What it takes to win the race

How has the world of personal motor broking changed since the advent of direct insurers such as Direct Line?
I think the motor insurance market has become much more customer-focused with the advent of Direct Line, a slick, high-profile and aggressively marketed company, selling motor insurance in a completely different way, and direct to the public.

Since then, brokers have had to fight harder to win and keep business that was normally accepted as being ‘safe’. No personal lines policy is now safe due to aggressive marketing techniques from the plethora of direct writers vying for business. Indeed, some brokers have thrown in the towel and have sold their personal lines book to others.

Why do you think direct insurance has proved so popular with consumers?
Firstly, price. The motor and, to a somewhat lesser extent, the household insurance markets are very price-driven. As direct writers can devote far more resource to advertising than intermediaries can or are prepared to do, there can be sometimes dramatic differences between what premium an intermediary can offer to a consumer and what the consumer can themselves obtain direct from an insurer.

Secondly, bad feeling. Direct writers began their advertising campaign some years ago by portraying brokers as ‘sleazy middlemen’. While it is a fact that most brokers were (and still are) receiving between 10 and 12.5 per cent commission before insurance tax on motor insurance, premiums via the direct writers were showing savings on broker-quoted business consistently upwards of 30 per cent, which certainly did nothing to detract from the general belief that intermediaries were pocketing exorbitant shares of money for their involvement.

However, those insurers with both a direct arm and a broker-led division were reticent about publishing the true reasons for these price differentials, including the little-known fact that direct writers pay approximately 40 per cent less in claims than their comparable broker channel, a statistic I have had confirmed to me by more than one insurance company representative.

Consumers can be wary of ‘middlemen’ – how do you justify your existence to them?
Many intermediaries have over the years done little to justify their existence and have allowed complacency or apathy to govern their attitudes. However, following the encroachment and success of the direct writers, coupled with the fact that there are still an enormous number of consumers, young and old, that like to be treated as people rather than numbers, brokers have fought back and can continue to do so in this market.

Brokers offer a service, deal with any adjustments, provide informed advice on any alterations or claims throughout the year and should fight the client’s corner were any dispute to arise. Good intermediaries should also automatically research and offer an alternative quote for their clients at renewal, whereas a direct writer will never tell the client anything other than what they themselves have to offer.

There will always be a role for the professional intermediary who offers a value-added service to their clientele, rather than just selling someone else’s product. As the direct writers employ more telesales tactics to market and cross-sell and need to rely on even more new business to replace that which is lost after the first year, I see some lost business being won back by the intermediary market.

What does the future look like for motor brokers?
I’m optimistic. Consumers have to make up their minds about what matters most, service or price. Few brokers will be able to offer the cheapest quote on the market. What they should offer, though, is a quality product, well researched, taking the consumer’s wants and needs into account and providing them with a competitive product from a reliable insurer – and not just washing their hands of them once the premium has been paid.

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