Lloyd’s has released a survey it commissioned, conducted by the British Insurance Brokers’ Association (BIBA), which concludes that “the new means of providing insurance in a marketplace where ‘Super-brokers’ could take large chunks of business is one of the biggest challenges for insurance brokers.”
The report, entitled What British Insurance Brokers Think, found that “new distribution trends such as the Internet and direct writers, as well as the creation of ‘Super-brokers’ through consolidation, are the main issues brokers are facing. The study also revealed that more than 80 percent of brokers believe that maintaining profit throughout the insurance cycle continues to be the industry’s biggest challenge.”
Other key findings include:
— Brokers are spending more of their time dealing with increased regulation and becoming more internet-savvy. Almost 90 percent of those questioned said that they were actively addressing increased regulation, and three quarters were dealing with the challenges posed by the Internet;
— More than three quarters of those questioned said that the growth of ‘Super-brokers’ was the factor most likely to change the UK broker market in the next 18 months; and
— Brokers feel that they have adequately addressed the key issues of client money, contract certainty, and conflict management, although they feel more work needs to be done.
“The insurance cycle has been endemic in our industry for decades now,” noted David Meur, managing director of Genavco Insurance and chair of BIBA’s property committee. “It affects everyone in the business – insurers, reinsurers, intermediaries and, not least, insurance buyers. Our customers fail to understand why the premium they need to pay for an insurance risk can be so volatile over relatively few years, when the risk itself doesn’t change materially. It is therefore difficult to engender confidence in our industry on the part of our customers, and develop the reputation of integrity and professionalism which we espouse.”
Julian James, Director, Worldwide Markets at Lloyd’s, stated: “This research gives a clear indication that, to be successful, brokers need to tackle the challenges of changing distribution trends and embrace the opportunities they present. It also shows, quite rightly, that maintaining profitability throughout the insurance cycle remains a key industry challenge.
“At Lloyd’s, we work closely with brokers, BIBA, and the London Market Insurance Brokers’ Committee to address these issues, while the market’s strategic plan aims to ensure that Lloyd’s remains the platform of choice throughout the insurance cycle.”
The report indicates that despite the challenges, U.K. brokers are actively addressing the main issues, with three quarters saying they were dealing with the challenges posed by the Internet. They also see changes to distribution channels as an opportunity to improve business, with just over a third admitting they see this as the greatest opportunity for brokers in the UK over the next three years.
Mark Hewett, deputy chairman of Guy Carpenter & Company, pointed out: “Global economic growth will continue to be driven by the emerging markets – the UK, and London in particular, has always been a major player on the world stage with a concentration of intellectual capital and a proven ability to innovate. Changes to the distribution system should be seen as an opportunity offering real scope for growth, with improved accessibility, process efficiencies and the ability to deliver new products.”
Eric Galbraith, BIBA Chief Executive, said: “This survey confirms that the broking and intermediary channel is responsive to change, recognizes the challenges and opportunities that exist and continues to be innovative. The impact of the market cycle on intermediaries and their customers, consolidation and other changes in distribution, regulation and technology all provide continuous challenges and opportunities.”
The full research report can be seen at: www.lloyds.com/research.
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