No e-asy street for brokers

IT: Steve, do you think any brokers will go bust as a direct consequence of their failure to grasp e-commerce?
SV: I think that all businesses will need to have an e-commerce capability over the next few years, especially those in financial services, banking and insurance.

With the internet and e-commerce, customers will increasingly expect instant access to information, higher levels of service and better value for money. Brokers who don't recognise this, and plan and invest accordingly, will, I believe be operating in an inefficient and outdated business model and could well go the way of the door-to-door collector.

If we said there were currently about 10,000 brokers and intermediaries operating in the UK, how many would you estimate will be put out of business by e-commerce.
Hopefully, brokers will have the foresight to see the changes taking place, and will plan and act in time. There will still be a role for the broker providing expertise as a value-added service, but this will need to be backed up by a first class e-commerce service capability.

This means a significant investment in technology that may well be beyond the reach of many smaller brokers.

Those brokers will need to get bigger by teaming up with somebody else or selling out while their business still has a value. Alternatively, they may get an insurer or network partner to help fund the technology, in return for a long-term business commitment.

Within a few years, this market consolidation could conceivably result in there being fewer than 1,000 brokers as we know them today.

That would be an amazing change. Does it concern you, and if so, why?
Clearly it gives me something to think about, as much of my company's revenue is derived from the intermediary channel.

The good news, however, is that all the research suggests that the majority of people buying electronically will want informed choice - and that means intermediarised business. This is borne out by the fact that most of the recent high-profile new entrants are all acting as intermediaries offering comparative quotations.

So I don't think we are going to see a shrinking of the intermediarised market, simply an evolution to a larger market with new types of intermediaries. Brokers need to take a view on how they think the market will evolve and where their future place in that market will be, and then act accordingly.

Changing the subject, there have been a lot of initiatives in recent months involving the trade bodies, in particular Biba and the IIB. I know that this is something you have strong views on. Why?
I believe that before Biba commits itself to join forces with anyone, it should ensure it understands what it is trying to achieve, and the technical and business issues involved.

While companies such as IBM and Microsoft may have something to contribute, surely Biba should also seek input from the companies on whom the vast majority of brokers in this country will rely on to deliver the goods? For Policy Master's part, we offered some months ago to share our expertise in this area, and I am sure the other broker system suppliers would be prepared to do likewise. (How about it Mike?)

Surely we have a common interest in working together to ensure the prosperity of the intermediary channel?

Policy Master, along with the other software houses, has the expertise to help Biba.

Having spoken to my colleagues at Microsoft, I understand they were intending to discuss (with Biba) BizTalk technology which works with XML.

Policy Master is fully committed to BizTalk and XML, a technology already used in our e-commerce systems. In fact, working with Microsoft, we were instrumental in introducing these technologies to the UK insurance industry via the ABI.

The IIB plans to offer fully-interactive quotes engines to its broker-members. Surely that is a positive initiative?
As far as details of the IIB initiative are concerned, I am not entirely clear. However, they seem to be advocating the development of a common internet quotes and point-of-sale system to be used by brokers. Similar to the Experian "Central Site"? (Sorry Andrew if I've got it wrong)!

If this is the case, then I have to say I am not convinced about the viability of hundreds of small brokers on the internet, each with their own branded version of the same on-line quotes system.

How will people find them? How will they compete on price? How does this re-engineer their end-to-end business processes? How will they differentiate themselves? What is their value add? Will they be able to work on low single figure margins?, or will they collectively stand out as a more expensive alternative to the larger volume players?

No doubt all will be revealed soon!

One thing is for sure; this industry has never been short of technology initiatives claiming to revolutionise the way we do business, and I'm sure there will be more to come.

Clearly, there is a growing awareness within the industry of the need to become more efficient and the role that investing in IT plays in achieving this. Surely that has to be good news for any software company that can help its customers to achieve this?

Like brokers, we have had to adapt, and will continue to do so, in a changing market.

The products and services from which we derive revenue from today are very different to the ones we had five years ago. And they will undoubtedly be different again in five years' time.