Ancillary products are one way for a broker to boost its income around a keenly priced policy, but an increasing number of claims is leading insurers to raise prices

The business model of large high street brokers has, to some extent, been built around selling ancillary products via aggregators’ channels.

Products sold include motor legal, substitute vehicle and excess protection. The big earners are for credit hire referrals and bodily injury referrals, which can bring in up to £300 and £700 respectively.

The products are so lucrative that brokers will often sell policies below the insurer’s net rate to generate ancillary products.

It’s a model that has worked well for the big brokers, helping them to solid profits.

Concern over real value

Recently, however, the insurers have started to raise the prices of policies that brokers put on aggregator channels.

This is to compensate for the fact that some of the revenue streams earned by the personal lines brokers are for credit hire referrals and bodily injury referrals, which ultimately lead to a high level of claims for the insurer.

Other insurance heads are concerned about whether the policies offer real value to the customer, believing the surplus product charges are too high.

Dominated by the larger players

EMB consultant Naeem Ali says: “If a broker is distributing one business through the high street, another through their website and another through the aggregators, then all those going through the aggregators will have a higher price.”

Ali says the business model is dominated by the larger players rather than smaller personal lines brokers.

“You need to have infrastructure to get on to aggregators,” he explains. “There are some small players out there, but you really need XML capability, and portals and stuff to be able to feed the quotes through to the aggregator provider.

“There are a few regional, or national brokers, or high street brokers, that have tried to get into the action as it were.”

For an overview of the turnover and profits of the big personal lines brokers, and some examples of typical anciallary product revenues, see the charts under ‘Click on images’.