Results from Insurance Times research
Despite their threats, insurers have not cut commissions, according to research conducted by Insurance Times.
A survey of senior brokers also showed that fewer than one in eight expected merger and acquisition (M&A) activity to intensify this year, while half expected it to cool.
There was little consensus on when the market will harden. The highest proportion – 22% – said it would not harden until 2010, but one in five expected it by the fourth quarter of 2009 (see graph below).
Asked whether insurers were cutting commissions, 80% of the brokers said they were not. One said: “We have not seen any evidence of it so far.” Another said: “It’s the opposite. As relationships have flourished, commissions have been enhanced.”
Insurers led by Norwich Union have publicly said they want to cut commissions to consolidators. Igal Mayer, NU’s chief executive, has put 30% as the highest sensible rate for commission, plus expenses. Some consolidators had been demanding more than 40%.
One respondent to the research, which was conducted on more than 100 senior brokers by Newsquest Specialist Media’s research division last year, said: “We don’t have any special deals giving us extra commission. I wish insurers would stick their necks out and split all commissions between a market standard, plus a profit share. Bigger brokers get bigger commissions whatever the quality of their book. Roll on mandatory disclosure – it will only help us to compete when businesses see how much of their premium Towergate/Giles/Jelf/ Oval actually receive for the level of work they do!”