table of Contents
Table
Figures

Brokers continue to dominate the distribution of commercial insurance, with a 78.2% share of the market. Provincial brokers are less concerned about growing their online propositions. Banks have the potential to cross-sell insurance with their existing business services. Micro-sized enterprises are driving the growth of price comparison sites.

Scope

Verdict Financial’s “UK Commercial Insurance Distribution 2016” report provides an in-depth study into the trends of commercial insurance distribution. It discusses the influence of the differing purchasing behaviours of SMEs compared to larger corporate businesses, and pays particular attention to the role and strategies of brokers within product distribution. It addresses the challenges the market is facing, and key changes in regulation, before concluding with a five-year forecast for each distribution channel.

Reasons to Buy

Adapt your distribution strategy to ensure it still meets the needs of clients and intermediaries. Ensure you remain competitive as new innovations revolutionize the purchasing journey for clients and brokers.

Benchmark your firm against other players in the market.

Be prepared for how regulation will impact the commercial market over the next few years.

AXA
Direct Line
Hiscox
NFU Mutual
Aviva
Allianz
Premierline
Simply Business
Towergate
YOUR Insurance
Confused.com
Comparethemarket.com
Moneysupermarket.com
Gocompare.com
Barclays
Lloyds Bank
Arthur J Gallagher
JLT
Cobra
Marsh
Aon
Willis
AA
Saga
Thistle In

EXECUTIVE SUMMARY

Brokers remain dominant in a market shifting towards online purchasing

Key findings

Critical success factors

COMMERCIAL INSURANCE: THE DISTRIBUTION CHANNELS

Introduction

Brokers remain dominant despite growth in other channels

The complexity of commercial insurance sustains the dominance of the broker channel

Brokers are becoming less significant in the distribution of uncomplicated products

The distribution of SME insurance is moving away from brokers

SMEs are purchasing commoditized commercial products online

The direct channel is competitive against brokers within the SME market

Micro enterprises are driving the growth of price comparison sites, whereas small and medium enterprises are driving the growth of the banking channel

Commercial insurance distribution and the direct channel

Insurers are growing their direct channels

Product commoditization has limited scope within commercial insurance

Only a few commercial insurers have developed a direct proposition

AXA’s commercial direct offering is now digital-only

Direct Line for Business offers customers a range of additional online features and service options

Hiscox offers guidance to help customers build their own insurance package

NFU Mutual offers a traditional broker-like direct service

Aviva has brought back its direct offering for commercial insurance

Allianz has a long-established direct offering called Premierline

Price comparison sites and commercial insurance distribution

Aggregators target SMEs with commercial insurance products

Price comparison sites’ commercial offerings are in partnership with Simply Business and Towergate’s YOUR Insurance brand

Moneysupermarket.com and Comparethemarket.com are favored by SMEs

Banks and building societies and commercial insurance distribution

Banks and building societies are the least used channel through which commercial insurance is purchased

Banks have the potential to cross-sell insurance with their existing business services

Barclays and Lloyds are the leading banks providing SME insurance

Barclays’ business insurance is underwritten by Allianz

Lloyds Bank tailors its business offerings by company size

BROKERS AND THE DISTRIBUTION OF COMMERCIAL INSURANCE

The broker landscape is dominated by the top few global brokers

Global brokers have the largest share of commercial insurance revenues

The broker landscape is dominated by the top few global brokers

JLT is now the UK’s largest broker

Marsh is expanding into the UK SME market through acquisitions

Aon’s revenue remains steady year-on-year

Willis merges with Tower Watson to offer insurance broking and consultancy

Growth has slowed for Arthur J. Gallagher as it integrates its acquired businesses

There is a downward curve in revenue from global brokers to provincial brokers

National brokers handle significantly less GWP than global brokers

Super-regional brokers’ revenue is representative of their varying stages of growth

National, super-regional, and provincial broker growth strategies

Brokers are looking to use their existing products and expertise to grow

Brokers look to create a multi-channel distribution strategy by growing online

Acquisitions are an effective way to rapidly grow revenue

Brokers are using social media to engage with clients

National brokers are looking to expand their range of online services

Super-regional brokers have prioritized online quotation systems

Provincial brokers are less concerned about developing their online propositions

THE FUTURE OF UK COMMERCIAL INSURANCE DISTRIBUTION

The Insurance Act 2015 will modernize UK commercial contract law

UK insurance contract law is undergoing transformation

The Duty of Fair Presentation will pass disclosure responsibility from clients to insurers

Remedies for non-disclosure will be proportionate to the breach

Warranties will now only suspend cover until a breach has been remedied

Insurers can now only recover sums paid since an act of fraud

Insurers will have to highlight disadvantageous terms

The Insurance Act 2015 will have a positive effect on the commercial insurance market

How will the distribution landscape change in the coming years?

The SME market will become more dominant within commercial insurance

The decline of the non-SME market will cause brokers to lose share

Online offerings will rule for SMEs regardless of channel

Micro and small-sized enterprises will drive change in the SME market

The future of the SME market will be indicative of future commercial distribution

APPENDIX

Abbreviations and acronyms

Definitions

Brokers

Direct

MGA

SME

Methodology

Primary sources

Secondary sources

Bibliography

Table

Table 1: Percentage point movement in channel share by SME size, 2014–15

Table 2: The top five direct insurers (percentage of SME respondents), 2015

Table 3: Broker business growth strategies, 2016

Table 4: Broker business growth strategies, percentage point movement 2015–16

Table 5: Share of commercial insurance distribution by channel (%), 2013–20f

Table 6: Share of SME insurance distribution by channel (%), 2013–20f

Figures

Figure 1: Brokers retain their domince but have slightly lost share

Figure 2: The online channel is a popular method used by SMEs to purchase cover

Figure 3: Micro-sized enterprises are purchasing directly and through price comparison sites

Figure 4: The direct channel is becoming more popular within commercial insurance

Figure 5: The direct channel was worth £2.37bn in GWP in 2014

Figure 6: Direct Line for Business offers a range of 10 insurance products

Figure 7: Hiscox understands that each small business is unique

Figure 8: Price comparison sites have gained share within commercial insurance

Figure 9: Price comparison sites generated £624.3m GWP in 2014

Figure 10: The banking channels holds the smallest share within commercial insurance

Figure 11: The banking channel generated £480.3m GWP in 2014

Figure 12: Barclays’ Cover Finder Tool is simple but effective

Figure 13: Lloyds Bank tailors its business services to companies of varying annual turnover

Figure 14: JLT replaces Marsh as the UK’s largest broker in 2015

Figure 15: tiol brokers account for the greatest proportion of business totaling over £250m

Figure 16: Brokers are looking to grow by cross-selling and upselling their products 34

Figure 17: Marketing activity and web presence have become more popular growth strategies

Figure 18: Super-regiol and tiol brokers have the strongest presence on social media

Figure 19: tiol brokers are looking to introduce the ability to get quotes from their websites

Figure 20: Super-regiol brokers have the lowest adoption of a claims tracking process

Figure 21: Provincial brokers stay true to traditiol brokering strategies

Figure 22: The commercial market is forecast to grow

Figure 23: Brokers will lose share within the distribution of commercial insurance products

Figure 24: SME preference to buy online is forecast to grow

Figure 25: Micro and small SMEs have generated more GWP over time

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UK Commercial Insurance Distribution 2016; An industry where adapting to the market is key

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