How long till supermarkets dominate the broker market, asks Peter Smits
I read with interest the recent articles and comments concerning Tesco’s proposed opening of 30 in-store 'banks' and the possibility of them also providing 'advised' insurance sales.
It’s not clear from the article if Tesco plan to promote their own product range or adopt the role of the independent broker and offer a range of policies from a range of different insurers. I would assume that there will be a number of general insurance providers falling over themselves to provide products to this new channel of distribution, given the power of that particular brand and the volume of foot fall through these modern-day temples of worship.
However, I wonder if this course of action would not continue to suppress the rate, like the aggregators before them and continue the current trends we see for the general insurance market?
The regional independent broker seems to be flavour of the month at the moment with many prominent insurers announcing initiatives to support this channel and I assume that this is a reflection on the added value and customer loyalty that we can provide. Common sense tells us that insurers must now start to produce an underwriting profit and will therefore have to be very selective on which distribution channels they choose.
Whilst there is no denying the loyalty that these supermarket brands can command, I can't help feeling that their business model is more suited to their current internet and call centre arrangements rather than a traditional retail offering of a bank or 'high street' broker. The variety and ease of shopping at these out-of-town mega stores is what appeals and whilst I could be wrong I don’t recall seeing an in-store 'personal shopper' option last time I popped in for some groceries.
I’m also not sure who should prepare themselves for a price war? My limited knowledge and experience of the world of supermarket buyers is that the pressure to reduce cost is placed upon the supplier and that it is not un-common for the supermarkets to dictate the price that they are prepared to pay. I also understand that many supermarket buyers complain about the lack of space in-store and it therefore begs the question, where do we put the bank?
Whilst I am not naïve enough to dismiss this latest threat to the traditional high street broker, I do see it as yet another challenge for us to embrace and overcome, after all if we had believed all that we heard and read we would have all been long gone by now! Direct writers, banks, the post office, 'free insurance' and latterly the internet were all supposed to put paid to our livelihoods and whilst I cannot deny their impact we all continue to carve out our own little niches in order to thrive and survive.
For every twenty-five people that happily embrace the world of the mass produced solution there are one or two who cry out for the personal, professional service that is offered by the local independent retailer and that’s all we need. I know many who refuse to step foot inside a supermarket and have made it their mission in life to avoid them.
Our strength is to offer something different, something that the competition can't, go visit your commercial clients at their place of work, maintain regular communication with your personal lines clients, provide a one-stop shop, sales, accounts, claims, mid-term adjustments and unless the man who delivers the groceries suddenly starts offering financial advice after dropping off the numerous bags of shopping, I don’t see how you can compare the two offerings.
I have a poster in the front of our office which reads; “Supermarkets sell groceries, the bank provides foreign currency and your post office stamps! Get your insurance from a specialist, don’t take risks!”
I believe that the business models of these supermarkets should be applauded and we should rightly consider them a British success story, however I like many others have concerns that we could all wake up tomorrow and find our lifestyles completely dominated by the supermarket!
There may be one ace-in-the-hand that these supermarkets have, something I haven’t yet considered, I can just hear the conversation now; “You say you can get it cheaper on-line? We can’t do any better I’m afraid but how about we throw in another 500 loyalty points?”
In which case, let's pack-up and go home now, we’re all doomed and if any major supermarket happens to be reading this, I am available for consultancy work and will gladly work for groceries. What is it they say? Pay peanuts and you get monkeys!
Peter Smits is managing director of Ashbourne Insurance.