At the crossroads

Opinion remains split as to whether or not imarket, an online trading platform for small to medium-sized enterprise commercial business, is actually waving or drowning. Has it bitten off more than it can chew, or is the market about to take off in a way that will silence its critics?

The Polaris-sponsored imarket platform has been at the centre of much debate since it first came on to the scene five years ago and the high-profile appointment of Chris Hanks, general manager at Allianz Commercial, as chairman of Polaris has once again added to its profile.

Insurers that wish to feature on the imarket platform pay a yearly membership fee. This in turn covers the cost of research and development, which has run so far to tens of millions of pounds. According to Polaris managing director Martin McLachlan, a 'major investment' in refreshing imarket's hardware is just around the corner and so the cost of membership is unlikely to become any smaller in the near future. The question for insurers is whether or not the investment in imarket remains good value.

McLachlan comments: "Each insurer will do their own analysis and decide if the investment adds up."

According to McLachlan, over 90% by volume of the SME commercial market's insurers are now members, including carriers such as Norwich Union, RSA, Zurich, Allianz, Axa, Fortis, MMA, Brit, Groupama and NIG. The trick now is to drive volume. This has long been the issue and, while there was a wave of excitement over what the internet could do for the SME commercial market, it is taking a long time to unlock this latent potential.

Long haul

However, Angela Cleverly, commercial lines electronic trading manager at Axa, is quick to point out that common standards in the personal lines market did not come about overnight. She says: "This is the journey we are now on in the commercial market."

Although Cleverly says Axa is heavily reliant on the imarket standards, they have not yet gained the dominance in the market that she thought they would; this is as a result of the many "different proprietary ways of setting up and doing business" that still exist.

The inability of a single means of conducting electronic business to establish dominance in the SME market has always been seen as a weakness. Many have pointed to this ongoing rivalry as testament to the fact that there will never be an online platform that garners enough support to be truly representative and, as such, competitive.

Jason Potter, e-business and strategy manager at Allianz, believes that the very existence of different competing options is proof of the value that they can add. He believes also that the greater choice will help to open up access to online trading in this market to a greater number of brokers and, in time, that the best and most efficient model will gain a natural advantage.

Whether or not this is imarket remains to be seen, yet the fact that it not only has the support of multiple insurers but also is able to quote numerous insurers in each of the classes of business written on the platform means that it is arguably of increasing usefulness to brokers.

Although he is unwilling to be specific, Potter says that the quotes sold over imarket in the first six months of this year are up three-fold on the same period in 2007, while the premium written is up by a factor of four.

Growth

The business being conducted over imarket may still be small in comparison to other methods but the upward trend is encouraging for the electronic market. Potter comments: "At the end of 2007, over 30% of our business was done electronically in the SME sector; two years ago that was less than 5%." Two years down the line, he expects it to account for the majority of business.

Gary Burke, chief executive of iprism, another online platform, is in no doubt that critical mass will come sooner rather than later to the electronic market: "Conditions are very much in favour of the growth of electronic platforms. It's a combination of the tougher economic conditions, which are making brokers focus on their margins, combined with a new generation of tech-savvy brokers and the very rapid proliferation of broadband services across the UK. All of this is creating something of a perfect storm for electronic platforms."

Not only is a more proactive approach to IT from the broker community going to push this market but a lot of work is also being done by some of the software houses, which provide the everyday broker systems, to integrate them with some of these platforms.

This will mean that, without having to do anything, brokers can access the benefits of a platform to generate multiple quotes and services that they might not otherwise have gone out and put in place for themselves.

At present, imarket deals with around 30,000 insurer transactions generated by brokers through their broking software system and about 36,000 that brokers carry out through their web browser.

If more software houses offer the ability to connect to an online platform and incorporate it into their own system then this is going to be more convenient and drive more volume than if brokers have to use online platforms and their day-to-day business systems separately.

Indeed, imarket believes that it can generate a 30% cost saving for brokers using the platform through their software house as a result of the time that they save.

Electronic trading has been around for so long in the personal lines market that it is seems old hat, yet the commercial lines market is only now reaching a point where software houses, brokers and insurers can begin to expect a return on their investments.

Rivals

While much of the industry debate has centred on imarket, it is unlikely that it will remain the only significant player in this space; the opportunities are too great and the rewards too large for others not to continue competing hard for them.

Mark Bates, chief executive at IT firm RDT, comments: "Inevitably, developments in technology by independent software providers are opening up new ways of accessing information across the industry and making it easier for brokers to deal directly with insurers to retrieve relevant data and transact business. Different brokers have different requirements, depending on the size and nature of their business, and centralised portals will continue to play a significant role in the provision of services, offering both brokers and insurers a choice in how to manage their business processes."

The dream of online trading in SME commercial has taken longer to realise than many thought. While this may have caused frustration and led some to question the validity of the multi-million pound investments, it appears that these complaints will be silenced as the benefits are slowly but surely realised.

As Hanks says: "The next steps for Polaris will be to ensure that usage of imarket increases by brokers, particularly through its software houses, as well as to extend the range of services offered by the portal." This will be the test of its longevity.