Despite incremental growth in other channels, brokers still distributed 77.1% (£12.5bn) of commercial insurance in 2016, and are forecast to remain dominant in 2021, with 76.6% of the market according to GlobalData forecasts.
The importance of commercial e-trading
Insurers need to make it as easy as possible for brokers to do business with them whilst improving operational efficiency – and the adoption of e-trading is key to this. Experience shows that significant benefits are achieved from the automation of tasks and straight-through processing, with optimal efficiency for both brokers and insurers, as well as assurance that the actions taken are timely and accurate.
Enabling brokers to obtain a range of products in real time with fully integrated documentation, simply by keying in client information on a single occasion, removes the errors and omissions that occur when data is re-keyed several times, and provides significant time and efficiency savings.
Exchanging data electronically also provides certainty of the risks being insured, as both parties have visibility of the same data, and it is possible for documents, surveys and pictures to be attached as part of the risk details submission. These electronic documents are instant and traceable, and can easily be emailed onto clients, so eliminating printing costs.
What is holding the market back?
While the market is showing real signs of adopting commercial e-trading, there are a number of factors that are causing it to still lag behind its personal lines counterpart. In particular, the varied pace of insurer e-trading development means a full panel of products and functionality is yet to be achieved across all insurers.
Some insurers are still behind the curve in terms of developing their integrated e-trading solutions compared to what they offer as an extranet service. Often they offer their best products, prices and functionality via their extranets rather than on an integrated basis.
Brokers are aware of this, so while many understand the benefits of integrated e-trading, there is also a lack of confidence in such technology. As a result, they feel the need to check several extranets as well as the products provided through their software house system to ensure they are offering the best advice to their customers, and acting in their best interests.
While there does need to be the option of using extranets if that is how a broker wishes to trade, increasingly brokers are demanding insurer products that can be accessed electronically from their own systems. The real cost and efficiency savings are made through the elimination of re-keying of data with integrated e-trading, which also supports compliance with the FCA's requirements for intermediaries to act in the best interests of their customers.
Maximising the available benefits
Rather than just a sticking plaster on top of existing legacy software, the insurance industry needs to offer parity of product and functionality across all channels – and needs the systems in place to achieve this.
SSP has already seen evidence of this. A lot of brokers were using SSP's e-trading platform for commercial quotes, but were not always subsequently trading a policy. This was due, in part, to insurers offering subtly different pricing through their portal – which can be easily remedied. If there is a disparity where the portal is cheaper, it is possible to override the price in the SSP system to keep the policy on an integrated e-trade status, and users have been re-educated about this.
One other issue with the use of extranets is that, while the online journey is completely tailored to the needs of the individual insurer and only captures the data required by that particular insurer, brokers receive just one quote and the data has to be rekeyed into the broker’s system to progress.
Brokers might only try three different extranets and, if they are dealing with specialised risks, they may not receive a quote for that trade and will be unable to place the business. In contrast, panels within broker software houses act like a mini comparison website by generating multiple, comparative quotes from just one data entry. This facilitates trading for more niche books of business and specific schemes/products on a one-to-one basis, making it easier for brokers to place risks, even difficult ones.
What brokers want
By constantly reviewing their services, software providers can use system innovation to assist in driving adoption. To achieve the best outcome all parties need to act together, making it vital to listen to and act on broker feedback to enhance the user experience.
SSP has revitalised its approach to commercial e-trading based on a review of the barriers preventing its brokers from adopting e-trading. As SSP works with commercial lines brokers of all sizes, 50% of its broker base has a GWP of less than £5m. This means insurers can drive profitable growth through access to the more valuable, stickier business of smaller brokers – who trade significant untapped commercial GWP each year.
As well as being at less risk of being re-broked at renewal, this business has lower commission rates and typically lower combined ratios.
SSP identified a few fundamentals to address to achieve real adoption. In addition to educating users about the possibility of overriding the price in the system to keep the policy on an integrated e-trade status, it has established a new regional panel for commercial lines within its Keychoice insurance distribution business.
Taking a regional approach
The regional panel is being driven by the appointment of a new Commercial Lines Relationship Manager with over 30 years' industry experience in both a family-run local brokerage and several key positions in the commercial arm of Swinton.
Based on an ongoing review of the quotability rates, he will be working with insurers to highlight where a lot of specialist risks are not getting quoted for and, hence, where the opportunities lie.
Encouraging insurers to join Keychoice and quote for this niche business will increase the range of products available to be e-traded, making the proposition far more attractive to brokers.
SSP has also implemented a live-chat panel and recently announced Ageas as the third leading insurer to join. When brokers have any questions regarding, for example, a disparity in price, they can chat to the insurer within that session, get the answers they need and continue with placing the business.
Already e-trading is an essential way that brokers trade with insurers, so commercial lines insurers will need to continually develop their platforms to maintain a competitive advantage. The future is bright for commercial e-trading, and both the market and SSP are primed to respond.