Personal lines has been virtually lost to the direct writers, now the insurers are looking at SME business. That's fine, but don't forget the end customer, says Grant Ellis

A great deal has been written lately in the trade press about changes in distribution and quite rightly so. Most personal lines business has all but been lost to the direct writers.

Large buyers of insurance effectively buy direct too with an increasing proportion of the income of the Aon, Marsh and Willis's of this world coming from fees not commission. The battle now is focused on the middle ground - the £7.5bn or so of premiums paid by SMEs.

Most of this is still arranged for a commission by local independent brokers. But these are supposed to be exiting in droves as the population of principals gets older and statutory regulation looms. Or else principals are joining alliances or proper networks to get access to markets on equal terms with the big boys, and avoid spending too much time on the performance-sapping periphery of running their own business (nothing wrong in that of course).

National and regional consolidators are snapping up broking businesses in a race to gain market share and control of distribution. Acquisitions are justified by increasing the margin earned and by persuading insurers to accept a modest return on capital in return for 'preferred carrier' status and non-compete clauses.

Insurers are, however, thinking whether they can pull the same trick on the intermediary community for SME business as they have for personal lines. The present distribution channel for SME business is expensive and stuck with 20th century technology. But as yet, there has not been a Peter Wood or Martin Long to rewrite the distribution rule book as Direct Line did.

So do you recognise our industry from the description above? Do you identify with any of the players mentioned? Have you noticed that a key player has been left out? Of course you have. What has happened to the customer in all of this?

I was reminded that there is a customer in the distribution channel by a representative of an insurer. He told me: "After all it is us [he meant the insurers] who pay your wages."

Actually chum, you do not. The fact is that in whatever way the distribution channel shakes out in the 21st century it is the customer who pays. And customers do not like it when premiums go up, the office they have to deal with moves to a regional centre 25 miles away and the person they have known and trusted for ten years is replaced by

an account handler who seems reluctant to do more than pass on the inflated price offered for renewal by a preferred insurer, and above all no one involved in the insurance process seems to care any more.

We have a philosophy at The Broker Network - in our business there are multiple stakeholders. There are actually five. They are our members, our members' customers, the insurers we deal with, our own staff and our shareholders. We strive to achieve a balance between the needs of the five. And that means we remember and respect the right of the end customer to have a legitimate say in how we and our members do business.

Because we know that if we do ever forget, the end customer might just remind us by voting with his feet. And so he should too.

Grant Ellis is managing director of The Broker Network