“Online aggregators have revolutionized the distribution of personal lines insurance in the UK,” concludes a study from Finaccord, a market research, publishing and consulting company specializing in financial services.
However, the study also found that they “have not repeated this achievement for commercial non-life insurance. As a result the aggregators “rely on specialist brokers for selling commercial liability, property and professional indemnity insurance.”
Finaccord’s new report, Affinity and Partnership Marketing in UK Commercial Non-Life Insurance, analyses the distribution of commercial lines through a wide variety of actual and potential affinity distribution partners.
Its announcement said: “These include professional and trade associations plus other types of organizations, such as automotive associations, banks, building societies, online aggregators and brokers, sports organizations and trade unions.
“In total, Finaccord investigated 1,320 organizations and found that 535 of them offer at least one type of commercial insurance policy, or 40.5 percent. This rate exceeds 50 percent for three categories of distributor, namely sports organizations (84.2 percent), online aggregators and brokers (70.0 percent) and professional associations (53.2 percent).”
However, the report points out that “sports organizations and professional associations tend to offer a limited range of policies to their members, concentrating on commercial liability and professional indemnity insurance, respectively.
“In contrast, online aggregators and brokers typically offer multiple types of cover, including commercial liability, motor, property, and professional indemnity insurance. Across all these categories of distributor, only trade associations offered a fuller range of policies, on average.
“Nevertheless, there is a major difference in approach between more traditional insurance brokers such as Endsleigh, Hastings Direct and Swinton, and online aggregators. While brokers usually offer policies that they intermediate themselves in the normal manner, the major online aggregators have usually formed partnerships with other brokers to act on their behalf, with the exception of commercial motor insurance.”
Finaccord singled out Towergate Underwriting’s YOUR Insurance brand works, which works with both Comparethemarket.com and Confused.com (for commercial liability and property risks), while Simply Business is used by Gocompare.com, Moneysupermarket.com and Tesco Compare (for commercial liability, property and professional indemnity insurance).
“By its nature, commercial insurance requires more specialist underwriting than personal lines and there are fewer underwriters active in some of these fields, so it makes sense for aggregators to work with brokers for these policies,” said David Parry, Managing Consultant at Finaccord.
“Commercial motor insurance is an exception where the aggregation model works well – in fact, affinity and partnership marketing schemes run by most types of distributor rarely include commercial motor insurance, because aggregators and specialist motor insurance brokers handle it best,” he added.
Across all of the distributors examined by Finaccord, brokers were found to be the most important type of partner used for commercial affinity schemes. The study “identified a total of 1,345 of these initiatives, counting a partnership for, say, commercial liability and motor insurance as two separate initiatives, since different underwriters can be involved for the different risks. In total, more than 80 percent of these commercial affinity schemes are organized through a broker, sometimes with one specific insurer used to underwrite the risks.”
Finaccord’s research also ascertained that “a very large number of brokers are active in the commercial affinity market, since it involves a wide variety of distributors across a range of industries, each with different insurance needs. Finaccord identified a total of 228 brokers involved in at least one of these schemes, running a combined total of 1,264 initiatives between them.
“In this highly fragmented market, only four brokers held a share of 3 percent or more of this total, led by Towergate, which is the clear leader measured by number of partnerships at 8.9 percent. It is followed by RK Harrison (4.0 percent), Bluefin (3.3 percent) and Giles Insurance Brokers (3.0 percent). In addition to the online aggregators mentioned above, Towergate also works with the RAC and several trade associations, notably the Federation of Small Businesses.”
Parry noted that “affinity and partnership marketing can require detailed knowledge of an industry sector, and RK Harrison works with several trade associations where it has this expertise. The other approach is to handle a high volume of small businesses, which is the strength of Simply Business. Towergate is exceptional because it combines both of these approaches, for example acting as broker for members of the United Kingdom Home Care Association and for customers of Confused.com.”
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