Norwich Union has gone some way to addressing the “dual pricing” between its broker and direct motor business that caused such a storm last year. The project will be completed by the end of the year, when the insurer should be able to announce a far more transparent pricing structure.
But, no matter how clear it becomes, brokers know they can't compete with direct channels on price alone. Telephone-based channels, which have high customer-acquisition costs such as expensive call centres and advertising, are on average cheaper than broker business once they've reached critical volume. And new web-based channels have vastly cheaper customer-acquisition costs from the outset.
The extreme price differences for the same motor risk had to be eradicated. While motor business is low margin, brokers faced losing far more than a single commission – customers who wanted a portfolio of financial products and also their reputation for good service. Norwich Union cannot afford to alienate a distribution channel that controls such a large chunk of its written premiums.
But, in the long run, traditional brokers will continue to see their motor book dwindle. The prices offered through the internet will be ever more attractive to a price-sensitive public.