Mark Whitehead, commerce manager, Ace European Group, says brokers can benefit from the web
Ace has focused exclusively on broker distribution channels for commercial insurance, but it's obviously necessary to recognise that the direct channels exist. Distribution via insurance company extranets and the direct channel are possibly the most established for SMEs, although not many insurers are actually playing in the direct space.
More insurers are starting to distribute products via broker back office systems, such as Acturis, Misys, Sirius and SSP. Ace has recently moved from its extranet-focused approach to distribute its D&O product via Acturis and Sirius.
Ace is now an Imarket partner and will launch a simple, multi-profession PI product for our existing brokers.
The history of e-commerce tells us that in general it can take some time before online sales dominate any sector. Successful companies in the online world such as Amazon, e-Bay, EasyJet, and Lastminute.com, all have strong brands and simple concepts executed well. Brokers cannot enter the space in a half-hearted fashion, because weaknesses are rapidly exposed.
Gambling, music and porn, are the three biggest online sectors, but the point there is that the world still has betting shops record stores and red light districts. Traditional markets will not just disappear. Online is just another choice to give the customer. Many customers still want to talk to people and press the flesh.
People are happy to set up a bank account without advice, but they talk to IFAs about bigger choices. The same will hold for commercial insurance and SMEs.
In the broking sector there are companies that promote online services that are little more than window-dressing. They are just application forms online. Your policy documents are delivered manually, not online, and when, if you want to renew or adjust your policy, you still have to pick up the phone.
In many ways, the web is bringing the traditional broking skills back to the fore, bringing brokers back up the value chain and highlighting where you can add real value.
This can be hard for businesses who have traditionally allowed customers to do whatever they want, charging separately for additional services. As cost pressures increase, your customers might have to start paying for the luxury of speaking to someone, especially when certain advice is available free online.
In the travel direct market, Lastminute.com and Expedia, in order to compete, make no money from short European flights and they use these loss-leaders to build customer retention for the more profitable longer haul flights, so you may find you need to do something similar for the SME market if you want to compete with the direct players.
It's necessary for brokers to sharpen their commercial skills. As consolidation takes hold the organisations with the best negotiation skills will be able to leverage their size and get the most value out of the insurers.
In the current online world, many organisations make their entire income from click-through revenue, where companies pay a fee to other companies for driving traffic to their website. There's no reason why this can't work in the commercial insurance sector. In fact, why not charge clients for access to your advice and then get a fee from the insurer when they click through to get a quote from, say, Norwich Union?
The real opportunity that is yet to be seized upon in the commercial insurance sector is a full online broking site for the direct market. Brokers have the insurance skills, the marketing capabilities and the relationships to take up that challenge, and I believe the next significant opportunity will be around that.