New research shows how brokers should be working with aggregators, but it could already be too late. Sarah Kennedy reports.
Brokers hesitating to join the masses flocking to price comparison websites be warned: time is running out. As the sites have gained popularity, they have gained power – and they may be turning against brokers.
According to a recent survey by Coverpoint, the results of which will be presented at the Biba conference, brokers still view price comparison sites, also known as aggregators, with mistrust. The research also shows that some brokers are out of touch with what policyholders want, particularly in personal lines claims. Coverpoint chief executive Harry Croydon warns that brokers need to wake up to reality and get involved with aggregators before it is too late.
Traditionally, brokers have seen aggregators as the enemy. Earlier this year, Biba issued a scathing report on the market, claiming it was confusing and sometimes misleading. It caused a flood of national press headlines and a promise by the FSA to investigate further.
Of the more than 100 brokers who responded to the Coverpoint survey, many said clients want a bespoke service for the personal lines products they buy, a view that Coverpoint’s Croydon believes is not entirely realistic. “Brokers are living in a world where they think they are offering a unique service, but really it is full of commoditised products,” he says.
Brokers believe that consumers use aggregators to get the ball park figure of prices and then go to brokers to actually buy the policies, according to the research. But Croydon discredits that theory. He says that many consumers look to purchase insurance over the internet because it can be done outside of business hours.
“Brokers need to be energetic, innovative and linked-up to proper technology in order to compete.
James Harrison, Insurancewide
These misconceptions may explain why, despite the cross-selling and distribution opportunities offered by aggregators, there are still only about 60 brokers actively engaged with the sites. But the delay in joining the panels from which the aggregators draw their quotes may come back to bite brokers. As their popularity grows, many aggregators are becoming increasingly picky about whose products they will list. “They will have to get in quick, otherwise they will lose out,” warns a spokesman from one site.
The power has shifted, and brokers will now have to work harder, according to James Harrison, chief executive of price comparison site Insurancewide. “Brokers need to be energetic, innovative and linked-up to proper technology in order to compete,” he says.
Harrison adds that brokers should invest in niche products or offer a twist on a particular line of business that sets them apart from competitors on the panels. “This could be a massive opportunity for brokers as opposed to a massive threat,” he says. “They need to look at the market and say, ‘I want to appeal to a certain group’ and then really go for that niche. That is adding value.
“There has been some great success of brokers sitting on aggregators. However they need to set themselves apart otherwise they are just presenting the same panel as everyone else.” Ashton Berkhauer, commercial manager of insurance at uSwitch.com, is surprised that more brokers didn’t get involved with aggregators earlier, particularly when those sites were more eager for participation. “Whenever there is a shift in technology, inevitably there will be losers,” he says.
One broker that is playing in the aggregator arena is Kwik-Fit. Managing director Martin Oliver says that to succeed on the sites, firms have to be willing to make some sacrifices. “It puts a premium on price, so to be effective you need to be prepared to operate on low margins and build an infrastructure that has low variable costs per policy and additional sources of income,” he says.
“Brokers need to come out of the closet. They seem to come over as a bit naive.
Martin Oliver, Kwik-Fit
Kwik-Fit has been on aggregator sites since 2004 and has found the internet has made the search for car insurance much quicker and more reliable than face to face encountes or phone calls, Oliver added. “Brokers need to come out of the closet. They seem to come off as a bit naïve,” he says.
That said, in the past six months there has been a noticeable trend of start-up brokers coming into the market specifically to work with aggregators, said uSwitch’s Berkhauer. The strategy gives the broker instant access to large pools of business without high advertising or marketing costs. These brokers can also use the data supplied by aggregator sites to keep abreast of business opportunities in those particular areas across the UK.
Berkhauer adds that there are advantages for aggregators in working with start up brokers because they usually offer a niche area of business that brings something new to the site. It’s a tactic more brokers will need to develop if they hope to compete, he believes.
“Unless they can bring something new, extra or offer prices that are cheaper, why would aggregators add them?”
Why brokers want to play with aggregators
Cheap and easy access to large pools of business without the costly marketing spend.
Debra Williams, managing director of Confused.com, says: Before price comparison sites, brokers typically had to spend considerable resources building and developing a brand in order to compete with the direct players. This may have been suitable for larger insurers with deep pockets, but not so for the smaller insurers or brokers.
The introduction of price comparison sites has helped level out the playing field by providing insurers, regardless of size, access to large volumes of business, opening up new risk profile opportunities.
Price comparison data to help brokers better compete against direct insurers.
Aggregators can provide brokers with data on what their competitors prices are like. This will help the broker to tweak prices to allow them to be more competitive in the future, says Richard Mason, head of insurance at Moneysupermarket.com
Confused.coms Williams adds that this also allows brokers to negotiate specific schemes with underwriters and compete more favourably against direct players. They are also able to offer incentives such as free legal cover.
Aggregators say their sites can help brokers and insurers, particularly in the niche areas, to attract the customers that meet that brokers criteria, through their filter systems.
As long as a broker lists competitively priced products, its brand will be exposed to approximately five million motor quotes that take place on aggregator sites per month, says Ashton Berkhauer, commercial manager of insurance at uSwitch.
But Berkhauer warns: The customer may go to the broker or insurer website after receiving a quote in order to gain confidence and if the site is not comprehensive or professional, that customer might shy away.
Many brokers sacrifice their own fees in order to keep the products they list on aggregator sites more competitively priced. On top of this, when they do make a sale, they customarily pay a fee to the aggregator site.
That said, brokers have the ability to generate revenue through the cross-selling of other products. For example, they may be able to sell a household policy to a customer who purchased a motor policy from them through an aggregator site. Aggregators can give brokers access to customers they may not normally have and this can provide a key source of income.
Based on the information collected by the sites, aggregators are able to advise brokers of opportunities to do more business. The sites can highlight particular areas in the UK or a niche that is not being properly served, allowing brokers to capitalise on that need.
Search engine optimisation.
Aggregators tend to enjoy the top spots on search engines such as Google in both the natural search and advertising categories. Because of the power of aggregators, many insurers and brokers do not pop up on the first page when conducting a simple search. Being part of an aggregator will direct traffic to that brokers site, if its prices are competitive.