Commercial broking growing in importance, says IMAS founder
Aggregator-focused brokers could make an appearance in the Insurance Times Top 50 Brokers as early as next year, according to IMAS founding partner Olly Laughton-Scott.
In his Insurance Institute of London lecture at Lloyd’s yesterday, the IMAS founder also noted a rising importance of UK commercial broking over the past 10 years, and predicted a prolonged soft market.
Laughton-Scott’s lecture charted 10 years of broker mergers and acquisitions based on the changes in the Top 50 Brokers over the decade. He also looked at the future of broking.
He noted that technology had transformed personal lines insurance distribution over the past 10 years. He predicted: “Over the next couple of years we will see a number of brokers who built their business purely around servicing aggregator sites. They will be popping into the Top 50.”
Laughton-Scott also pointed to an increasing prominence of UK commercial broking at the expense of London market and international brokers.
Commercial brokers make up the largest group of new entrants to the Top 50 over the past 10 years. Thirteen of the new entrants were commercial brokers, compared with just one international broker and four London market brokers.
Commercial brokers also made up a higher proportion of the Top 50 than in 2013, while the number of London market brokers has dropped sharply.
The 2013 Top 50 contained 14 commercial brokers, up from nine in 2003. There were 16 London market brokers in 2013, down from 25 in 2003.
Laughton-Scott explained this is because few mid-sized Lloyd’s brokers have been buying smaller ones over the past 10 years, while mid-sized UK commercial brokers, such as Towergate and Oval, have been adept at snapping up smaller rivals.
Looking to the future, Laughton-Scott said that he expected a “long-term soft market” because of continuing competition.
“You will have to work harder and run faster to stand still over the next 10 to 20 years,” he said.
One trigger for pressure on prices could be technology. Laughton-Scott predicted that the emergence of the driverless car could render motor insurance almost useless.
He said: “Should this happen, the people and the capital that serve that industry and the opportunity to make profit will be massively curtailed. It is quite possible that we will see capacity then leak into other markets and that could lead to a long-term softness in the markets.”
Laughton-Scott also noted that technology makes companies more efficient, which gives them additional capacity to chase new business.
He said: “Those who provide solutions with new technology will win a disproportionate amount of business and those who do not will suffer and may be bought.”
However, he also pointed out that embracing technology is not the be-all and end-all, particularly in commercial lines.
He said: “In commercial the impact [of technology] is going to be much less important. People still need guidance. They still need the personal touch.
“If done correctly this is extremely powerful, as demonstrated by A-Plan and Be Wiser.”