Intermediaries can still compete in the general insurance space, argues Kevin Paterson, sales and marketing director, Assurant Intermediary
While the jury is still out as to whether the green shoots of recovery in the UK property market actually have roots, there can be no debate that general insurance has come to represent an important revenue stream for mortgage intermediaries. I firmly believe that general insurance will remain an important income generator in the years to come as it is highly unlikely that the mortgage market will achieve the heady heights of 2007 before the credit crunch took hold.
In a previous column, I looked at the main lines of general insurance business that most mortgage intermediaries are currently involved with. However, if general insurance is going to be an increasingly important line of business, some may want to venture into additional product lines such as travel or pet insurance.
<b>So what is the opportunity</b><b>?</b>
The good news is that most people buy some kind of insurance. According to the Association of British Insurers, over 70% of UK households buy buildings, contents and motor insurance. 20% buy mortgage protection or income protection. In 2008, total general insurance net premiums amounted to £33.8 billion. The motor insurance market is the biggest, worth almost £11 billion last year, followed by property (£8.8 billion) and accident and health (£4.6 billion). And, if your clients ever say that insurers never pay out, you might like to inform them that they paid £22 billion in claims last year!
Before you get too excited by the prospect of tapping into these billions yourself, the bad news is that the distribution of personal lines insurance such as motor, household, travel and the like has undergone tremendous change of the past 10 years.
The ABI reports that the proportion of people buying insurance policies through brokers has fallen from 54% in 1998 to 35% in 2008. In contrast, 17% is now sold by banks and building societies, when 10 years ago they sold less than 5%. One of the biggest changes in distribution was brought about by the emergence of the so-called ‘direct’ players – think of the big red telephone – who commanded a whopping 32% of general insurance retail sales last year. In fact, the direct channel has become the primary route to market for private motor insurers.
However, the rise of the aggregators has arguably had the biggest impact on the distribution of general insurance products in recent years. Their marketing spend is enormous: three appeared in the top 10 advertisers in 2008. At the beginning of the year, Alexsandr the meerkat hit our TV screens. His popularity as the face of comparethemarket has resulted in an 83% increase in traffic to the website while competitors, confused and even moneysupermarket, have lost market share.
<b>So is it realistic for mortgage intermediaries to compete effectively in this space?
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I would argue that it is. You are already in a stronger position than your specialist general insurance broker counterparts. While they struggle to get in front of consumers, figures from the Association of Mortgage Intermediaries reveal that 90% of people believe that seeing an adviser is important to them. They value advice on their mortgage, and this provides you with solid opportunities to discuss their other financial needs. Still, you will need to be a little creative. I believe that it is possible for intermediaries to tap into the aggregator model without it costing a fortune. (However, that’s a subject for the next column to address, so watch this space!)