Norwich Union’s decision to launch its own internet ‘price checker’ – and pull its products from comparison sites – might be the first salvo in a war between the major insurers and the aggregators. Mary Ring reports.

Two weeks ago, Norwich Union aired a new television commercial. An employee sits in a bar with two colleagues, brimming with excitement as he explains that NU will offer its customers a price comparison service when they buy direct from the insurer online, and that it will even show prices lower than its own – and offer customers a click through to buy from its rival.

What the TV character, called Happy, does not explain is that NU will no longer make its policies available through aggregator sites. The UK’s biggest insurer has decided to abandon one of the most popular, and still growing, distribution routes. Aggregators accounted for 23% of motor sales last year. Why has NU taken such a risk – and will its rivals be emboldened to follow suit?

The insurer’s site now offers a ‘price checker’ that enables consumers to compare NU’s motor quotes against a panel of 11 other insurers. Consumers visiting the site will also be able to check the policy features of more than 140 rival providers.

NU declined to comment on take-up for the price checker so far, or on how much it has spent on the advertising campaign.

The insurer has also been tight-lipped on the strategy behind its decision. An NU spokesman said only: “We feel the market has become a little overcrowded and that it is time to do something different. We are a direct business and we want our customers to come directly to us again.”

NU denied its decision to move away from aggregators was an attempt to cut distribution costs, but it cannot be taken in isolation. It comes as NU is outspokenly trying to push down broker commissions, at the risk of losing volume of business.

In August, NU’s general insurance business reported an operating profit of £326m in the first half of 2008. This was up from £284m in the same period of last year, but the 2007 floods caused the insurer £235m of damage – distorting a result that would otherwise have been far higher than this year’s.

The personal lines book has been a particular problem. Despite efforts to increase rates in its motor and home lines, the insurer posted a £53m underwriting loss in personal lines for 2007. This loss was largely down to a badly performing motor book. The motor market remains tough and NU, like all other insurers, has had to release reserves to prop up its underwriting results.

Hayley Parsons, chief executive of, believes there could be another reason for NU’s move away from aggregator sites. She suggests the insurer has lost business through this distribution channel because it has put up its rates, making itself less attractive to aggregators’ price-sensitive audience.

“NU increased their rates in line with what needs to be done in the market,” she said.

“Unfortunately other insurers have not followed suit, leaving NU in a very difficult position where their rates have not been as competitive as they used to be.”

“We are chatting to some other high-profile direct insurers who are looking to do exactly what NU has done.

David Harlow, Quote Exchange

Parson’s comment might go some way to explaining NU’s attitude to aggregators. Despite the popularity of the model with consumers, insurers have blamed it for keeping rates down.

Aggregators claim they facilitate distribution and save insurers money on marketing costs. But is this offset by the low policy prices they enforce?

Carlton Hood, chief executive of, said: “Aggregators have changed the way insurance is bought. If insurers recognised this – reduced marketing spend in other areas and focused on aggregators for distribution – they could increase their market share and make money.

“The problem is when an insurer continues to spend money on marketing while paying aggregators at the same time.”

But what if other big companies decide to drop the price comparison sites instead of the marketing spend? Without the support of the big companies, the aggregators would struggle to maintain their popularity.

David Harlow, managing director of Quote Exchange, the technology provider that built NU’s price checker, is certain other insurers will follow its lead, bringing the aggregator model on to their own sites to compensate.

“We are currently chatting to some other high-profile direct insurers who are looking to do exactly what NU has done,” he says.

Harlow explains that for insurers such as NU, which trade on the back of well-established brand names, direct distribution makes marketing sense.

Mike Powell, consultant for general insurance at market researcher Defaqto, agrees. “It could be that large insurers take the same view as NU, if premiums stand and rates aren’t going up,” he says.

“If you look at intermediaries on aggregator sites, any insurer who has an online presence through intermediaries can get an aggregator presence by being on their panel.”

While consumers still flock to aggregator sites, they will continue to be a significant distribution channel. But their future might not be so rosy if they are abandoned by the powerful insurer brands. It is far too early to predict the demise of the aggregators – but perhaps their days of unhindered, unopposed growth are over.