Over the past ten years we have seen a remorseless attack on the small independent high street broker, which is increasingly seen as a soft target on which to blame the considerable woes of the insurance industry.
Sorry to disappoint those people who pick on this easy target to cover up their own failings, but the high street market is not ready to roll over and surrender yet. Research we have carried out over the past 12 months, coupled with the results from surveys conducted among regional brokers, shows that, while fewer in number, the high street presence is leaner and fitter than ever. Their only major obstacle is the unlevel playing field on which the insurance company groundsmen expect them to play.
Armageddon is not upon us despite what the AA, Tony Cornell, ScreenTrade and opponents of the GISC do or say. A plethora of alarmist hokum is being generated by people who just do not understand the demands and expectations of the insuring public in relation to their social structure and behaviour.
So what is going to finish off the high-street broker?
- The AA way. The AA now tells us that the internet will do it. Well they said that about tele-sales and were they right? No. The AA shut its high street offices to concentrate on tele-sales – apparently the former were unprofitable. Why then can HHH, Swintons and Bennetts make a success of their front line operations? Maybe the AA misjudged the market, who knows?
- The internet. Will it or won't it? We see so many comments by e-commerce traders about how many hits their sites are receiving and how many quotes are being given. Funny we don't see any take-up rates. In truth, they are appalling and the whole exercise is costing a bomb.
Just to look at the majority of sites and try to request a quote is enough to put you off. Insurance is famous for its conservative and stuffy image and nothing has changed there – where are the people with imagination and flair? If the internet sites are to succeed they have to become far more interesting – exciting if you wish – less time consuming and much more user friendly. You just fall asleep half way through with the sheer monotony of it all.
Brokers are told to embrace new technology or die, but they have been told that so many times before and badly let down by the people supposed to be supplying that technology.
Full cycle EDI is a classic example of broken promises dating back to the beginning of the nineties, when systems were still not producing the goods at the end of the decade. No wonder brokers don't embrace the new technology; they have spent far too much money and been let down too often. There is a very large pool of customers who are not on the internet or rightly suspect that security is far from adequate. Brokers will not be panicked into making expensive decisions for a minority audience, the small ones will have to wait until pooled resources are available and that is down to the trade associations to sort out. If Messrs Slack, Williams and Paddick really value their membership, this is where they can help the high street broker the most.
A word of warning. The financial implications of e-commerce are viewed with some suspicion in the City, and it is the private investor who is responsible for the current bubble in the stock prices. One major U-turn could have serious consequences, worse still the current justified suspicion about security over the internet is becoming entrenched and there is a growing reluctance to provide personal details on line. The small broker knows that he/she cannot afford to set up an active web site. Any money put aside for such an enterprise may well be better spent elsewhere.
Our research over the pastyear is well documented on our website and further research enables us to give the replies to the points raised above. See www.agency-management.com.
- Direct Writers. Tony Cornell, in his column in Insurance Times on the 27th January 2000, claims EDI has made broker business more unprofitable for insurers. That may be so, although his article contains very little substance in support of this statement, and once again drags in references to Direct Line and expense ratios, all of which were expounded in the last millennium.
Remember the Financial Mail on Sunday, December 11 1994? Paul Durman told us that "Churchill Insurance and other Direct Line copyists could be fighting for survival next year (1995)…" David Campbell of Bacon & Woodrow predicted heavy losses in the direct sector for 1995 & 1996, eventually forcing several out of the market. Sid Pennington the then MD of The Insurance Service said: "Royal intends to be one of the three big direct insurers remaining by the end of the decade". They got it wrong.
- Computer Software. We are constantly informed that the software houses have been charging far too much with little result. It is generally considered that the software houses have not delivered the goods – 75% of the participants in our survey would change if there was something better to change to. The rest considered their systems a "compromise". The year 2000 promises more choice and the hope that the oligopoly by the big three can be broken. For ten years (or more) brokers and insurers have paid enormous sums of money for software systems that are perceived to have failed to perform. Despite that grudging loyalty caused by a monopolistic situation, those very software houses are looking to by-pass the very people who supported them during their formative years. Brokers have seen what MISYS thinks of them with Penta and ScreenTrade, the rumblings now mention hardware platforms.
Every broker must review the software support contract to understand exactly what the options are. There must be clear performance targets for BOTH participants with precise costings for future up-grades and development. Brokers must stop writing blank cheques and insist on guaranteed value for money contracts.
The internet is outside the budget of all but the large brokers. By all means have a site for information and
e-mail facilities for the customer to make contact this way if required, but small brokers cannot afford the costs of a fully operational site and there is no point in thinking otherwise.
Spend some cash on having a really good home site with e-mail facilities designed and leave it at that. They cannot compete and there is no point in breaking the bank by trying.