Intermediaries must meet challenge of Banks and Direct Market

In SME Commercial insurance the broker is still King, but they face a major challenge to their dominance of this market from bancassurers and direct writers. Although in the commercial SME lines market, most businesses buy insurance through a broker, direct writers and bancassurers now have their eyes firmly fixed on this market, a move that is not unwelcome by customers.

With the BIBA conference² about to begin, Mike Powell, Principal Consultant for General Insurance commented: "Brokers have been the main source of packaged SME insurance for businesses, but there is a real challenge from the banks and direct insurers. Brokers are not having it all their own way as the banks and direct insurers are making an impact, especially at the ‘micro' end of the market".

Powell added: "The number of SME products now available on the internet means that obtaining a quotation is now quick and simple. Many businesses now have the capability to research online for their business insurance needs. Online purchase of personal lines insurance products continues to increase, and this is even more so as price comparison sites make the research process even simpler. On this basis, there could be an argument that businesses may feel that a more competitive quotation could be obtained by going direct. Similarly, banks have a captive market as any new business start up needs a business bank account. There is also a need for business insurance which can also be provided by the bank".

Powell continued: "Brokers though still have unique selling points over banks and direct insurers. In the medium to large sector of the commercial market, these types of businesses have varied and unique insurance requirements that need specialist professional advice, which may not be catered for by the banks and direct insurers.

"But, the main concern for brokers must be that it will be inevitable that the banks and direct insurers will start to target these types of business. Brokers must meet the challenge made by the bancassurers and direct writers. If the last twenty or so years of direct insurers, and more recently banks, entering the personal lines space has taught brokers anything, it is that if they dismiss this challenge they will be left by the wayside."