E-commerce companies in the SME space could begin to cut out brokers from the sector, warns commercial director

Insurance is a complicated product – and commercial lines insurance is even more so. 

The commercial side of insurance has long been thought so complex that a specialist broker is required to navigate it.

According to Biba’s recently published manifesto, entitled Managing risk for growth and economic security, some 40% of gross written premium (GWP) in UK personal lines was placed via a broker, whereas brokers accounted for 94% of all UK commercial lines GWP.

Brokers are dominant in the commercial lines sector when compared to personal lines, but is it this dominance that has led to a slower pace of digitalisation when compared to the personal lines market?

Not quite. There are commercial brokers in the UK market exploring their options for digital services to improve efficiency, drive growth and secure their margins but, when compared to the personal lines market, there is less incentive to improve processes. 

Personal lines brokers and insurers compete in a much more customer-driven market, with these customers and their expectations around what a retail experience should look like providing the impetus for accelerated development.

Back in 2022, Konsileo cofounder Peter Henderson told Insurance Times: “Personal lines has led the way on digital insurance, driven by disintermediation, online purchasing and the need for cost savings in a low margin, high volume market.” 

And while there have been advances since then, these still lag behind the personal lines sector.

Speaking to Insurance Times, however, software provider IS2’s founder Simon Pritchard explained that those working in commercial lines should not rest on their laurels.

He explained: ”In the future, digital natives will increasingly be the people making insurance purchasing decision and [in the commercial lines sector] they’ll be demanding more configurability, app access and the ability to adjust their policies easily, for example.

”However, many organisations have put a tick in ‘doing digital’ without making the necessary continual investment in the channel once it’s built – many of the services in [commercial lines insurance] aren’t really capable of delivering the service that customers will increasingly expect.”

Future risks 

As digital natives – those who have grown up with digital experiences and come to expect certain levels of service – age into positions where they make commercial lines purchasing decisions, they will increasingly demand more digitalised processes in the way that personal lines customers already do.

Pritchard added: ”In order to develop an adhesive, proper digital customer service product, you need data that provides a single point of truth in one place, so that wherever you come into the distribution channel you’re going to get the same data.

“That sounds like a simple point, but [at the moment] there are so many disparate systems to navigate [in the sector] that see the joy drop off. We’ve been doing a lot of work in this area so that if you’re offering new terms or revised premiums, it’s not so disjointed.” 

IS2 commercial director Joe Sultana added: ”We’re competing for an audience that are used to having tech in their hands from other industries and from other interactions they have – they then come across insurance, which is pretty poor in comparison.

“Like anything, if the customer experience is bad then customers will tend not to use it again – that’s a risk to our industry, certainly in the commercial sector.” 

Sultana added that, while broker dominance of the commercial sector remained a fact, the future could see challengers from outside the sector move into the space. 

“The smaller end of the [commercial] market – the small and medium sized enterprises (SMEs) – is where the volume is and where premiums are not particularly high,” he said.

“There’s no reason why those types of businesses won’t interact more digitally and, as that demographic changes, that’s only going to become more prevalent.”

The risk is, Sultana explained, that e-commerce companies in the SME space could begin to cut out brokers from the sector by implementing digital improvements and leveraging the information they have on SMEs, such as stock levels and revenue information, to embed insurance within their platforms. 

He said: ”I’m not saying it’s round the corner, but in two or three years I believe we will see organisations like that begin to take on insurance as part of their offering, because they can provide real-time data.”