Talking up the banks' SME strategy is bad for brokers, says Grant Ellis
I am hearing more and more regularly from people within our industry that the high street banks are going to become the broker's major competitor for small SME commercial insurance in the near future. Indeed it is also mooted that, just as the broker has lost out on his personal lines portfolio to the direct players, so he will now lose his domination of SME business to the banks.
This conclusion is apparently based on recently published research, but is, when all's said and done, still only a prediction, and let's face it - the track record of the banks in this arena is pretty dire. Those of you who are as old as me will have seen banks try, and fail, to make concerted inroads into this market. Oh, sure they have made grand promises in days gone by, but have always failed to attract the level of customer that they thought they would, and it's not so difficult to see why. Most small businesses have a love/hate relationship with their bank. They are viewed with deep suspicion, and certainly not with the level of trust that SMEs vest in their accountant, nor indeed their insurance broker.
I have a theory about this. Banks pretend to know about their customers and their business but really don't know them at all. Let me give you an example - earlier this week
I received a letter from my bank of some six years, advising me that as my bank balance was now in the black (which is a bit of a novelty by the way) it would be sending a "financial adviser" to see me to explain how I could make more of my new-found wealth. It knows I am a director and shareholder in not one, but two IFA businesses, and that as a result such an approach is inappropriate and a total waste of time (because I told them the last time they did it).
Customers will not tolerate having to remind suppliers time and time again about their business and circumstances, re-playing the same information over and over again with each contact. They expect the supplier to remember, and banks find that very difficult to do even for their core products, never mind for peripheral services such as insurance. Because brokers invariably have a relationship with their customers and really do know them, this has not been an issue.
The problem with predictions like this is that they drive the thinking and actions of those who provide the products that brokers sell - the insurers . The insurers
like the small SME market - it consistently makes them money, and they all want their share of it.
If insurers now believe that the brokers' future in this market is
limited and the banks are the "players" of tomorrow, then it is logical to assume that they will increasingly dedicate their efforts into courting the banks rather than traditional broker sources.
As a broker, I have no problem with competition, but phantom competition like this is more difficult to deal with. And it may be that brokers are after all allowing the banks an opportunity to gain a foothold by offering an increasingly transactional and "take it or leave it" service to their smaller SME customers and thereby mirroring the banks' impersonal service.
While understandable, it removes the brokers most valuable and unique benefit, and has the effect of commoditising the transaction. And we all know that the only winners then are the large players with big infrastructures and deep pockets.
So maybe the insurers are right to follow such a prediction. I, however, have more faith in brokers than that.
Grant Ellis is chief executive of The Broker Network