Tempting decisions

Insurance aggregator sites provide the opportunity for both brokers and customers to address their mutual requirements in the same place. Having a ready-made pool of UK consumers ready to buy online is proving a considerable commercial advantage for some brokers - especially in personal motor - but as with any kind of online selling, there are good ways and bad for brokers to make use of these sites and several pitfalls to be circumvented in order to maximise the available opportunities.

Jeremy Moll, commercial director at Comparethemarket.com, sums up what aggregators have to offer and what they are looking for from their partners: "We are a formidable force, providing brokers with access to millions of quotes a month on the back of a significant marketing spend. We operate on the basis of fixed-cost acquisition, so brokers only pay for the sales they make.

"In return, we need to be sure that brokers bring something new and different to enhance our offering to customers."

Operational considerations are also important, as Hayley Parsons, chief executive at Gocompare.com explains: "We handle over a million car insurance quotes a month, so brokers need to be sure that they are able to deal with high volumes."

Technology is a priority too, she adds: "Brokers need to have a good information technology infrastructure and full online capabilities in place." However, the most important requirement for her firm is price: "Our partners must have competitive rates."

While aggregators represent a considerable business development opportunity, not everyone has been won over by their charms, as Parsons admits: "The response from brokers has been a bit of a mixed bag. Some embraced the opportunities right from the start and even changed their business model as a result; there are some very different views out there as well."

Moll agrees: "Historically, aggregators have been perceived as a threat. Some brokers still see us in this light but many take a more positive view."

Open arms

Romford-based broker Performance Direct is one of the many that has welcomed the arrival of aggregators, as marketing director Matthew Collett confirms: "We see them as a good source of new business and believe they are positive for the UK public.

"We benefit from the might and power of price comparison advertising to reach a greater number of potential clients. We would never be able to afford to spend that much ourselves."

Michael Lynch, head of e-commerce and marketing at Kwik Fit Insurance, is also an enthusiastic supporter: "We were early adopters in the aggregation market and this gave us the valuable opportunity to test the elasticity of our pricing model and technology."

He adds: "Some brokers are a bit nervous of insurance aggregators but most seem to welcome the concept as a model for generating new business. The fact that it's based on a fixed cost per acquisition is positive as well.

"We've adapted our business model to aggregators because we believe they are here to stay. We get a good return on our investment."

Some brokers and insurers prefer to promote their own brands on the sites, whereas others take a different approach as Michael Lawrence, personal lines sales director at LV Broker Division explains: "We do not participate directly but brokers sell our products on aggregator sites such as Comparethemarket.com, Confused.com, Gocompare.com and Moneysupermarket.com."

Lawrence also believes that aggregators are worthwhile, whether for direct or indirect promotion. He notes: "Comparison sites have become a major distribution channel for brokers. Customers can see the whole of the market in one place and anything that helps provide customers with more choice can only be a good thing.

"The sites present the perfect distribution model for brokers. They only pay for the business they acquire and they don't have to do any advertising, which removes marketing costs. The sites also provide a level playing field in theory, as the smallest brokers can compete with the largest.

"They will have more success in offering specific niche services though - comparison sites are all about price ultimately."

This last sentiment about price annoys many brokers because it goes against their instincts. In May 2008's PB Sentiment Survey, 70% of brokers saw aggregators as a threat although only 7% were losing significant amount of business to them. However, there appears to be an opportunity to be the leader on the sites when it comes to specialist requests.

Collett comments: "Brokers benefit from aggregator sites because we fill gaps in the market by offering quotes in areas that bigger companies might be more reluctant to quote on. For instance, we quote for high-performance vehicles, whereas bigger companies often prefer to focus on quotes for Mondeo-man with his four-year no-claims bonus. Each side is doing the other a favour."

Simon Hughes, sales and marketing director at Open GI (which supplies software allowing brokers to use aggregators), has also observed how finding a niche on aggregator sites can be a valuable exercise for smaller brokers: "Aggregators are dominated by the big players, so smaller brokers have to be creative with their offerings because they will otherwise struggle to compete on price. They do still have to be competitively priced though: these are comparison sites, after all."

Hughes continues: "[Smaller brokers] can be successful if they step away from the underwriting footprint of the bigger players. For instance, if the big guys don't want to deal with the driver who has had a few convictions then this is where the specialist small broker can step in to make some money."

Unique attraction

Finding a niche market to operate in and offering attractive rates are vital in order to develop new business on aggregators. Appropriate differentiation may also help brokers to optimise their sales, as recent research by Comparethemarket has shown that consumers are now taking factors other than price into consideration.

Moll highlights: "In May, we did an analysis of quotes and sales. We discovered that 58% of sales were made through quotes from brokers that were not positioned at the top of the screen, which tells us that customers are no longer just looking at price to make their decisions. They are also looking at the level and type of cover and at where different brokers can add value to the quote, for example by including legal protection and breakdown service."

Lynch confirms that this approach is appealing to the market: "Differentiation is a big factor in how well aggregator sites can work for a broker. Introducing offers such as a free MoT test, discounted satellite navigation system or cashback has been beneficial for us."

Money made on aggregator sites is not necessarily easy money, however, because there are challenges for brokers to overcome. Hughes explains: "There has been a change in the attitude of consumers, which has had an impact on renewals. Instead of automatically renewing with the same broker, customers are more likely to go back to the aggregator site for another look to see if they can find a cheaper deal. This means that it's harder for brokers to retain business, though the financial rewards are there for those that pursue them."

The rewards have to be pursued and guarded with a vengeance to make it all worthwhile, as Lynch points out: "Pricing can change daily - or even by the minute. We have to be clever and adaptable enough to move quickly, to protect our market share. It keeps us on our toes."

Collett also sees price sensitivity as a key challenge: "We need to remain competitively priced and to ensure that we also make effective use of the data given by the sites to convert the quotes to sales.

"We see around 200,000 quotes every day coming through these sites and our main goal is the same as everyone else's: to keep improving our conversion rate."

Indirect promotion presents similar challenges, as Lawrence points out: "The marketplace is extremely price-competitive. We also need to have confidence in brokers' processes. For instance, brokers need to ensure that they can properly validate customer information, otherwise it may affect underwriting results."

Lawrence concludes: "Aggregators represent an excellent source of distribution for brokers as long as they remain aware of the pitfalls of renewal and competition." Although many would disagree, it is worth investigating.