UK Commercial Insurance Distribution 2019

The purpose of this report is to provide an in-depth study into the most significant developments and recent trends within commercial insurance distribution. It discusses the influence of the differing purchasing behaviors of SMEs compared to larger corporate entities, and pays particular attention to the role and strategies of brokers (traditionally the main channel used by customers) within commercial insurance product distribution. The report also addresses the current challenges the market is facing, key regulatory factors, and the possible inclusion of new digital technologies to enhance the product selection and/or distribution process. It concludes with a five-year forecast for each distribution channel.

Commercial insurance distribution remains dominated by brokers due to their ability to provide advice and a wide range of products. But their position is being eroded in the SME markets as more businesses prefer to purchase through the direct or price comparison site channels due to their simpler insurance needs. However, as cyber threats become more prominent the need for cyber insurance is increasing, opening the door for brokers to appeal to businesses that need help understanding the threats they face and thus regain their foothold in the SME space. Broker consolidation has also continued in the market with Marsh, the largest UK broker, acquiring second-placed JLT in early 2019 – greatly strengthening its leading position in the process. Others may look to follow suit in the coming months in order to maintain their competitiveness in the market.

Scope

– Brokers hold the lion’s share of commercial insurance, accounting for 79.3% of all written premiums.

– The size of both the SME and non-SME UK commercial insurance markets grew, with an expected GWP of £17.7bn between the two in 2018.

– The broker landscape has been transformed by digital offerings via price comparison sites and innovative players.

– Acquisition continued to play a key role in commercial insurance in 2018, as brokers look to consolidate their position within the market.

Reasons to buy

– Adapt your distribution strategy to ensure it still meets the needs of clients and intermediaries.

– Ensure you remain competitive as new innovations revolutionize the purchasing journey for clients and brokers.

– Benchmark yourself against other players in the market.

– Be prepared for how technology is set to impact the commercial insurance market.

Companies mentioned

Marsh

Jardine Lloyd Thompson

JLT

Aon

Willis Towers Watson

Hiscox

Uber

INSHUR

Zego

Nimbla

AXA

XL Group

Simply Business

State Farm

Facebook

Twitter

Flock

Skywatch

Towergate

Compare the Market

Aviva

Direct Line

NFU Mutual

Hastings Direct

Admiral

Allianz

Barclays

HSBC

Lloyds Bank

Santander

Virgin Money

Metro Bank

Starling

Monzo

N26

Tide

Revolut

Arthur J. Gallagher

Yorkshire Bank

Halifax

Lycetts

Granite

First Central

Berry Palmer Lyle

Bluefin

Jelf

CyberCube

Chartwell Healthcare

Belgibo NV

Blackstone

Risk Services

Purple Bridge Group

Pavey Group

Wealthify

Deliveroo

Airbnb

Tapoly

Dinghy

Coverbuilder

Acre

USAA

Cytora

Zesty.ai

Groundspeed

QBE

Polaris

Brolly

Table of Contents

Table of contents

1. EXECUTIVE SUMMARY

1.1. Brokers continue to dominate commercial insurance distribution

1.2. Key findings

1.3. Critical success factors

2. CHANNEL ANALYSIS

2.1. Introduction

2.2. Key regulatory updates

2.3. Brokers continue to dominate, and are fighting back in the SME space

2.3.1. Price comparison sites have expanded SME insurance at the expense of traditional brokers

2.3.2. Simply Business is a role model for e-brokers in the SME market

2.3.3. Banks and building societies rebounded after seeing a steady decline in recent years

2.4. Commercial insurance distribution within the direct channel

2.4.1. The direct channel is much more prominent among SMEs

2.4.2. AXA and Aviva dominate the increasingly digital SME market

2.4.3. AXA suffers setbacks despite XL acquisition

2.4.4. Uber’s latest partnership aims to remove brokers from the picture

2.4.5. Hiscox looks to leverage its cyber cover to increase its market share

2.5. Retailers/affinity groups and commercial insurance

2.5.1. Affinity providers target SMEs with commercial insurance products

2.6. Banking providers and the distribution of commercial insurance

2.6.1. Banks and building societies are used the least to purchase commercial policies

3. BROKERS AND COMMERCIAL INSURANCE DISTRIBUTION

3.1. The broker landscape is dominated by five global firms

3.2. Global brokers retain the largest share of commercial revenues

3.2.1. The top five brokers accounted for around 25% of the total market in 2018

3.2.2. Marsh will further strengthen its leading position after the acquisition of JLT

3.2.3. JLT remained in second place in 2018

3.2.4. Aon climbed back up to third after recording the highest growth among the top five

3.2.5. Arthur J. Gallagher fell to fourth

3.2.6. Willis Towers Watson dropped to fifth as its brokerage took a hit

3.3. Common themes emerge from the growth strategies of brokers

3.3.1. Brokers look to facilitate growth through cross-selling and upselling

3.3.2. Acquisitions are high on the agenda of national brokers

3.3.3. Brokers are warming to the use of social media

3.3.4. Provincial brokers keep the focus on traditional methods but seek to develop online channels

3.3.5. Super-regionals are prioritizing social media engagement

3.3.6. National brokers are looking to enhance their online propositions

4. THE DISTRIBUTION LANDSCAPE GOING FORWARD

4.1. Tech advancements will play different roles in the commercial sector

4.1.1. Cyber insurance presents a huge opportunity to gain market share

4.1.2. Gig economy insurance continues to grow

4.1.3. Blockchain is yet to become mainstream within commercial lines

4.1.4. AI will benefit many facets of commercial insurance

4.1.5. E-trading has become the norm in commercial insurance

4.1.6. AXA offers car insurance in partnership with Brolly

4.2. How will the distribution landscape change in the coming years?

4.2.1. Growth in the commercial market stems from SME insurance

4.2.2. The continued growth of digital brokers will cut into traditional brokers and direct channels

5. APPENDIX

5.1. Abbreviations and acronyms

5.2. Definitions

5.2.1. Brokers

5.2.2. Direct

5.2.3. Managing general agent

5.2.4. SME

5.3. Methodology

5.3.1. GlobalData’s 2018 UK SME Insurance Survey

5.3.2. GlobalData’s 2019 UK Commercial Broker Survey

5.4. Bibliography

5.5. Further reading

List of Tables

List of Tables

Table 1: The most popular commercial insurance providers among SMEs, 2018

Table 2: Leading UK banks and their business insurance providers

Table 3: Percentage of brokers planning to employ selected strategies for growth, 2019

Table 4: SME and non-SME GWP splits (£m), 2017–23f

Table 5: Share of the commercial insurance market by channel, 2017–23f

List of Figures

List of Figures

Figure 1: Brokers are slowly increasing their market share

Figure 2: Online sales dominate the SME commercial market

Figure 3: Distribution channels are much more competitive in the commercial space

Figure 4: The direct channel’s share remains lower than pre-2016

Figure 5: Direct GWP increased slightly in 2018 despite market share declining

Figure 6: AXA is not as popular with brokers in 2019 as it was in 2018

Figure 7: Retailers/affinity groups have seen their market share decline since 2016

Figure 8: Retail GWP saw a slight increase in 2018

Figure 9: Banks’ market share is dwindling

Figure 10: Banks’ GWP has been declining since 2014

Figure 11: Marsh topped Insurance Times’ rankings for the second year in a row

Figure 12: Growth strategies vary by broker size

Figure 13: Social media is becoming increasingly popular among brokers

Figure 14: Provincial brokers mostly embrace features associated with traditional insurance broking

Figure 15: Super-regional brokers have the highest adoption of social media to engage clients

Figure 16: National brokers are looking to improve their use of social media as an engagement tool

Figure 17: Large businesses dominate the EU standalone cyber insurance customer base

Figure 18: Brokers account for four out of 10 cyber insurance policies sold in the SME market

Figure 19: Commercial GWP is expected to exceed £20bn in 2023

Figure 20: The broker channel will continue to dominate the commercial space

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