Over the last few years, the broker e-trading market has seen plenty of progression in terms of capability and metrics, and that looks to continue.

Earlier in the year, Zurich’s head of mid-market Morgan Lyons told Insurance Post there is “definitely a growing demand” from larger strategic partner brokers to start onboarding larger commercial combined risks via e-trade capabilities.

Theo Duchen, co-CEO and co-founder of Acturis, also said earlier this year that “e-trading for commercial is going to increase a lot,” adding: “There’s still a lot to go. An average broker’s book by premium in their commercial account is probably 10-20% electronic. That should ultimately get to 50%. So, we should be moving toward 80% of policy count, 50% of the premium.”

So, there will be a huge increase in the prominence and reliance on e-traded products on broker software houses, but does the market have the breadth and depth of technology providers ready for that?

Two types

The market of broker software house providers can be split into two groups, as Joe Sultana, commercial director for IS2 explains.

“You see it in a couple of camps. One is the open market-type solutions, where Applied Systems, Open GI, SSP, Acturis and the like tend to sit, supplying more broker management systems with open market pricing.

“Then you have a number of what I would call smaller software providers, boutique suppliers. A bit like ourselves, supplying more to the niche market.”

One client of IS2 is Ceta, and commercial director James O’Hara explains he felt the technology firm was the ideal partner for the business he wanted to write.

“We don’t do private motor; we won’t do standard home. What we’re looking to do predominantly is in the leisure markets. We’ve got a panel of insurance companies, and we will go out and bid for business.”

We’re constantly innovating to help our clients do more, more efficiently

O’Hara explains Ceta controlled every part of the onboarding process before partnering with IS2.

When it wanted to outsource that process, O’Hara says there was plenty of competition in the specialist part of the market in order for Ceta to choose an appropriate partner.

“There’s a reasonable amount of choice,” he says. “I don’t think it’s huge, but I’d also say the size of the market may not support lots of suppliers.”

Open market

However, on the open market side of things, many think there are a limited number of viable options for an insurer to partner with and host their e-trading products.

Dave Kelly, commercial director for Percayso, and formerly of Open GI lists the “big five” as Acturis, CDL, SSP, Open GI and Applied Systems.

“We also integrate with a number of the insurtechs, so Ignite, IS2, and lots of smaller ones,” he added.

Open GI CEO Simon Badley says the firm invests a lot of time and money in innovation.

He says: “We’re constantly innovating to help our clients do more, more efficiently. From cloud-based hosting for security and agility to using AI that improves customer journeys, machine learning to identify fraud, APIs to plug in services seamlessly - and dynamic pricing to give clients the edge on their competition.”

Martyn Mathews, managing director of SSP Broker, remarks his firm has been on a positive journey recently, making efforts in the personal lines space.

“We’ve worked hard this year to bring on more insurer schemes,” he says.

If you are a commercial lines broker, you’re more than likely to choose Acturis because of access to auto-rated products that can be provided in that system

Recently, SSP announced it had switched on eight insurer schemes, with a further 12 in the pipeline.

The latest products include Aviva Commercial Vehicle and Household, Markerstudy Private Car and Covea Private Car and Household.

He also reveals the firm has retained clients who looked like they were heading to rivals.

“We have had some success in five organisations this year that were due to leave to go to one of our competitors, but they have now chosen to stay with us and enter into long-term agreements. It’s a critical component in the process of rebuilding trust.”

Applied Systems has previously outlined improvements to the service and how it has been paying dividends, bringing insurer clients such as Zurich, Arch and Iprism on board.

Dominance

But for Kelly, and others, there is still a clear leader in the commercial and personal lines spaces.

Kelly says: “The reality is: if you’re a broker and you operate in personal lines, you have only got a choice of one of those five.”

Sultana suggests CDL is the dominant player, saying it “controls the market” regarding personal lines.

Nigel Phillips, CEO at CDL, comments on these views: “The UK insurance market remains extremely competitive, as we see when tendering for business transformation projects; there remain a number of established UK software houses, as well as start-ups and new entrants from overseas. 

“However, given that CDL has always specialised and invested in the high-volume personal lines sector and has built a reputation for resilience, innovation and excellence, working with household brands such as AA Insurance, Co-op Insurance and Swinton Insurance, you would expect to see us feature in powering many of the larger brands.”

Kelly continues: “If you are a commercial lines broker, you’re more than likely to choose Acturis because of access to auto-rated products that can be provided in that system.”

We can only focus on making our offering better by continually reinvesting in our solution and delivering consistently for our community

Theo Duchen, co-founder and co-CEO of Acturis, disagrees that the provider is dominant in the commercial lines market.

He says: “We believe our broker market share is around 33%. This suggests we have a leading position but certainly not a dominant one and is consistent with the fact that there are many competitors in our space – all of whom  we have the utmost regard for.”

However, Kelly isn’t the only one who thinks Acturis dominates the commercial lines market.

Sultana says: “When it comes to commercial trading, Acturis now has the most users and the largest client base.

“Acturis are now controlling a lot of the insurer pricing. They run a lot of the insurer extranet sites.”

SSP Broker’s Mathews adds: “Acturis did a great job of investing in the commercial lines market. And, you know, organisations were very, very happy to jump on board with that and so on. They have a large market share, there is no doubt.”

But Duchen thinks there is ample choice, and Acturis should not be considered responsible for a lack of choice.

He comments: “This is a brutally competitive market as anyone in the market will attest, and this keeps all of us on our toes. 

“We can only focus on making our offering better by continually reinvesting in our solution and delivering consistently for our community.

“Acturis should not be seen as responsible for any perceived lack of choice - which is simply not true given the number of credible competitors.”

Insurer partner

However, given that there are at least two major UK insurers, Aviva and Zurich, that only deal with Acturis, questions of healthy competition have started to surface.

Harriet Conway, head of proposition and digital deployment at Zurich, explains the level of business the insurer does with Acturis.

“We initially invested in Acturis, and we have a 10-product suite built with Acturis and available on the open market as well as through our extranet.”

Meanwhile, Derek Cowie, head of SME change and transformation for Aviva, explains how the insurer only works with Acturis.

He says: “There’s an obvious leader that does a range of products when it comes to e-trade, and probably the widest range, and that helps facilitate the range that we have.

“We only trade with the main market leader at the moment.”

Aviva and Acturis recently announced the latest project they have partnered on, an application programming interface designed to streamline the claims process for brokers.

Aviva stated at the time that the platform would provide a seamless, one-way transfer of individual claim records and updates from the provider’s claims system directly into a broker’s Acturis system.

Cowie says Aviva has worked with the other suppliers in the past, but it hasn’t worked out.

“We have tried a number over the years, and we just find the responsiveness that we get from some of them is better than others. That’s a big factor for us, because if it takes more effort to deal with a third party, it becomes more time-consuming and costly.”

Charlie Hicks, managing director of broker EIC, says a combination of ease of use and buy-in from the market is behind his firm’s affinity with Acturis.

He adds: “Having a fantastic CRM system is just that if you cannot get the insurers to link up with the capabilities. It’s why we have been with Acturis for so many years because it feels as if the insurers want to be on the system and work to improve how quotes are written full cycle. 

“It’s about understanding what a broker needs as opposed to a tech outfit telling brokers what they need and not getting to the core issues that genuinely need to be addressed.”

Healthy competition?

So really, with just five players to choose from in the open market space, and one clear choice for either personal and commercial lines, is the market in a healthy position when it comes to choosing e-trading partners?

“It’s been a discussion point for many years,” says Sultana. “I don’t think it’s healthy for the market. I don’t think it’s healthy for innovation or competition.”

The limited number of technology providers could also leave the market in a very vulnerable position, others observe.

As has previously been reported, software houses have suffered outages, or cyber-attacks that have rendered the business out of operation for various periods of time.

SSP suffered an outage in 2022, then later that year, suffered a cyber attack, both of which caused major disruption to its service.

Acturis it self suffered an outage back in 2016 due to a National Grid lightning strike, but the software provider was back online within two hours and subsequently increased the number of back-up generators.

But with the increased sophistication of cyber attackers, what risk is there to the market if Acturis or indeed CDL were to go down?

Conway explains: “There is a risk to all of us in terms of the dominance that they [Acturis] have.

“You can see that in terms of some of the moves other people are trying to do in this space, in terms of getting access.”

But Conway says this is something Zurich, and indeed others, will have considered and have prepared for.

“Operational resilience is obviously something that we have a heightened look into everything that we do in terms of ‘what do you do in these scenarios?’

“We do lots of scenario planning in terms of down for a day, down for a week, down for a month or down indefinitely."

But even so, she says the effects of Acturis going down would be huge.

“I think it would be an incredible market challenge in terms of if Acturis went down.”

Both CDL and Acturis have acknowledged this and made moves to ensure maximum cyber security.

Philips comments: "CDL has consistently invested extensively in its technology, its infrastructure and its people.

“We have cloud capabilities and a proven track record in leveraging the scalability and resilience of Amazon Web Services services to rapidly, reliably and cost-effectively handle around 160 million quote requests daily, with sophisticated anti-fraud measures in place.

“We have also invested significantly in our cyber security team and tooling, adopting a proactive stance to monitoring intelligence, industry developments and potential threats, and ensuring ongoing training and testing for vulnerabilities."

Duchen adds: “No software platform is 100% immune from potential attack or outages.

“All we can do is to try to maintain high standards to minimise risk.  Acturis prides itself on investing heavily in our infrastructure and the security of the system. 

“We also deploy market-leading security solutions to prevent and resist any potential cyber threat. Acturis continually carries out cyber awareness activity across the business. 

“We can never be too careful or predict what might be around the corner, but we take every precaution we can, including a full business continuity solution, which we test regularly with the Acturis community participation.”

Increase competition

So, there is an apparent need for the market share to be spread, but it is not just for safety reasons.

Will McAllister, managing director for EMEA at Guidewire, says: “Competition is good for market dynamic. It’s good for innovation.

“We operate the world over and you see different competitors in every market we play in.

“There are certainly some markets where the competition has been in situ in that market for years. They’ve built certain regulatory integrations off the bat.”

He says he has seen markets across the world where there “hasn’t been that disruptor come into that market," and that has led to the market going a little stale.

“People would suggest that maybe that’s why they haven’t seen the innovation that they’d like,” he says.

Kelly says there hasn’t been a true competitor coming in to challenge the market status quo since Acturis back in the early 2000s.

“Probably Acturis was the last one that came in and disrupted,” he says.

On how another player can present a true challenge to the market leaders, Sultana says it is all down to access to products.

“To get more of a level playing field across the market, regardless of of whether it is to catch Acturis, it is product distribution. It is where insurers choose to distribute their products.

“The number one decision for brokers is: does it give me access to the insurers I need? And that’s a huge bite.”

Kelly adds: “You are only as good as the panel of insurers that we quote with.”

But if Acturis or CDL has already built up the portfolio of insurers, and therefore has the access to products brokers need, how can others gain traction?

It becomes a bit of a vicious circle.

Regulator looking

If the market dynamic has been like this for a while, and a “talking point” over the same period, could it have piqued the regulator’s attention? Guidewire's McAllister believes so.

He says: “I’ve had conversations with regulators in the last few years where they are concerned about hyper concentration in several different areas. Not specifically the broker space, but generally, they’re thinking about hyper concentration as a risk in the technology age.”

Whether there will be any interference, however, he is not sure.

“There’s always the potential,” he says. “I would imagine that’s the last resort for the regulator or the CMA because if there’s an active merger acquisition, then they obviously have an easy position to step in, but it’s harder when it’s just organic market share evolution.

“But, as I say, I know the regulator is keeping an eye on it and is right to keep an eye on it. Because, you know, again, because of the importance of the industry to society you have to make sure that you’re sort of spreading the risk.

“It should be second nature to insurance.”

What next?

So, the market has to address any competition worries before they become an issue being addressed by the regulator, and obviously to facilitate innovation.

But whose responsibility is it to address the concentration? Are the software providers selling the technology, or are the insurers placing the business?

Sultana suggests the responsibility lies with the insurers to spread their product development wider.

“If you haven’t got enough product, you can’t get the brokers," he says. "If you haven’t got the brokers, you can’t get the product. It is a challenge, but it really depends on what the market wants.

“If insurers want more of an even playing field, if they want to have a more balanced view of where their business comes from, then it’s in their interest to have a more distributed model across the market.”

Insurers have attempted to spread the risk, but sometimes, it hasn’t worked out.

Aviva recently announced a pilot with Applied Systems for its homeowner’s product, but that pilot was short-lived, as Aviva pulled the plug in November.

Aviva stated then that “the volumes and key metrics that have been achieved do not justify the ongoing investment”.

But with the earlier point, if the market has slowly developed so that the only place to get the desired volumes is through one provider, how can that be addressed?

Sultana thinks insurers should “take a bit of pain” to even the playing field.

“They [insurers] have got to support and take some pain if they want to even that out,” he says. “That’s the thing: Will they take some pain?”

Cowie agrees with Sultana to a degree, but says software houses need to up their game and capabilities to make them a viable alternative to the dominant players.

“I would say, maybe yes, but it has to come from the software houses making their own strategies clearer and having a product their users will use.

“We still see people using our extranet. Why is that? Because brokers prefer our website rather than other options giving them the ability to e-trade.

“Pain equals money. So, whether we want to invest that kind of money into developing these things, it has to be worth it.”

Zurich is another provider making a conscious effort to spread its product distribution, but this is still in its infancy.

Conway explains: “We’ve been on a recent growth agenda. That includes the Bravo digital trading and the first integration onto Applied.

“So, we are in our infancy of stretching that beyond Acturis.

“It’s something that we are committed to. We’ve got a strategy and a road map to make sure that we do have all those products available by alternative means. But I don’t think it’s as quick as any of us would like in terms of turning all those on.”

Conway says others have started a similar journey already, but that more insurers need to “play ball”.

She continues: “For brokers to see that they have a credible alternative, the insurers need to play ball in terms of linking into those alternatives.”

Conway highlights the work of Polaris, which is ensuring all software providers bring a certain standard to the market.

“It’s a balancing act of helping brokers do things differently while still keeping that simplified product set that allows it to be packaged.

“The market is predicated on those market standards that allow some of the ease of that comparison that is important to brokers.”

Mathews believes it is down to both parties.

He adds: “It’s incumbent on me to keep investing in my customers and my brokers, and one of the ways I can do that is by constantly asserting pressure with the insurers to allow access to products and show to them that actually, they’re going to have a good return on that if they do integrate into our platform as well.

“That additional pressure will come more broadly across the market to get access to the best products, which is all about creating choice.”

But for McAllister, the onus is on the challenger software providers to bring about a compelling vision to compete.

“I don’t think we should invite insurers to take risks in a regulated space," he says.

“It’s for us as suppliers to the industry to come in and prove ourselves rather than expecting them to move things around just for the sake of potentially seeding competition.”

What challengers need to do

So, how can a challenger firm gain traction? Where is the market going for those looking to gain market share?

Sultana says brokers and insurers ask: “What can that software do to me? How can it automate my business? How can it make me more efficient, more profitable?”

O’Hara comments: “As a broker, I want access to all products in the market, with the caveat that the reason we win in our business is the amount of data that we can consume, and what we do with that data. So we can package it up and give our insurers a balanced view of the markets we play in.”

Also, the issue of integration time was repeatedly mentioned.

Firms have been addressing this, with Applied Systems chief revenue officer Chapman previously outlining the improvements it has made in bringing on clients quickly.

He said last year: “The investment we’ve made in APIs makes integrating to and from Applied technology easier than ever.

“In the UK in 2020, it took on average nine months to implement a change from one software platform to another. We are now less than six weeks. 

“We are really making great strides on improving the process and investing in the teams of people around the solution to make sure changing is as easy and pain-free as it can be."

But the issue of speed and cost is still rife in the market, as Sultana explains. 

“I’ve heard of some pretty horrific costs and charges just to get a product live. And if you’ve got to do that five times, then you know it’s pushing on margins.”

Kelly adds: “I want to be able to roll out quickly and implement. ‘Can I connect to this? Do the systems talk together? And when they do, can I roll it out and implement it quickly?'

While the market is moving very slowly, there is still a long way to go before the market is seen as healthy

“Far too often, you hear these stories about it taking nine months to make the decision, and then it takes another 18 months or two years to implement it. By then, the world’s moved on.

“Functionality is key, but how do you prove that functionality exists? There is a lot of smoke and mirrors that people talk about in the market.”

O’Hara would like to see more open-source APIs that allow brokers to just go out and find the best product.

“The dream for me would be the availability of product if we just use software houses. But there’s a barrier, which doesn’t need to be there because underneath that is the technology. So, just open-source APIs so we can go and seek the best product. It doesn’t matter who’s hosting that product.”

But, O’Hara admits that is unlikely.

Mathews says the key to winning business is giving the client a competitive advantage while being a silent enabler.

“The technology has to be robust and scalable. That is a theme across any software house, across any type of broker, it has to be robust nowadays. Expectations have changed immeasurably.

“Technology must also be a silent partner, an enabler. Many brokers don’t have huge budgets to make significant technology changes. So, whatever I do, I need to be that silent partner that just makes things easier for them.”

The insurers have given feedback to all software providers also.

Cowie says software houses need to be “focused on their users and the experience they’re trying to give their users”.

“But also have insurer input to that right, because one cannot operate efficiently without the other,” he says. “A provider that provides that good balance between the two, and engaging both in any changes or enhancements will give their users better outcomes.”

He also thinks they should sell their proposition “in parts” rather than a full package all the time.

“They need to provide flexible platform packages, sell their system in parts,” he says. “That makes the broker feel like they’re getting value for money. They don’t just say: ‘Here’s your full platform for £x. A broker might not use half of it or take advantage of it.”

However, his biggest issue is having an open conversation with the software provider and looking at data to address where improvements can be made.

“They can tell me the high-level stuff: ‘Here’s your volume,’ but they can’t tell me why that is happening. Things like that, getting into the analytical side of the data to find out what is going on, and how we can address it.”

While the market is moving very slowly, there is still a long way to go before the market is seen as healthy.

Often, it is said that competition feeds innovation. In this case, it seems the innovation needs to come first.