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Blog: The post-Covid landscape for broking? It’s too early to tell

Paul Trail

Paul Trail, of Close Brothers Premium Finance, consider how the broking landscape might change as we move beyond coronavirus.

I’ve spoken to a lot of people about the post-Covid future for broking, but the consensus is that it will be some time before we can safely say that we are entering the ‘new normal.’ In the meantime, life is going to be unpredictable.

So, the true impact of the pandemic on the broking sector won’t be clear for some time yet. It may be months, even years before the virus is finally behind us, but looking back, one thing I can say is that brokers have coped pretty well during the year to date.

There is no doubt that the biggest pressures were felt in personal lines, where volumes were down by a fifth at the heart of the lockdown. That was balanced by an increase in commercial volumes, as well as a significant reduction in claims costs while vehicles were off the road.  Parts of the motor market, including motorbikes, have struggled, as the sector is highly seasonal, but we are seeing signs of recovery.

Overall the market is steady and there is nothing hugely out of kilter with where it might normally be. We predict that there will be hardening on some rates, but it is hard to see how motor insurers can justify ratcheting up premiums given such low claims during the second quarter.

Forbearance
Premium finance has been stable, but from the beginning of the pandemic, Close Brothers Premium Finance (CBPF) was very busy with forbearance requests and dealing with customers contacting us for assistance and advice on how to make their payments. Helping customers was and continues to be a key priority. CBPF started to offer forbearance as soon as the Coronavirus took hold. Additionally, we worked closely with the regulator and our broker partners to ensure the best possible outcome for our mutual customers.

I’m confident, however, that in an economy that is already showing signs of recession, helping personal lines customers to spread the cost of their insurance in order to make it more affordable is a critical service brokers can offer. Most brokers offer premium finance facilities, and through our partnerships with 1,600 brokers we already help over three million customers UK-wide.

Demand for this service is bound to increase, and we may also see some further blurring of the lines between personal and commercial lines broking, as many personal lines brokers will look at writing small commercial, assuming they can adapt their business models.  

Insurers
In light of a number of recent failures among non-UK insurers, including Gefion, Qudos and Alpha, as well as Enterprise and Elite, I don’t think we’ll see more of these lightly capitalised insurers over here for quite some time. There was clearly a view that a skinny capital model was OK in order to make quick money, but it hasn’t proved to be a winning formula, and of course brokers have had to work extremely hard to find their customers alternative cover. 

Covid has shown once again how adaptable brokers are, and to that accolade we must now add resilience. We’ve seen how brokers have the ability to withstand anything that’s thrown at them and find a way to thrive and prosper, even though conditions are extremely tough. One prediction I’m happy to make is that broking is set to remain at the forefront of the UK’s business environment for many years to come.

Paul Trail is managing director for Close Brothers Premium Finance.

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