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UK Commercial Insurance Distribution 2015

UK Commercial Insurance Distribution 2015

Summary

While the characteristics of both personal and commercial insurance products have gradually evolved over recent years, the distribution dynamics of the market have been the subject of a more rapid change. Operational developments and improvements in technology have increased competition within this space, which has led to the establishment of multiple distribution channels.

Synopsis

  • Understand the shape of the distribution landscape and assess the relevance of traditional insurance brokers.
  • Gain an insight into the current trends in the commercial insurance sector and how the market is evolving due to technological advancements.
  • Access the latest data on SME purchasing behavior, with analysis on client services, product development, and emerging channels and platforms.
Reasons To Buy
  • How is the role of the traditional brokers being challenged by new and/or emerging distribution channels?
  • Which brokers are the most dominant in the market and how are they retaining their statuses?
  • Why are more insurers developing direct propositions and how will this impact on the distribution of commercial insurance in the future?
Key Highlights

Brokers continue to have a very strong presence in the distribution of commercial insurance. Brokers have continually represented the majority share of commercial distribution. Other distribution methods such as the direct channel and comparison sites have experienced small growth in an otherwise static environment.

A small number of brokers dominate the UK commercial insurance distribution landscape by revenue. Three in particular have generated the biggest returns over the past four years – Aon, Marsh, and Willis – with JLT Group recently emerging as another major player in the market. Each of these companies has a significant global presence.

Brokers will remain the main distribution channel for commercial insurance products for the foreseeable future. Technology advancements are enabling more insurers to revert to the use of the internet as a means to streamline and commoditize the personal lines market.


  • Executive Summary
    • Brokers are still the dominant force despite growth in the other channels
    • Key findings
    • Critical success factors
  • Commercial Insurance: The Distribution Channels
    • Introduction
      • Traditional practices are facing tough competition in an increasingly dynamic market
      • Insurers need to adapt but ensure they don't deviate too far from regular practices
    • Brokers remain the dominant force in the distribution of commercial lines
      • The channel split has experienced little change over the past six years
      • Brokers are becoming less significant in the distribution of uncomplicated products
      • Banks and building societies are still cautious about developing an insurance proposition
      • More business is now generated through price comparison sites than the banking channel
    • Commercial insurance distribution and the direct channel
      • Selling direct has become a favored route to market for basic commercial insurance
      • Direct propositions will struggle with products that are complex
    • Insurers are targeting SMEs with direct sales of commercial insurance products
      • The popularity of aggregators in personal lines is beginning to take effect in the commercial space
        • Table Commercial insurance products listed on the four main price comparison sites
    • Only a few commercial insurers have developed a direct proposition
      • Table Top five direct insurers (percentage of respondents), 2014
      • AXA's commercial direct offering is digital-only
        • Table Micro-enterprise market by distribution channel (percentage of respondents), 2014
      • Hiscox offers a comprehensive online proposition for business customers
      • Direct Line for Business offers a comprehensive online platform for commercial insurance
      • NFU Mutual provides a direct service for all insurance product lines
      • Zurich Municipal provides an online hub for public sector insurance products
      • Customers remain unsure of the insurers that offer a direct solution
  • Brokers and the Distribution of Commercial Insurance
    • The role of brokers remains crucial in an increasingly diversified market
      • Acquiring new customers is key to facilitating growth
        • Table The UK broker landscape consists of four different groups of broker
    • Global brokers have the largest share of commercial insurance revenues
      • A select few dominate the market, leaving a chasmal gulf between the other brokers
      • Aon was the largest broker in the UK in 2014
      • Marsh's overall market performance has been inconsistent over recent years
      • Organic growth is driving JLT but it is not afraid to make acquisitions
      • Willis has maintained a steady performance despite setbacks in its retail operations
      • Arthur J Gallagher has become a major insurance broker after several small purchases
      • Acquisitions are seemingly the only way for brokers to significantly grow revenues
        • Table Top five brokers by brokerage (2014) and 2013 ranking
    • National brokers are expected to focus more on acquiring new customers, not businesses
      • Developing existing products is the preferred method to acquire customers
      • Group restructurings have increased Towergate's overheads
      • Bluefin looks to bolster its underwriting capabilities
      • The growth of broker networks has slowed, causing a shift towards retention
    • Super-regionals and the provincial brokers
      • Changes in product purchasing habits are threatening the role of provincial brokers
      • Bollington looks to introduce new digital initiatives
      • Other UK brokers should follow Bollington's example and invest in new technology
  • The Future of UK Commercial Insurance Distribution
    • How is the landscape going to change in the coming years?
      • Brokers will remain a dominant force in the distribution of commercial insurance
      • The direct channel will expand its share at the smaller end of the SME market
    • Business integration and organic growth are the main focus points for national brokers
      • National brokers will concentrate on the placement of business in specific areas
      • National brokers will focus on organic growth and integrating their acquired businesses
      • Large acquisitions facilitate brokerage growth and expand market coverage
    • Broker network memberships have stagnated
      • New network memberships have slowed, meaning competition on retention is high
    • Insurance brokers are a resilient force
      • Brokers have the capabilities to adapt to changing markets
        • Table Forecast market share of the distribution channels in commercial insurance (%), 2013-19f
      • Commercial insurance: the future decoded and emerging opportunities
  • Appendix
    • Abbreviations and acronyms
    • Definitions
      • Brokers
      • Direct
      • PPI
      • SME
      • MGA
    • Methodology
      • Verdict Financial's 2014 UK Commercial Broker Survey
        • Table Commercial brokers, by type
        • Table Commercial brokers, by annual premium income
      • Verdict Financial's 2014 SME Insurance Survey
    • Bibliography
    • Further reading

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