Brokers to be handbagged by Avon ladies

2005 is shaping up to be a testing year for the leaner and largely consolidated broker market. Having negotiated the regulatory 'hump', brokers have been looking forward to getting back to focusing on more core activities.

However, other competitors - having also dispensed with the initial wave of regulatory effort - are also raising their games.

This is illustrated by the abundance of new ventures piling into the motor market; the collective effect of which is likely to be two-fold.

First, and most obvious, is the threat to brokers' market share, but history also shows that new entrants and ventures price aggressively, which exerts downward pressure on the market cycle. This makes it a distinct possibility that rates will now soften more rapidly as a result.

These new propositions' plans to target particular driver profiles, such as Zurich's tie-up with easyMoney taking the no-frills approach, Quinn Direct and Insure and Go targeting inexperienced drivers and cosmetics giant Avon's plans to exploit its existing female brand bias, further illustrates how comprehensive the attack on motor is.

A recent report by Cornell Consulting claims the growth of the top-250 independent brokers has slowed to 9%, the lowest growth since 1999, representing the effects of the softening cycle so far.

But, the issue of softening rates in 2005 is unlikely to be localised to the rate-softening barometer of personal motor. AM Best's assessment of January renewals initially commended market-wide underwriting discipline.

However, the rating agency also warned that traditional leading reinsurers could buck this trend by capitalising on their strong business position.

It also flagged up the possibility that relatively new players - particularly those in Bermuda - could reduce prices to attract new business at a time of ample capacity.

One mercy, however, is that the 20,000 additional Avon ladies that are reported to be drafted in to sell motor insurance, may not appear for five years, so that is one showdown some of you may be able to delegate to your successors.