IT opening new channels

UK personal lines distribution continues to evolve. Long gone are the days of the high street or telebroker and brand domination by direct insurers appears to be on its last legs. Never before have we seen such rapid change in our distribution landscape. While many see this as a threat to their models, others see these changes as an opportunity for growth.

Much has been said about the rise of aggregation. More advanced insurers have already realised the benefits of this channel and have quickly developed sophisticated pricing models to support bespoke product propositions, while others still worry about the apparently different risk profile it delivers. Distributors have become increasingly innovative, developing new revenue models to support the winning of customers in a price-sensitive environment. And there are now a lot of them. This year, at least six million people will switch their car insurance using an aggregator and it's only a matter of time before other products catch up.

Aggregation is not the only area of rapid growth. Many household brand names have now successfully launched insurance propositions, exploiting their unique distribution capability through established channels - be that retail, internet or telephone. These brands have also recognised their value in an aggregation environment and, by augmenting their product and service proposition, have found they can win and keep customers without the need to offer just the best price.

In future, distribution will favour the more technically able with leading edge systems and infrastructure. Technical innovation often goes hand-in-hand with entrepreneurism and the increasingly complex and fragmented UK market will create many gaps for the able to fill. We have seen the development of search engines, social networking, the iPhone and semantic web but it's not clear what the next major distribution channel will be. However, as customers become more technically savvy, these developments will provide some clues.

The current downturn in economic fortunes, resulting in low investment returns for insurers and pressure on margins for distributors, has inevitably led to a microscopic, market-wide cost review. As insurers and distributors make their organisations leaner, powerful often technology-led partnerships emerge. By removing much of the unnecessary frictional cost between broker and underwriter, the industry has every opportunity to come out of the current downturn intact and with new channels serving customers" however they demand it.

Matthew Donaldson, group director, BGL