The Knowledge: Market survey

In a bid to look deeper and gain some insight about what is really happening in the dynamic motor market, Insurance Times undertook a sentiment survey among brokers. The survey generated nearly 250 responses within 24 hours alone – a sure sign that brokers wanted to know too. Here is what they told us.

1. What has happened to rates?

There was almost unanimous agreement that personal motor rates had hardened, but opinion was more divided when it came to commercial motor rates. Two in three respondents agreed that rates had hardened, while roughly one-third thought that rates were around the same as this time last year. These dissenting respondents came from brokerages of all sizes, although large brokers (GWP >£10m) were the most well represented, with one in four holding this view.

2. Has motor capacity changed over the past 12 months?

In personal motor, indications are that there is less capacity but not significantly less. Nearly one in two brokers thought there was less capacity and, of these, around one in eight indicated that the capacity change was significant. On the other hand, nearly 40% thought capacity remained unchanged.

For commercial motor, the findings suggest that capacity is more or less unchanged.

3. How have clients reacted to the motor market rate changes?

Indications are that clients, not brokers, have taken control. Clients are turning to the internet to check rates on aggregator websites, and they are checking with direct insurers too. Unsurprisingly, this is more of a problem for personal motor brokers, but it is also causing a headache for commercial motor brokers.

Half of personal motor respondents reported that clients referenced aggregators, and 37% reported that clients referenced direct insurers in order to negotiate a better deal. For commercial motor brokers, direct insurers posed a slightly greater threat than aggregators: 16% of commercial motor brokers indicated that clients referenced aggregators, while the figure was 19% for direct insurers.

It didn’t seem to make a difference if brokers worked with insurers, either. Motor clients generally were less persuaded by business retention tactics, such as offering add-ons for increased premiums or offering no or lower premiums changes in return for lower levels of cover.

Slightly more commercial motor (22%) than personal motor brokers (18%) reported clients agreeing to accept lower levels of cover, but add-ons were not popular with clients: only 7% of commercial motor and 4% of personal motor brokers reported clients agreeing to this.

And if clients are unable to negotiate a better deal, they vote with their feet; client churn is high in motor insurance. Half of personal motor brokers reported that some clients had taken their business elsewhere in response to rate changes, whereas this figure was 40% for commercial motor.

But it was not all bad news for brokers. Around a third of personal motor brokers reported that some clients accepted their renewal offer without further negotiation and paid up, with this figure increasing to 44% for commercial motor.

4. What impact are aggregators having?

For personal motor brokers, aggregators are causing a major headache; more than one in two respondents reported that they thought the threat from aggregators had increased over the past 12 months.

Aggregators are also making an impact on the commercial motor market: three in eight respondents reported that they thought the threat had increased here too.

But traditional sources of competition still exist, albeit to a much lesser degree in personal motor. Clients’ reactions to rate increases showed that competition in personal motor from other brokers is much lower than in commercial motor. Nearly one in six personal motor brokers reported that some clients had referenced other brokers in order to negotiate a better deal, whereas these proportions nearly doubled for commercial motor brokers.

5. What about insurers’ responses? Have they offered more help to beleaguered brokers?

This receives a resounding ‘no’ for personal motor brokers, where insurers appear to have become significantly less inclined to sell motor insurance through brokers. Nearly three-quarters of these brokers reported that insurers have become less supportive, offering fewer and/or worse deals, while a further quarter reported no change from last year. A paltry 4% of brokers indicated that life had improved.

The situation was only slightly better for commercial motor. Roughly two in five brokers reported that insurers had become less supportive, and an almost

equal number reported that matters have become no worse. In this case, 14% indicated that insurers were becoming more supportive.

6. What advice do brokers have for insurers?

When asked “what is the one thing that insurers could change that would significantly aid your motor market business?”, at least half of the suggestions were related to how insurers are managing premiums. Many asked that insurers show more rating consistency, avoid dual pricing, and offer a level playing field through all distribution channels.

Brokers can only hope that insurers will listen, as this survey shows that the motor market is not an easy place to be an intermediary.