Technology link up - Aggregate expectations

There is no denying that in the last few years, aggregators have grown greatly in size and stature; however, opinions are still split over whether they pose a threat or offer opportunities to brokers. As comparison sites continue to flourish and more appear on the market, the question arises of how - and if - intermediaries can harness them to their own advantage, and what role technology can play in this process.

Some commentators believe aggregators allow brokers of all sizes to compete on a level playing field, while others feel that as the necessary technology systems can cost tens of thousands of pounds, this can prohibit smaller players in the market from participating. And while intermediaries are an important ingredient to the success of comparison sites, they are arguably at the whim of the most popular sites, which are able to pick and choose those appearing on their panels.

Hayley Parsons, chief executive officer of Go Compare, which recently became the first aggregator to be welcomed as an associate member of the British Insurance Brokers' Association, says: "Brokers are key to the success of comparison sites and vice versa."

She claims that 70% of its motor and home insurance panel (with 72 and 28 members respectively) and more than 80% of its van and motorbike panel (17 and 21 members) are made up of intermediaries comprising of larger telesales, smaller niche and high-street brokers.

Broker benefits

Ms Parsons believes many broking partners have seen benefits "both in terms of their profile and ultimately their sales figures", which allow smaller brokers to "compete on a level playing field with the larger insurance companies" and gave panel members the opportunity to quote on more than a million pieces of business a month.

In agreement is Carlton Hood, CEO at Confused, which also deals with around a million quotes a month and has 62 and 43 members on its motor and home panel respectively. He says sites give brokers and insurers the chance to quote on volumes on an unprecedented scale, and adds it is important that panel members understand how to make aggregators work for them with many investing funds from other areas.

"We charge per sale," he explains. "It can be much cheaper than traditional acquisition and can grow their margin at the same time.

"If they work with us we can see how and where you can be price competitive, if not it will be an extra cost."

However, David Rudd, retail director of personal lines division at Heath Lambert, which is sits on the Money Supermarket, Go Compare and Confused panels, admits major opportunities are probably more available to the mid to large-sized brokers rather than the smaller high-street operators. He believes "fairly significant costs" are involved in establishing links with aggregators so data can be exchanged, but adds once this was done his company experienced few problems.

Ms Parsons also acknowledges that some initial IT investment is needed to ensure systems can be integrated. And many believe this should not pose a significant barrier to smaller brokers.

Simon Hughes, sales and marketing director at software company Open GI, says the investment needed is not as large as people think and the benefits are potentially immense.

"How many brokers are able to expose themselves to more than 40,000 quotes a day?" he asks. "That is how many people are going to the bigger price comparison sites. If brokers are blind to the internet then they are really missing out as that's a huge market."

Similarly, Nigel Phillips, business strategist at CDL, says the process is "pretty simple and seamless". He explains: "We deal with about 20 brokers and not all of them are large. Some of them are smaller brokers and the sites are a large source of their income. Typically through the CDL hub our brokers can access 120,000 requests for quotes per day - that's a fantastic opportunity."

Yet Quotes 2 Me CEO Manjit Rana claims aggregators "can only really talk to the big brokers". In order to participate in an aggregator environment his firm had to invest a lot of money in technology, around £30,000 to £50,000 - a figure not all brokers can easily lay their hands on.

He believes approximately 4500 brokers do not have an online rating engine. "Thousands are not able to address this marketplace because they don't have the technology," he explains. In contrast, he adds there are cheaper and easier ways for brokers to access the market that do not require them to buy expensive technology; for example, Quotes 2 Me is available to the whole market, as long as the broker has an internet connection.

Clear products

Mr Rana argues that for the aggregator model to work, "a lot of reliance is placed on the existence of commoditised and well-defined products" - hence the focus on personal lines. In addition, he says non-standard and small to medium-sized enterprise commercial products are hard to rate as systems do not have the capability to process the detailed information required.

However, Mr Phillips envisages aggregators will operate in the commercial lines sector in the future. "Some of the commoditised products that can be automated lend themselves to that," he explains.

Whatever the view of aggregators, what remains clear is that they are likely to be a permanent feature in the industry. "Aggregators have risen to prominence. I can't see it changing. If you want to deal in volume market you have got to be represented by aggregators," explains Mr Rudd.

Ms Parsons concludes: "When the arrival of Direct Line transformed the insurance market in the 1980s, many speculated that this would spell the end for the broker but this was not the case; the same applies to the growth of the comparison industry.

"In our view, it's essential that the two industries are working together and ultimately to ensure that we provide the customer with the best possible service. It's time we started thinking as an insurance industry and not just as separate distribution channels."

It may be time, therefore, for brokers to start considering what their technology systems can offer them in terms of access to this lucrative market.