Archive for Insurance Brokers

Commercial Insurance On The Internet

Until recently it was extremely difficult to purchase commercial insurance online. In the last couple of years there has however been an explosion of small business and SME commercial product offerings appearing online and an equally large number of comparison sites, some general price aggregator and other specialist commercial insurance broker websites.

With so many new products and markets for modern risks emerging, knowing what business insurance cover is available online has become increasingly difficult with more choice.
Insurance Blog asked the insuranceblogger to investigate:-

Commercial Insurance Distribution Channels on the Internet

If you worked for a UK Insurance company just twenty years ago or anywhere else in the world for that matter, you would not have heard the term Internet distribution channel, except perhaps in the idle chat of the IT department boffins and analysts in the company cafeteria.

There were only two main distribution channels, or ways of moving insurance products to the market and the Internet as a serious sales and marketing contender would have to wait another ten years to appear.

At the time, the main channels were the direct channel, which meant producing insurance products that could be sold directly to the public from a call centre, thereby cutting out the costs and expense of managing a middleman, and the broker or intermediary channel.

The broker channel was further sub-divided into insurance brokers, agents, tied agents, consultants, sub-brokers, managing agents for Lloyds and the affinity corporate market.

Both channels offered different propositions for the same products dependent upon the way a policy was sold.

At the time only personal lines insurance products such as car and home insurance were available via the direct channel.

It was also considered that commercial insurance and business insurance were too complicated a product to sell direct over the phone, would take up too much time and would require a bank of approved underwriters with scripts to man the phone lines, as no commercial insurance autoquote systems existed. Consequently nearly all commercial insurance was sold via the intermediary channel.

This dual path situation for the sales, marketing and deliverance of insurance polices continued until Insurance finally became a product that could be bought and sold on the Internet. The earliest offerings around the turn of the Century were for personal lines insurance and there was barely a mention of Commercial insurance, save for the odd contact us button.

Ironically as personal lines insurance developed over the Noughties and became a much larger channel of distribution, the two previous direct and broker channels re-established themselves online, this time in much closer competition.

However both the insurance companies and the insurance intermediaries were caught napping as a new distribution channel emerged on the Internet; the aggregator or price comparison site, and in record time accounted for over 90% of online Internet insurance sales.

The public love to compare prices and the fact that most personal lines products could autoquote without the intervention of an underwriter, meant they could all be aggregated into an online insurance price comparison site, such as we see everywhere in the media today. This is a testament to the comparison sites success as a channel in its own right.

Commercial Insurance in the meantime was still in its infancy as a channel on the Internet, until very recently.

The inertia was mainly due to the reluctance of the large general insurance companies to standardise and autoquote for commercial products. They felt the risk was too high and underwriters resisted the change.

The change came about by market forces as the Broker channel started to sell commercial products using its own web-enabled back office systems.

This meant that online business insurance brokers could collect information about a businesses insurance requirements on a website form, and pass the data to its internal systems. These back office comparison systems are composed of a panel of insurers and providers that provided autoquotes.

Straight through processing to an insurance company could be carried out by the existing EDI or electronic data interchange mechanism.

The single broker business and commercial propositions soon became the target of the price aggregators and the large and now very rich comparison sites, who started to offer online insurance comparisons using broker panels in 2009, which rapidly became popular with small business.

The large composite commercial insurers were forced to respond and last year released a string of autoquote products into the Internet channel including packages for shops, offices, pubs, commercial let property, tradesman, professionals and commercial liability to name just a few.

The fact that it is nigh on impossible to watch television for more than an hour or two today, without seeing an advert for a builders public liability and tools policy from a dotcom is proof that the Internet has finally arrived as a commercial insurance distribution channel.

Commercial Insurance online is available from UK Commercial Insurance. The UK brokers operate one of the largest commercial insurance quotes comparison sites on the Internet.

Comparing Commercial Insurance Quotes Online

A Guide to Comparing Commercial Insurance Quotes

You can’t turn the telly on these days without seeing an advert for tradesmans business insurance or commercial liability with all the big insurance comparison websites and direct insurance companies vying for attention at one dotcom or another. Insurance Blog asked Insurance Blogger Dave Healey to take a look at commercial insurance and small business insurance websites in the UK and see how easy it is to get commercial insurance quotes.

One upon a time it was virtually impossible to obtain commercial insurance quotes without a visit to the nearest regional General and Life offices of a large corporate insurer or if you were lucky a local high street commercial insurance broker who had access to at least one commercial insurance agency for most risks, and if really lucky this broker would have specialist business insurance schemes or access to Lloyds underwriting facilities.

Comparing Commercial insurance quotes just wasn’t an option for most businessmen who had better things to do with their time so they usually took the advice of a local broker who could at least place the business. Local and provincial brokers would appoint account managers and inspectors to regularly meet with their commercial clients and keep all the business local. Inertia set in and kept the competition down and prices for cover high.  Shopping around and comparing commercial insurance and getting a range of quotes just was not feasible until very recently…..

Today all sorts of commercial insurance products are available online either direct from insurers or via an intermediary such as a commercial insurance broker with online placement facilities. Some of the larger commercial intermediaries offer comparison sites for SME business, as do all the top four general price comparison sites that dominate the screens and rankings. The broker offerings are usually much wider than the price comparison sites and they have access to many more markets.

The downside to buying commercial insurance over the Internet from say a site more known for comparing car insurance or comparing credit cards, is that there is no one at the end of a phone to give you advice about your commercial risk and when it comes to claims…….computer says uh! Would you buy business insurance off this man?

For comparing commercial insurance quotes it is always wiser to use a broker comparison site. A UK Commercial Insurance broker site will allow you to compare products and prices from all the top insurers on their panel and offer advice and claims help when you need it. They can also arrange for cover for larger risks and provide services like surveys which are often a condition of the commercial insurance quotes given imposed by the system underwriting rules.

If you operate or are responsible for any type of business entity or commercial enterprise, in order to obtain the right insurance for the company you will need to find and compare suitable commercial insurance quotes. A quote is an offer of certain defined insurance covers in a policy for a monetary price.

Quotations can be obtained from numerous sources including locally from specialist high street insurance brokers, over the phone from insurance companies or brokers, or from the many online companies and comparison sites offering all types of insurance cover.

A commercial insurance quote forms a legal offer and is the basis of the contract of insurance between the proposer and the underwriting company. The information you provide on the quotation form is used to calculate both the premium quoted and the levels of cover offered on a policy. The quote data a company provides will be used to complete the policy documents. It is therefore very important that when applying for commercial insurance quotes that the information you supply about your business activities is correct and truthful.

Most companies offering quotes will agree to honour the price offered for a period of thirty days or one month following its issue. When obtaining a quote, regardless of the source, ensure that you retain the reference number which will enable you to either take up the or recall and revise the offer at a later time. Prices offered can fluctuate and a premium offered one week may not be available the next.

Quotes and premiums can be obtained for all business types and all business and commercial risks for both business liability and property insurance, either separately or combined in what is known as a package.

Commercial property insurance will typically provide cover for buildings and contents of business premises of varying types and sizes. For example a shopkeeper would be interested in covering his glass shop front and shop stock whilst a small draughtsman business would require a price for covering the business office equipment. For this reason quotes for a business are often given by insurance companies for packaged policies that are property specific, such as shop insurance quotes or office insurance quotes.

When looking for cover search for companies that offer quotes for your particular type of building. Let property buildings only insurance quotes are available for landlords who just want to cover the buildings, fixtures and fittings. Equally commercial property tenants and lease-holders can obtain quotes that only cover the contents, stock or liabilities.

Liability quotes can be obtained with either combined property insurance packages or as a standalone quotation for individual business liabilities. The most popular liability products quoted for are public liability insurance, employers liability insurance, product liability insurance and professional indemnity insurance.

Commercial liability quotes are widely available online for most trades and professions. Packages often offer all risks cover and if you are looking online most systems allow you to pick and choose various liability coverage options

When comparing quotes online you will not have the assistance of a broker to advise you. It is vital therefore to ensure that you check that the levels of indemnity and covers offered are sufficient for your business, because levels of commercial insurance cover quoted for, can vary as often as the price.

Commercial Insurance quotes are available from UK Commercial Insurance who operate one of the UK’s largest online commercial insurance comparison and online brokerages.

Insurance company failures predicted as Euro Solvency rules are applied

QIS5 set to see an increase in Insurer failure rates:
As final implementation of Solvency II looms ever closer, more and more industry experts are now predicting a complicated and worrying time for a growing number of insurers. Willis Re have recently admitted their own fears for the UK’s smaller regional insurers, predicting that many more companies are looking likely to fail in QIS5 than did so in the previous such exercise QIS4.

In a recently released report the global insurance brokers reinsurance arm announced that Quantitative Impact Study (QIS) 5 is shaping up to be a far tougher test than its predecessor, of which only 11% of insurers failed. Whilst claiming that the failure rate will be “much higher, especially for smaller regional insurers” the report also warns that the smaller players as well as regulators will have multiple problems particularly when developing and reviewing  internal models. One of the major reasons the report singles out the smaller players is the fact that they are often unable to benefit from the   diversification credits that are available.

Commenting on the report, Willis’ MD for analytics and head of international enterprise risk management, David Simmons said “Solvency II and IFRS will have profound implications for all insurance professionals in Europe, but the repercussions will be felt worldwide with the new IFRS being adopted by most major economies in 2013 and the rise of Solvency II-like regulatory regimes worldwide.”

Meanwhile, the International Underwriting Association (IUA) has warned that the government’s plans to reform financial regulation within the UK are currently being heavily undermined by the demands being placed on insurance regulators as Solvency II implementation draws nearer. With demand for high quality regulators now often comfortably outstripping the supply, a lack of qualified and competent staff is proving to be a very real concern.

With a number of IUA members already having reported delays in approvals of internal models, many fear that the creation of the UK’s latest two new regulatory bodies the Prudential Regulatory Authority (PRA) and the Consumer Protection and Markets Authority (CPMA) will only serve to exacerbate the situation further.

Citing the FSA’s “declining prestige” as a major contributing factor to the current situation, IUA Director of Government Affairs, Nick Lowe commented that “there is a dearth of qualified and experienced staff competent to supervise the insurance industry.”

Whilst it is clear that the implementation of Solvency II has caused greater demand for regulatory professionals, many in the industry agree with Lowe’s opinion that the dramatic decline in standards at the FSA has meant that “many individuals with the right skills have taken their employment elsewhere.” in recent years.

As Lowe points out “regulators will have difficulty in recruiting people of the right calibre. An imbalance in supply and demand will mean that staff costs will be high.”

Not all corners of the industry are quite so gloomy in the face of Solvency II however and at the recent ABI conference PwC partner Charles Garnsworthy was able to highlight the competitive advantages that may become apparent as the EU directive takes hold.

Discussing the “great opportunities for insurers to transform how investors, analysts and policyholders perceive the security and value the sector adds” Garnsworthy sees this period of regulatory flux as one full of competitive opportunities.

In a bold and positive speech he asserted what he saw as the opportunity to “stand out from the pack” as he urged those insurers present to ensure that they don’t lose sight of the “strategic impact of Solvency II”.

Whilst I personally believe that the wholesale changes Solvency II will create across the entire general insurance landscape will certainly be felt in every corner of the industry, I absolutely agree that it is those companies that embrace the changes, rather than fight them, that  will now flourish.

In  Garnsworthy’s words “Solvency II will be a catalyst for managing risk and capital more efficiently and is a real chance for the industry to send a clear message to the markets that it can respond swiftly and decisively to opportunities.”

Whilst certainly many of the challenges that Solvency II is currently throwing up are extremely daunting to say the very least, the opportunities that are also being created are equally as exciting. One thing is for sure, we are now approaching one of the most crucial periods of change the industry has ever know.

A look at Lloyd’s Insurance Market

Lloyd’s Insurance Market originated in a coffee house belonging to a certain Edward Lloyd in 1688, which was the haunt of those concerned with maritime trade.

For many years business transacted at Lloyd’s was confined to marine insurance.

Lloyd's insurance London

In the nineteenth century, however, a large non-marine business began to be built up, particularly business from overseas, and Lloyd’s is now a major international market in this field as well as being famous as a provider of specialist car insurance.

This organisation is unique in the world. The Council of Lloyd’s, established under the 1982 Lloyd’s Act, is the governing body and activities under its jurisdiction are governed by Acts of Parliament. Statutory regulations aimed at preserving the solvency and integrity of Lloyd’s underwriters differ from those applicable to insurance companies, though the intent is the same.

Unlike most of its competitors in the insurance and reinsurance industry, Lloyds is not a company. The Society of Lloyd’s was incorporated by the Lloyd’s Acts 1871-1982. The systems used for issuing policies, collecting and accounting for premiums, and dealing with claims also differ from those adopted by insurance companies.

Only accredited Lloyd’s brokers can place insurance at Lloyd’s. The Corporation provides the premises and all the facilities for those transacting business within its jurisdiction, together with the regulatory controls.

The actual business is not transacted by the Corporation of Lloyd’s but by underwriting members on the one hand and Lloyd’s insurance brokers on the other.

Underwriting members are individuals and their liability is unlimited. However, it would be impossible for all those who are underwriting members of Lloyd’s to transact the business individually and thus they are formed into syndicates in the charge of the person who is responsible for the transaction of the business on their behalf.

This person has complete power of attorney on behalf of the members of the syndicate.

Naturally, an underwriter with power of attorney needs to have assistance and this is provided by his accredited deputies. Those persons actually accepting insurance have of course to comply with rules and regulations and submit themselves to the disciplines of the Corporation.

The Lloyd’s insurance broker is the other part of the market and is also subject to rules and disciplines. He has to be accredited and membership is not granted freely. Only a Lloyd’s broker can enter the Underwriting Room and transact business therein. The ‘Room’, as it is called, is that place where the underwriters sit at ‘boxes’ and transact the business. It is normal for Lloyd’s brokers to be either limited companies or partnerships rather than individuals, and the chief executive of such a company or partnership is the broking member.

The staff of the company with broking powers are known as ‘substitutes’.

There is in addition a category entitled ‘messengers’ who are allowed to take messages into the Room to give the broker but who are not empowered to conduct any insurance broking.

Lloyd’s broking offices range from the giant companies through medium-sized operations, to the very smallest broking firms. Many large and medium-sized offices employ specialists and operate a number of separate departments. Small firms may specialise in one class of business or another and operate with unique trade syndicates. For instance, one broking house concentrates on professional indemnity business, many others on reinsurance, yet others on the hotel and catering trade, and so on. Some small firms, however, operate a general business.

The new Room at Lloyd's Insurance

While there is a principle that transactions have to be carried out in the Room itself there are a few exceptions to this, it would be totally impractical for Lloyd’s to transact motor insurance business, particularly for individual policyholders, in this way. Certain motor insurance syndicates have overcome this problem by allowing provincial insurance-broking firms to deal direct with them but requiring that the premium is guaranteed by a Lloyd’s broking firm. Some of these syndicates have actually set up offices in provincial cities and the local insurance brokers deal direct with these offices. This method enables syndicates to compete with insurance companies having local branches.

The Changing World of the Car Insurance Broker

The Role of Car Insurance Brokers has changed significantly over the years. Rationalisation of  the market, new technologies, new methods of working, financial regulation , call centre and demands for new products from the public,  has led to a new breed of intermediary…….

The role of a car insurance broker traditionally, is to act as an intermediary between the customer and the underwriting Insurance Company. Within this role there are various functions that they carry out in interaction both with the car insurance buying public and the Insurer with who they place the business.

When a broker places car and motor insurance risks on cover, their role has a major difference to other types of insurance in that the spread of risk is smaller. This is because a very high proportion of motor business is eventually placed on the basis of ‘one risk, one underwriter’ – that is to say, a Lloyd’s underwriter or Motor Insurance company.

When a member of the public goes to a motor insurance broker they expect that the broker should be fully aware of all the covers available and offered in a standard car insurance policy and a commercial motor policy. A broker also should be knowledgeable about the differences in policies and prices offered by the various Insurance Companies and underwriters with which his brokerage does business.

The Car Insurance Brokers role does not just stop with the supplying and purchasing of the insurance. They should be available to act as an intermediary with the Insurer at any time, acting upon the client’s behalf should there be any changes to the policy mid-term of the contract period, or to deal with any claims that need to be made.

The two main insurance areas dealt with by the car insurance broker are the private individual’s motor policy and the commercial fleet motor policy.

A marked tendency in the large broking house during recent years has been to concentrate more and more on the commercial motor insurance fleet placings, and less and less on the private sector of the market.

Many large international insurance brokers view the private motor insurance as uneconomic for a fully sustainable business, and so specialist sub-brokers or large provincial and regional brokers are dealing with a greater proportion of this class of motor business.

Car Insurance Brokers receive commissions for their role as intermediaries which are received from the Insurance companies with which the business is placed. The commissions available in the motor market varies somewhat and the recent ‘soft market’ where premiums and commissions are low, have also led the high street insurance broker to seek more profitable business in insurance classes other than Motor. Commissions for a car insurance policy may range from 7½ per cent to 20 per cent although with commercial vehicle contracts and large fleet business, brokerage may be agreed on a fee basis which is often charged over the whole portfolio for that particular client. In the past a standard rate or tariff which was agreed and reviewed by the Association of British Insurers professional body (ABI) was used in the UK car insurance market. This is no longer the case, but this approach still influences some underwriters in some specialist car insurance areas.

In recent years, however, many larger brokers have developed what is known as a ‘direct dealing account’. This is where the broker introduces a sub-broker to underwriters and then permits him to deal directly with them under a fronting agreement with their own marketing. The accounts, however, will still pass through the main broker. The commission is split between the main broker and the sub-broker, with the sub-broker usually commanding the higher percentage. An important restriction applied to the sub-broker within the fronting agreement is that he must pass the premium on to the main broker within 30 days of inception of the risk.

The role of the motor broker has changed somewhat in recent years with the development of Internet based quotation systems.

In particular the insurance comparison websites who have taken over the role of the broker to some extent. These quotation systems have been used successfully however by some car insurance brokers who have adapted and embraced the technology and now offer full on-line comparison quotes from their panels of insurance providers. The benefits are a very quick service, although it may still be advantageous for the broker to ‘shop around’ for the best deal for one’s client, particularly if the cover is for a non standard driver or car.

Whatever the changes in the technologies and methods of Car Insurance delivery there will always be clients who want a human face and to talk to someone directly about their insurance needs. The role of the broker is ultimately communication.

If a driver owns a classic car, specialist classic car insurance brokers will compare classic car insurance policies and rates on the customers behalf. Similarly if a customer has medical conditions or convictions or is a young driver that wants to drive a high performance sports car a Specialist Car Insurance Broker will be able to place the risk amongst their many schemes. A Broker is often the only option for non-standard motoring risks that the mainstream suppliers will not service.

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