Overview 1
Catalyst 1
Summary 1
Executive Summary 2
Large national brokers continue to dominate commercial insurance distribution 2
Independent insurance intermediaries of all types retain their leading market share in 2008 2
A significant proportion of respondents were contacted by a consolidator but do not intend to sell their business 3
Almost 5% of respondents stated that they planned to close or sell their business 3
41.5% of respondents have been approached by a broker consolidator over the last 18 months 3
Acquisitions between brokers continued in 2008, albeit at a slower pace 3
AXA has continued to increase its presence in the UK commercial insurance market through its broking arm Bluefin 3
Cullum Capital Ventures continued with its acquisition strategy in 2008 3
The broker network space is becoming increasingly overcrowded 3
A number of players have launched their own broker networks and clubs in a bid to generate extra revenue 3
Table of Contents 4
Table of figures 5
Table of tables 6
Market Context 7
Introduction 7
Total UK general insurance GWP grew by an estimated 2.0% in 2008 7
Premium income in the motor insurance market increased to an estimated £13.5 billion in 2008 7
The property insurance market recorded an increase in premium income in 2008 7
The accident and health market increased by an estimated 3.5% to £6.0 billion in GWP in 2008 7
The pecuniary loss market grew by an estimated 2.0% in 2008 7
The general liability market contracted by an estimated 3.8% in 2008 7
The group accident and health sector achieved the strongest growth in the commercial insurance market in 2008 8
There are a total of 4.8m businesses operating in the UK, the majority of which are SMEs 10
The number of UK enterprises grew by 4.7% to 4.8m 10
More than 99% of UK companies are small businesses 11
Distribution Dynamics 14
Introduction 14
Large national brokers continue to dominate commercial insurance distribution 14
Independent insurance intermediaries of all types retain their leading market share in 2008 14
Direct players account for a small but growing portion of the commercial general insurance market 14
Corporate partnerships have maintained only a small presence in the commercial insurance market 15
Banks and building societies distribute negligible amounts of commercial general insurance 15
A significant proportion of brokers will pursue organic growth and target new customer groups 17
More than half of brokers intend to pursue organic growth 17
Consolidation within the intermediary channel is likely to slow in the next 18 months 17
Increasing premium income is the primary driver behind broker acquisitions 18
Almost a fifth of brokers had made an acquisition in the past 18 months 19
A significant proportion of respondents were contacted by a consolidator but do not intend to sell their business 20
Almost 5% of respondents stated that they planned to close or sell their business 20
41.5% of respondents have been approached by a broker consolidator over the last 18 months 21
Swinton had approached nearly half of the respondents with an offer for their business 22
One third of brokers belong to a broker network, however a significant proportion of brokers do not intend to join one 23
One third of brokers have already joined a broker network 23
Most brokers joined a network in order to increase the size of their panel 24
The majority of brokers who were not already in a broker network did not intend to join one 25
Customer Focus 27
Introduction 27
The broker channel continues to dominate the market with retention levels remaining high 27
Brokers remained the dominant distribution channel to target SMEs in H1 2008 27
The internet is the least common platform for SMEs purchasing commercial insurance 28
The majority of SMEs remain satisfied with their insurance provider 29
Long standing relationships are important to SMEs purchasing commercial insurance 30
SMEs purchasing their insurance through a bank or a broker value advice from their insurance providers the most 31
SMEs purchasing their insurance through a bank or a broker value advice from their insurance providers the most 31
Price is important to many SMEs choosing an insurance provider 32
A large proportion of SMEs are unlikely to switch to a new provider 33
Only 22% of SMEs have switched to a new provider over the last two years 33
SMEs belonging to the wholesale, retail trade and repairs sector are more likely to switch providers 34
Just over 10% of SMEs are planning to change providers over the next 12 months 35
SMEs that have been with their insurance providers for less than two years are more likely to switch providers in the next 12 months 36
SMEs switching to a new provider do so on the basis of price 37
A significant proportion of SMEs are willing to purchase insurance from a bank or direct in a bid to save money 38
Over 40% of SMEs stated that they would consider purchasing insurance from a bank or building society 38
The majority of SMEs surveyed will not consider a purchase from a bancassurer 39
The majority of SMEs remain open to purchasing their insurance direct from insurers 40
SMEs satisfaction with their current insurance providers prevents many from going direct 41
SMEs value previous experience and referrals when choosing an insurance provider 42
A significant proportion of SMEs are open to purchasing their insurance via the internet or phone 43
The convenience factor of the phone is appealing to many SMEs considering a telephone purchase 43
Many SMEs are unwilling to purchase their insurance over the telephone 44
Over a third of SMEs would consider a purchase online 45
Employers' liability and public liability were the most likely products to buy via alternative platforms 46
Competitive Dynamics 48
Introduction 48
Acquisitions between brokers continued in 2008, albeit at a slower pace 48
AXA has continued to increase its presence in the UK commercial insurance market through its broking arm Bluefin 48
Giles acquired numerous commercial brokers in 2008 48
Oval achieved a strong performance across its businesses in 2008 49
Cullum Capital Ventures continued with its acquisition strategy in 2008 49
Towergate announced a 13% increase in its income in 2008 49
The direct channel, the internet and aggregators are changing the distribution landscape of commercial insurance 50
The internet can be an effective means to distribute commercial insurance to SMEs 50
Coverzones, an internet only commercial broker, launched into the commercial insurance market in 2008 50
JLT launched Insurantz.com, an online trading platform, in 2008 50
Simply Business has a strong presence in the aggregator space 50
Moorhouse extended its online insurance comparison site Constructaquote.com 50
Endsleigh and Kwik Fit have launched online SME propositions 51
A number of insurers offer commercial insurance direct 51
Direct Line for Business reported strong growth in 2008 and has maintained its price competitiveness 51
Norwich Union withdrew its direct commercial proposition in August 2008 51
Many insurers have strengthened their non-direct propositions in a bid to win SME business 51
LV= launched three new policies for pubs and hotels though its broker distribution arm, ABC Insurance 51
Fortis joined the Budget van insurance panel 51
MMA has continued to expand its presence in the SME market 52
The broker network space is becoming increasingly overcrowded 52
A number of players have launched their own broker networks and clubs in a bid to generate extra revenue 52
Marsh launched its ProBroker network in March 2009 in a bid to target the SME market 52
Jelf's Purple Partnership reported strong growth for 2008 52
HSBC Insurance Brokers launched Labyrinth Club in an effort to support small regional brokers 52
Norwich Union launched the Broker Independence Group in March 2009 53
Broker owned MGAs have become a common feature in the commercial insurance market 53
Insurers are scrutinizing the costs imposed by broker networks and MGAs as economic pressures mount 53
Norwich Union's Club 110 is well positioned to compete in the broker network space 55
Multinational brokers continue to hold a large share of the UK commercial insurance market 56
Marsh had the largest market share in terms of client turnover in Q1 2009 56
The top five brokers control more than 90% of the large corporate sector 57
The market share of the top five brokers increases among companies with a larger turnover 59
More than 90% of large companies with a turnover greater than £1 billion are covered by the top five brokers 59
Multinational brokers continued to acquire smaller brokers in 2008 61
Aon launched a credit insurance service to SMEs and acquired the specialist broker Supercover 61
Willis announced eight new members to its broker network 61
JLT acquired HWS in 2008 and announced a 12% increase in turnover from its UK and European operations 61
The Future Decoded 62
Introduction 62
The direct channel's share is expected to grow, while the broker channel is forecast to contract 62
The market share of the broker channel is forecasted to decline to 78% by 2013 62
Direct players account for a small but growing portion of the commercial general insurance market 62
Corporate partnerships have a small presence in the commercial insurance market and are forecasted to grow to 3% in 2013 62
Banks and building societies are expected to retain their market share at the same level until 2013 63
Company staff and other agents are forecasted to remain static 63
APPENDIX 65
Definitions 65
Premium income measures 65
Gross premium 65
Written premiums 65
Distribution definitions 65
Banks/building societies 65
Brokers 65
Company staff 65
Direct 66
'Other' company agents 66
Utilities/retailers/affinity groups 66
Methodology 66
Datamonitor's SME Insurance Survey 66
Further reading 68
Ask the analyst 68
Datamonitor consulting 68
Disclaimer 68
List of Tables
Table 1: Total general insurance GWP by line of business, 2004-08e (£m) 8
Table 2: Commercial general insurance market GWP by sector and year-on-year growth, 2004-08e (£m) 10
Table 3: Profile of UK enterprise by volume, employee numbers and turnover, 2007 13
Table 4: Market share of distribution channels in the commercial general insurance market, 2004-08e 16
Table 5: Q: ""How important is it to receive advice on an ongoing basis from your insurance provider?"" 32
Table 6: Key data on broker networks operating in the UK commercial insurance market 56
Table 7: Top five brokers by turnover of clients, Q1 2009 (£m) 57
Table 8: Market share of the top five brokers in terms of clients' turnover by client employee band, Q1 2009 (%) 59
Table 9: Market share of top five brokers by client turnover, Q1 2009 (%) 60
Table 10: Forecast market share of distribution channels in the commercial general insurance market, 2006-13f (%) 64
Table 11: Q: ""What business sector are you involved in?"" 66
Table 12: Q: ""How large is your company in terms of number of employees?"" 67
Table 13: Q: ""How large is your company in terms of turnover?"" 67
List of Figures
Figure 1: Brokers are the dominant route to market for commercial insurers in the UK 2
Figure 2: The general liability market witnessed a significant contraction in 2008 8
Figure 3: The group accident and health insurance market achieved strong growth in 2008 9
Figure 4: The number of UK enterprises reached 4.8m in 2007 11
Figure 5: Almost three quarters of UK companies have no employees 12
Figure 6: Brokers are the dominant route to market for commercial insurers in the UK 16
Figure 7: Organic growth and targeting new customer groups are the key ways that brokers are seeking to grow their business 17
Figure 8: The majority of respondents do not intend to make an acquisition in the next 18 months 18
Figure 9: Many brokers plan to pursue acquisitions to grow their premium income 19
Figure 10: Almost a fifth of brokers had made an acquisition over the last 18 months 20
Figure 11: Almost 5% of respondents indicated that they plan to close or sell their business 21
Figure 12: 41.5% of respondents have been approached by a broker consolidator over the last 18 months 22
Figure 13: A significant proportion of brokers were approached by Swinton and Towergate 23
Figure 14: One third of brokers cited that they belonged to a broker network 24
Figure 15: Access to a larger panel of insurers is the main motivation for joining a broker network 25
Figure 16: The majority of brokers are not willing to join a network in the next 18 months 26
Figure 17: Most SMEs purchase their commercial insurance through the broker channel 28
Figure 18: Most SMEs purchase their insurance through face to face contact with their insurance provider 29
Figure 19: Most SMEs are satisfied with the service they have received from their insurance providers 30
Figure 20: A large proportion of SMEs have been with their insurance provider for more than 10 years 31
Figure 21: Receiving ongoing advice from their insurance provider is important to most SMEs 32
Figure 22: Many SMEs consider the price of an insurance premium to be an important factor when choosing a commercial insurance provider 33
Figure 23: Most SMEs surveyed in 2008 have been with their insurance provider for more than 10 years 34
Figure 24: Respondents belonging to the wholesale and retail trade and repairs sector are more likely to switch providers 35
Figure 25: The majority of SMEs plan to remain with their current insurance provider over the next 12 months 36
Figure 26: SMEs that have been with their insurance providers for two years or less are twice as likely to switch to a new provider 37
Figure 27: Price is a key motivator to SMEs switching providers 38
Figure 28: SMEs may consider a purchase from a bancassurer in a bid to save money 39
Figure 29: A significant proportion of SMEs believe that banks lack specialist expertise 40
Figure 30: Price remains central to SMEs considering a purchase from a direct insurer 41
Figure 31: Most SMEs are content with their current providers and therefore would not consider going direct 42
Figure 32: Previous experience is an important source of information to SMEs choosing an insurance provider 43
Figure 33: The convenience factor appeals to many SMEs prepared to purchase insurance over the phone 44
Figure 34: A significant proportion of SMEs would not consider a telephone purchase because they simply prefer face to face 45
Figure 35: A significant proportion of SMEs would consider a purchase online in a bid to save money 46
Figure 36: SMEs show a greater inclination to purchase employers' liability and public liability via the telephone and internet 47
Figure 37: A timeline of major events in the broker network arena, 1994-2009 54
Figure 38: Norwich Union's Club 110 is in a good position to compete with more established networks 55
Figure 39: Marsh and Aon held the largest share of client turnover in Q1 2009 57
Figure 40: Willis has the largest market share in the SME market in terms of total client turnover 58
Figure 41: The top five brokers held the largest share of turnover among those firms within the largest turnover band 60
Figure 42: The direct channel is expected to grow its share in the UK commercial insurance market 63