More SMEs are wanting to buy their insurance online – and aggregators are keen to pick up the business. So where does that leave the broker?

Brokers with an inherent distrust of aggregators will surely feel a shudder go down their spine at the thought of more SME business being transacted through price comparison websites, a channel until now used mainly for personal lines business.

But it could soon happen – and that’s bad news for brokers, who see aggregators as damaging profit margins by pushing down prices. A Datamonitor report on commercial insurance distribution in 2009 concludes that more than a third of SMEs would consider buying their insurance online. And the number of searches on Google for “compare business insurance” has increased by 40% over the past year. So how should brokers respond?

Biba technical and corporate affairs executive Graeme Trudgill says an increasing number of brokers are taking an “if you can’t beat them, join them” attitude.

“Brokers are aware that lots of SMEs are looking to save money,” he says. “Twelve per cent of our members are engaging with aggregators and we think this will double in the next two years.”

Brand benefits

One of the main advantages of signing up with an aggregator – particularly for a small broker – is that it can help them with brand awareness, argues Trudgill.

“If you’re a small broker in a regional office in a market town, how do you get your brand out there?” he asks. “Aggregators are a cheap form of getting business, the acquisition costs are low and you don’t need a big marketing department.”

Brand-building possibilities aside, however, there are disadvantages to signing up with an aggregator . “You have to pay a fee,” Trudgill says. “One aggregator asked for £25,000.”

He believes that brokers interested in joining an aggregator should negotiate away any such sign-up fee.

“We also have concerns about terms of business agreements. Some have a clause that states brokers cannot cross-sell other products to customers they get via the comparison site.

But cross-selling is a broker’s bread-and-butter. They should negotiate away any clauses that prohibit it.”

Market maturity

First Assist’s specialty insurance division managing director, Alistair Hardie, says it is inevitable that SME business, particularly cover-generating small premiums, will go online. “SME business at the micro end will go online and aggregators will play a part,” he says. “Some brokers would say ‘we’ve heard this for years’, but there is now a recognition that the SME market is coming to maturity and going online, as the technology is there.”

Hardie says there are options. “Brokers could choose to ignore it – although those who do could get into difficulties. They could choose to compete and emphasise their value when it comes to placing unusual risks or high-premium risks,” he says. “Or they could look at what aggregators do and integrate it into their business model. While there are customers that aggregators won’t be able to cater for, it may be better to find a method to deal with people who have simple insurance needs.”

Hardie says First Assist has launched an online [SME insurance] solution. “We can white label a solution. In other words, we provide the end-to-end solution and the broker can brand it.”

Joining forces

Hardie believes brokers should join forces with aggregators. “I would probably engage. It’s a case of how I make profitable the part of my business that involves sitting face to face with a customer for a few hundred pounds of premium, of which you’re getting perhaps 15% in commission.”

But Coverzones chief executive Simon Ball says that while demand for online SME insurance is growing, the opportunities for brokers to work with aggregators are limited.

“More people are searching using the question ‘where can I get business insurance quotes?’. So the demand is there and the market is moving to a point where a significant amount of business can be done online,” he says.

“The online marketplace poses a significant challenge to the two-, three- or four-man brokers. But I don’t know whether the opportunities will ever be there to work with aggregators. Instead, brokers will have to focus on higher-than-average value risks or more complicated risks.”

Alternatively, brokers could offer a service that combines obtaining cover with risk management advice.

Ball says: “Brokers will have to look at where they can genuinely add value, because an increasing number of SMEs will go down the self-service route.”

That said, brokers will still have an important role to play, he argues. “There are people out there who will still want somebody to place the business for them.”

The personal lines broker who signed up

Personal lines broker MCE Insurance has signed up with several of the major aggregator sites, including, and

MCE director Julian Edwards says: “We realised that these distribution channels will play a continually important role, whether that’s in the personal lines market or the commercial lines market. They have aggressive marketing strategies and large budgets.”

As more SME business is bought online, Edwards says, aggregators will offer personal lines brokers the opportunity to expand into the SME market. “As [SME] products become more commoditised, it makes it easier for brokers such as ourselves to enter the market”, he says. “We won’t go into the SME market this year, but I wouldn’t take it off the cards altogether.”

However, Edwards warns of the potential pitfalls of signing up with an aggregator. “It’s important to understand the importance of verifying data,” he says. “Price comparison sites are susceptible to a higher number of non-disclosures. Your mid-term cancellation rates also will increase and your retention rates decrease. You have to drive efficiencies throughout your business.”

So you want to work with aggregators?

1. Make sure the product you are offering is suitable for sale on the internet. Some, such as motor fleet insurance, may not be appropriate.

2. Aggregators will ask for sign-up fees, but try to negotiate out of these. Brokers have been asked to pay up to £25,000 to join sites; that’s too much.

3. Read an aggregator’s terms of business agreement very carefully. Some include clauses that prohibit brokers from cross-selling to clients they have won via the aggregator. Get these clauses taken out.

4. Verify information submitted by customers via aggregators. Non-disclosure is more common on price comparison sites.

5. Mid-term cancellation rates increase and retention rates decrease when you do business through an aggregator. Factor this into your business plan. IT