Aggregation aggro?

The rise of the aggregators in personal lines is a phenomenon. They have become a force to be reckoned with for a very simple reason: customers like what they do. Up to a third of consumers are very likely to use a price comparison site (more than the number who are likely to buy direct), while more than half say they appreciate the whole-of-market concept.

These price comparison sites have radically changed the dynamics of insurance distribution.

Firstly, they carve out some of the margin traditionally earned by brokers and the direct writers. Some brokers even work for "negative commission" when they deal through aggregators, earning a return by up-selling value added products later. However, less is still less.

Aggregators are also beginning to change the nature of customer ownership by exploiting their databases to market the same or other products. Inevitably the brands that they sell may also be diluted. Perhaps we need to get used to the fact that no-one truly owns the customer any more - and even when we do it's only for a year.

Aggregators direct customers through a simple decision making process to secure a sale. Price matters in the online world and even if it was already a dominant success factor, it might soon become the only one.

Quite how this fulfils the treating customers fairly mandate, promoted so vigorously by the Financial Services Authority, is difficult to gauge. But the concern has to be that the benefit of selling value, expert advice and guidance, is in danger of becoming too expensive. The final choice rests with consumers, but do they really have the knowledge to make the right decision?

Whatever we think, the genie is now out of the bottle. And what's next? More aggregators? Consolidation in the price-comparison market? Or perhaps a super-aggregator that surveys information gathered by rivals?

What is clear is that for insurers, the risk of getting your pricing even slightly wrong dramatically multiplies the risk of being selected against. But as the longevity of policies continues to shorten, we might yet see an increasing need to generate profits earlier in the life cycle as an extra incentive to enforce underwriting discipline.

Record numbers of people are buying on the web, and this trend will continue. The appetite for internet solutions is insatiable, and surfers are proving to be extremely promiscuous.

These are the facts of life online today and we need to continue to respond to the demand.

Who ever said that insurance was boring?