Norwich Union leads the charge with declaration that it will lose business before paying sky high commissions.

The major insurers began to fight back against consolidators in the broker market this week, with the largest, Aviva-owned Norwich Union declaring that it would rather lose business than pay sky high commissions.

Aviva also declared its intention to scrap the Norwich Union brand as its senior staff signalled that it had had enough of consolidators calling the shots and was ready to use its might to bring back realistic commissions.

Major consolidators, which buy up other brokers to increase their books of business, are believed to be charging insurers up to 50% commission.

NU Insurance chief executive Igal Mayer said: “We are concerned about the increasing levels of commissions that consolidators are demanding. The economics have changed; the margins aren't there anymore in commercial lines. We will reverse the trend of these increases. That is what we are looking at.”

He added: “We are happy with commissions paid to other brokers.”

Market sources warned that reducing commission rates could prove difficult for NU because some of its main brokers have become accustomed to generous rates. One source said: “Some brokers have relatively large accounts with it because it is quite generous with commission. It will be difficult to reduce commission rates with those brokers who have given it a lot of business.”

Aviva’s strong line comes as other insurers have begun to lose patience with the consolidators. In another sign of their waning sympathy, it is understood that consolidator Oval has struggled to raise money from insurers, as it seeks to refinance for 2009. RSA and Zurich have refused to take a stake in the business. Allianz already has a stake.

One market source said that there is a new spirit of realism in the insurer community: “Why should insurers sit back and watch [consolidators] like Oval, Jelf, and Giles build broking empires in the same way that [consolidator] Towergate has, and then be exploited by the rates they are demanding? It’s just crazy. They will not accept it.

“They’ve tried to alter their distribution strategies and buy into brokers, but there has to be realism in the negotiations.

“Brokers need to know from the outset that they cannot, as a new generation of consolidators, leverage the kind of power that Towergate has.”

Meanwhile, Aviva announced that it would no longer be known as Norwich Union. The UK’s largest insurer said it would bring its Norwich Union, Commercial Union and General Accident brands, and their 57,000 staff, together under the Aviva banner, though the rebranding will take two years to complete.

Mayer said: “It will take 18-24 months to migrate everything over to the new brand. We will be talking to brokers and staff about how to do this.”