Aggregators - The real picture

We have come a long way since 2002 when few people had heard of aggregators and fewer still knew their names. In those days, comparison sites remained the domain of travel firms such as ebookers.com. Halfway through that year, an online quote engine called Confused.com arrived from the Admiral Group's subsidiary, Inspop.com, claiming to provide low-priced motor insurance quotes from a broad range of insurers.

Fast-forward to 2008 and there are tens of similar quote comparison websites, all vying to provide us with quotes for personal lines policies. Some brokers dislike the platforms, accusing them of offering ill-advised policies to misguided shoppers and lamenting the price-orientated structure that offers little in the way of explaining exactly what is covered and what is excluded.

This month's PB Sentiment Survey (see pp.34-41) reveals that there is still a large amount of distrust between brokers and aggregators. Over 70% of those polled believe that aggregators propose a threat to traditional brokers, citing reasons such as "(they are) reducing everything to price", "they wield too much influence with insurers" and even "they encourage customers to review their policies each year". Only 5.1% of brokers advertise their products via comparison sites currently and, of those few, 68% say that they are unhappy with the level of business generated.

However, just 7% of brokers believe that aggregators are taking away significant amounts of business from them while others say that they are another sort of business stream. One intermediary notes: "(Aggregators) enable us to demonstrate that we offer a viable electronic solution against the direct markets."

There is further evidence of brokers adopting a "if you can't beat them, join them" attitude when it comes to comparison sites. David Rudd, retail director at Heath Lambert, notes that HL's experience with promoting its household products on aggregators has been largely successful. He says: "I'd say 65% of our total premium sales come through these sites (now). Brokers' attitudes towards aggregators have changed because it has become an established distribution channel. They're also a positive for smaller brokers because the sites allow them to compete alongside the larger brands."

Recognition

Insurers are also aware of this increased access to markets. Mike Keating, general manager of the personal lines intermediary division at Axa, said: "We know that Kwik Fit, Budget (BGL Group) and The AA all rely heavily on the aggregator model: we think one (in particular) has as much as 70% of its business coming through aggregators." He added: "We've seen that most brokers prefer the big names when it comes to aggregators because consumers gravitate towards the brands they know best. The more established names are those supported by mass media campaigns."

Keating believes a broker's strength lies in its ability to adapt to changing market conditions and that those joining the big-brand aggregators could expect an increase in revenue of around 65%.

Brokers that are considering advertising on comparison sites (5.5% of you according to the Sentiment Survey) may like to consider that it can take as long as 12 months to join an aggregator, however, if your software house and IT teams are efficient then it can be achieved in a matter of weeks.

Peter Gerrard, head of insurance at Moneysupermarket.com, says that brokers are now recognising aggregators as a cost-effective way of marketing their firms: "The cost of bidding for key terms on search engines has gone through the roof in recent years; it makes better economic sense to pay an aggregator instead, since you pay only when a customer has bought your product."

After approaching an aggregator, or vice versa, a fee for each acquisition is agreed (typically around £40 according to industry sources), and a meeting is arranged. The aggregator's IT team will meet with your broker's IT team to establish a programming script between its quote generators and your quote engine. The aggregator then applies rigorous and ongoing testing to ensure that everything runs smoothly.

There are still concerns when it comes to Treating Customers Fairly and the problems that arise from a price-dominated market platform, including policies that can leave the customer unaware of how little cover is offered by a specific policy. Some aggregators have attempted to work their way around the problems by offering alternative ways of rating quotes. GoCompare for example, (the creation of two of Confused.com's designers, Hayley Parsons and Andrew Akerman) has devised a five-star rating where customers can show what they think of their insurer.

Many brokers feel that this does not go far enough though, believing that while aggregators may see themselves only as distributors and not advisers, the public does not realise this. One such concerned broker is Only Insurance, part of the London-based Only Group, which felt so strongly on the subject that it decided to set up its own aggregator to run alongside its independent and primarily telephone-operated brokerage.

Ian Durrell, head of business development at Only Group, says that, having started out as an affiliate in 2004 and subsequently moving into the general insurance broking space in 2006, Only Group realised that there was a gap in the market for an aggregator which could talk through the policy with a customer and offer advice. He comments: "We saw the way customers were being treated by comparison sites and thought we could do better. We wanted to combine the power of a broker with the power of an aggregator."

Done deal

Over half of the products on Only Group's comparison platform, Onlyinsurance.com, come from the Only Insurance broker. Alongside the broker on the aggregator panel are 42 other insurers and brokers. The Only Group has also developed a number of white-label deals with big name companies including The Sun Online, Loot and most recently, the direct marketing giant IPT. Other national newspaper deals have been agreed and are waiting in the wings, though are not live yet.

Durrell responds to accusations of not advising customers fairly by saying: "TCF is an evolving model. As the market changes there's a role to be played by regulatory bodies to provide advice. I think somebody, probably the Financial Services Authority, should be providing the public with a guide to using aggregators."

Any accusation of a broker 'turning to the dark side' by becoming an aggregator is quashed by Durrell, who retorts: "The thing people need to realise is that the internet is a whole new way of communicating. Speed is key and, in order to promote the profile of your broker, you need to boost your business and marketing strategies." He has no regrets but, given the choice, he would have started the venture 12 months earlier, before the aggregator market became crowded.

Durrell is also open to speaking to other brokers about getting them on his site. "It comes down to the finances really," he stresses. "If you're not getting good returns on your marketing strategy then (advertising via an aggregator) could be a cost-effective solution."

Looking to the future, aggregators are almost certain to turn their hand to off-the-shelf commercial offerings. Moneysupermarket's Gerrard believes that, despite the current inertia of commercial policyholders, attitudes will change within five years: "It will be a complicated process getting commercial products onto an aggregator, though it's not impossible. Initially, people thought home insurance would be too complicated to aggregate but this was solved with more in-depth questions at the quote stage. The same will apply to commercial packages: it'll just be a really long questionnaire."

The FSA's impending regulation of the travel industry will also prompt a boost in aggregator sites, according to Gerrard, with consumers choosing to shop around for travel insurance rather than going with the packages offered by their travel agents.

Comparison sites are likely never to be able to provide a complete solution and only time will tell how much of a threat they will become to traditional brokers. In the interim, for those that are willing and that have the right products, there is a vast well of opportunity to tap into.