Online SME trade grows apace

Despite the inflated rhetoric and desperate pushing for market position, there was little evidence that clients in the small to medium-enterprise market were switching to online transactions; in recent months, however, insurers have been betting on this changing: Direct Line has been marketing its commercial products aggressively, asking SMEs to 'cut out the middleman'; insurer Brit has taken a 38% stake in online broker Xbridge; and Google has predicted that traffic to specialist websites could increase by 75% this year.

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Another sign is that Jardine Lloyd Thompson has launched an online portal, Insurantz.com, selling commercial insurance products to sole traders and SMEs, while a source from Ace told PB that it wants to transact 40% of renewals online by the end of this year. If they were not previously, you can be sure that commercial brokers are definitely sitting up and taking notice.

According to Jason Potter, e-strategy and business manager at Allianz Commercial, there is no doubt that online trading is a firmly entrenched part of the SME sector: "It's something we see a huge growth in. Talking to brokers, there's an interest in how we can trade the business electronically.

"A third of our SME book is written electronically," he added. "It was 10% 18 months ago, though in comparison to personal lines there's still a long way to go." The types of policies available are the typical shops and offices offerings, though he stresses that online transactions do not have to be limited to this level: "We've branched out and now some commercial-combined offerings are available online."

Simon Cooter, distribution director at insurer Brit, agreed that, for SME business, online is the future. "My view is fairly simple," he commented. "In terms of micro business, I think that the sky is the limit for online transactions. The traditional face-to-face model is being phased out and the telephone model is becoming too expensive. It doesn't take a genius to make the connection between the fact that people who buy personal lines insurance online will be willing to purchase commercial insurance online. I'm convinced that micro business will undergo a massive transformation."

Despite optimism about the growth potential for online SME, Cooter doesn't think that brokers should be overly concerned: "I think that, in many ways, commercial brokers tend to focus on clients that are bigger than this anyway; I don't think we're in a position where clients paying £50,000 in premiums will flock online - those customers will continue to look to a traditional broker relationship. A micro business client is typically paying £1,000 in premium and some of the brokers we talk to see e-trading as the way forward. When you look back in two years' time, I think a lot of brokers will be winners."

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Potter agreed: "The products we're developing are there to support the broker market. Our e-trading effort is based on the broking markets. Brokers are embracing this and starting to think beyond SME."

Nonetheless, Potter added ominously that the SME market is starting a transformation along the lines of that which has already taken place in personal lines. He commented: "I think we're going to be looking at similar models to the personal lines market and the aggregator-type model.

"I think it will happen in less than five years; there's more of an appetite for it and the awareness of online trading is so much greater. It's moving very quickly." Commercial insurance aggregator Coverzones is already trading. We will discover in two years time how prescient these comments are.