Table of Contents
- Overview
- Executive Summary
- Total general insurance GWP declined in 2006
- Brokers continued to dominate the distribution of commercial insurance
- National brokers have lost distribution market share to the direct
channel, chain brokers and telebrokers
- Larger companies are more likely to have switched brokers between 2006
and 2007
- Companies with a large turnover are more likely to switch broker
- The market saw a number of mergers and acquisitions, many involving
brokers
- The broker channel is dominant in UK commercial insurance distribution,
however its share of the market is declining
- Brokers are forecast to see a 1% decline in market share between 2007
and 2011
- Table of Contents
- Table of figures
- Table of tables
- Introduction
- What is this report about?
- Who is the target reader?
- How to use this report?
- Market Context
- Introduction
- Total general insurance GWP declined in 2006
- The motor insurance market recorded its fourth consecutive year of
decline
- Property insurance GWP rose very slightly in 2006
- General liability recorded a significant fall in GWP
- Accident and health was the only business line to record strong growth
- Pecuniary loss GWP fell by 3.2%
- The general liability, commercial property, commercial motor and
pecuniary loss markets recorded a fall in GWP in 2006
- The UK business parc is continuing to grow steadily with most of the
impetus coming from the smallest firms
- The majority of UK businesses have no employees
- Distribution Dynamics
- Introduction
- Brokers continued to dominate the distribution of commercial insurance
- National brokers have lost distribution market share to the direct
channel, chain brokers and telebrokers
- The direct channel increased its share of commercial insurance GWP by
1% in 2006
- Affinity groups remain a small channel for the distribution of
commercial insurance
- Banks and building societies continue to play a small role in the
distribution of commercial insurance
- Organic growth remains a key strategy for brokers, although broker
acquisitions remain popular
- Brokers are keen to pursue organic growth
- More than one fifth of the brokers surveyed have acquired a fellow
broker
- More than a third of brokers surveyed are considering planning an
acquisition in the next 12 to 18 months
- Increasing premium turnover and regional growth are the key
motivations for planning a broker acquisition
- The broker network model remains popular as many brokers wish to gain
access to a larger panel of insurers
- Over a third of brokers are part of a broker network
- Many brokers joined a broker network to gain access to a larger panel
of insurers
- The proportion of brokers considering joining a broker network has
decreased since the H1 2007 survey
- Customer Focus
- Introduction
- Larger companies are more likely to have switched brokers between 2006
and 2007 while Jardine Lloyd Thompson performed well in terms of acquisition
and retention
- Companies with a large turnover are more likely to switch broker
- Commercial clients are more likely to switch from a multinational than
any other intermediary but overall those who switch are more likely to
move to a smaller broker
- Jardine Lloyd Thompson leads the pack in successfully acquiring and
retaining customers, with Willis a close second, whilst Marsh and Aon in
particular suffered negative net retention
- Aon was the largest net loser of clients between 2006-7, shedding
clients to brokers from both within and outside the top four
- SMEs buy mainly through brokers and long-term relationships are the norm
- In general SMEs are content with their insurance providers and
satisfaction levels remain high
- Retention levels among SMEs remain high with most staying with their
provider for longer than two years
- Almost 90% of SMEs are not considering a change of provider in the
next year
- A small group of SMEs are willing to switch provider in search of lower
prices
- Only 16 per cent of SMEs have changed insurance provider in the last
two years
- Premium costs are particularly a concern for those that have
switched recently
- One in 10 SMEs are considering switching their insurance provider in
the next 12 months
- Recent switchers show lower loyalty levels than other SMEs
- Price is the dominant concern for potential switchers
- Most SMEs would approach a broker if switching but some are open to
alternatives
- Brokers remain the top choice for SMEs to approach if they had to
switch provider
- Many SMEs are willing to consider alternative channels when prompted
- Up to 44% of SMEs would consider using a bank as an insurance
provider
- Almost three quarters of SMEs would be willing to consider direct
insurers, in the hope of cost savings
- Many SMEs are open to purchasing insurance by telephone
- Even more SMEs are willing to buy their insurance via the Internet,
showing the potential of this platform
- Commercial motor and property insurance are most likely to be
purchased through alternative platforms
- Alternative distribution channels face a number of challenges in
attracting switchers
- A core group of SMEs will not buy direct, as they believe that direct
insurers are more expensive
- Brand awareness in the commercial sector remains low, hampering
progress for direct insurers
- Over 50% of SME will not consider buying from bancassurers
- Direct insurers and bancassurers also have to overcome the
unwillingness of some SMEs to buy by telephone or Internet
- Two thirds of SMEs consider purchasing commercial general insurance
too complex for the telephone
- A majority of SMEs view commercial general insurance as too complex
for the Internet
- Competitive Dynamics
- Introduction
- The market saw a number of mergers and acquisitions, many involving
brokers
- AXA acquired numerous commercial brokers in 2007, reinforcing its
position in the SME sector
- Groupama acquired a majority stake in Lark Group in August 2007
- Direct Line began to offer business insurance in 2007
- Equity Insurance Group recorded a large number of small-scale
acquisitions
- Towergate continued to acquire numerous brokers in 2007
- Other brokers acquiring included Jelf, Giles, Broker Network and Oval
- The top ten brokers have a market share of 96% of client turnover
- The greater the turnover, the greater the market share of the
multinational brokers
- Of the companies in Datamonitor' s Insurance Broker Database, 22
arranged their insurance in-house
- Aon acquired Footman James in 2007 and is looking to improve its claims
process
- Aon to use InterResolve to revolutionize claims process
- Aon acquired specialist motor insurance broker Footman James in 2007
- Willis is planning to grow its SME business and introduced a new
commission structure in 2007
- Willis aims to grow its UK SME business
- Willis alters remuneration package by introducing 2.5% commission on
top of all fees
- Jardine Lloyd Thompson is to establish a new underwriting division and
has said that a transformational deal may happen in future
- Jardine Lloyd Thompson asserts independence from big 3
- JLT bought niche personal lines broker Pavilion in 2007
- JLT to establish an underwriting division
- The Future Decoded
- Introduction
- The broker channel is dominant in UK commercial insurance distribution,
however its share of the market is declining
- Brokers are forecast to see a 1% decline in market share between 2007
and 2011
- The direct channel will see its commercial insurance distribution
share rise to 11% by 2011
- It is anticipated that insurers will make more affinity deals with
retailers and associations to sell commercial insurance
- Banks are expected to retain a distribution share of around 1% between
2007 and 2011
- Company staff and agents will see slight reductions in market share
- APPENDIX
- Definitions
- SME
- Definitions of ABI terms
- Brokers
- National brokers
- Other intermediaries & brokers
- Chain brokers & telebrokers
- Direct
- Other company agents
- Utilities/retailers/affinity groups
- Company staff
- Banks/building societies
- Written premiums
- Methodology
- Datamonitor' s UK Commercial Insurance Broker Competitor Database
- Industry sectors
- Further reading
- Ask the analyst
- Datamonitor consulting
- Disclaimer
- List of Tables
- Table 1: Total general insurance GWP by line of business, 2002-6
- Table 2: Commercial general insurance market GWP and year-on-year
growth, split by sector 2002-6
- Table 3: Profile of UK enterprise by volume, employee numbers and
turnover
- Table 4: Market share of distribution channels in the commercial
general insurance market, 2003-6
- Table 5: Percentage of companies that changed broker between 2006 and
2007, by turnover band
- Table 6: Commercial clients switching broker, by broker segment,
2006-07
- Table 7: Acquisition and attrition performance of top four brokers
between 2006 and 2007
- Table 8: Customer retention within Aon, 2006-7
- Table 9: Customer retention within Marsh, 2006-7
- Table 10: Customer retention within Willis, 2006-7
- Table 11: Customer retention within Jardine Lloyd Thompson, 2006-7
- Table 12: Top ten brokers by market share of client turnover, 2006-7
- Table 13: Market share of multinational brokers by client size, 2007
- Table 14: UK companies arranging insurance in-house, 2007
- Table 15: Forecast market share of distribution channels in the
commercial general insurance market, 2004-11f
- Table 16: Crawford' s Directory industry sectors
- List of Figures
- Figure 1: General insurance GWP declined in 2006
- Figure 2: The general liability, commercial property and commercial
motor markets recorded a fall in GWP in 2006
- Figure 3: The number of UK enterprises increased by more than 100,000
between 2006 and 2007
- Figure 4: More than 99% of UK companies are small businesses
- Figure 5: National brokers dominate the distribution of commercial
general insurance in the UK in terms of GWP
- Figure 6: Organic growth remains a key growth strategy for the
majority of brokers
- Figure 7: Just over a fifth of brokers had acquired a fellow broker in
the previous 12-18 months
- Figure 8: Over 13% of survey respondents are planning an acquisition
in the following 12-18 months
- Figure 9: The majority of brokers planning an acquisition are doing so
in order to increase their premium turnover or achieve regional growth
- Figure 10: More than one third of brokers surveyed belong to a network
- Figure 11: Access to a larger panel of insurers was the most common
reason given for joining a broker network
- Figure 12: The vast majority of survey respondents have no plans to
join a broker network in the next 12-18 months
- Figure 13: Companies with a greater turnover are showing less broker
loyalty
- Figure 14: The commercial clients of a multinational broker are most
likely to switch
- Figure 15: Willis won the highest percentage of clients, but Jardine
Lloyd Thompson lost the smallest percentage of clients between 2006 and
2007
- Figure 16: Marsh acquired five clients from Aon between 2006 and 2007
- Figure 17: The majority of SMEs remain satisfied with their insurance
providers
- Figure 18: A majority of SMEs have been with their provider for over
two years
- Figure 19: Most SMEs do not consider dropping their current insurance
provider
- Figure 20: The number of SMEs staying with their provider for more
than five years has increased since 2005
- Figure 21: Price was the determining factor for choosing a new
provider among SMEs who have been with their current provider for less
than two years
- Figure 22: Most SMEs are planning on retaining their insurance
provider for at least the next 12 months
- Figure 23: SMEs that have switched recently are more likely to do so
again than those who have developed a long-term relationship with their
provider
- Figure 24: The price of insurance premiums is the most important
reason given by SMEs planning to change insurance provider in the next year
- Figure 25: SMEs have become more likely to consider direct insurers if
they were to change provider
- Figure 26: The prospect of cheaper premiums is the primary reason
given for being willing to consider using a bank as an insurance provider
- Figure 27: Price is the top reason given by SMEs that would consider
switching to a direct insurer
- Figure 28: Speed of concluding their insurance purchase is the primary
reason given by SMEs willing to consider buying via the telephone
- Figure 29: SMEs are willing to consider buying via the Internet if it
is quicker and cheaper than other platforms
- Figure 30: Over half of SMEs would consider buying commercial motor,
property and employers' liability online or via the telephone
- Figure 31: Fears that direct insurers will be more expensive is the
top reason why 26% of SMEs will not consider such providers
- Figure 32: Norwich Union is the direct insurer with the highest brand
awareness in commercial insurance amongst SMEs
- Figure 33: Half of SMEs which refused to consider banks view them as
more expensive
- Figure 34: The complexity of commercial insurance puts many SMEs off
purchasing it over the telephone
- Figure 35: The belief that commercial insurance is too complex to
purchase online is the primary reason SMEs give for declining to consider
the Internet as a distribution platform
- Figure 36: Despite having fewer clients, Marsh had a larger share of
client turnover than Aon
- Figure 37: Multinational brokers have a larger share of client
turnover for the bigger turnover bands
- Figure 38: Although the broker channel is dominant in UK commercial
insurance distribution, its share of the market is declining
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