The next great migration?

The launch of imarket in 2003 lit the fuse for electronic trading in small and medium enterprise cover but, so far, opinion is divided over whether the money spent on the portal has been a success or a damp squib. Before, during and after the launch of imarket, there were two main reasons for the relatively slow rate of progress in SME compared to personal lines products.

Jonathan Davey, director at SSP, explains: "Home and motor had greater volume with more standardised, straightforward products. In commercial lines, a surgery, a butcher and a baker have potentially different needs."

Imarket, according to Polaris' managing director Martin McLachlan, is responsible for 90,000 transactions a month of which the split between web browser and integration software house systems is approximately even.

A further substantial investment in hardware indicates a great deal of confidence in the whole concept of online SME trading. McLachlan continues: "We are increasing the capacity of the imarket portal by a factor of four due to the anticipated growth in volume. The vast bulk of SME underwriting has been done manually but the movement to automated writing is gaining ground."

Irrespective of your views on imarket, important questions remain over whether or not online SME trading is finally ready for take off and which companies will fuel it.

In terms of potential volume, not a lot has changed. Combined personal lines far outstrip SME: there are more than 28m cars in the UK according to the Department for Transport while there are only 4.7m businesses with fewer than 250 employees according to the Department for Business, Innovation and Skills.

Only a certain number of SME policies can be placed online. Davey continues: "A manufacturing wholesale or distribution risk - anything non-standard - needs to be individually underwritten by human beings to know the risk."

Historical argument

Those that believe most passionately in the advances to come in online SME trading point to two key issues. First, the initial switch to electronic trading in personal lines was far from smooth; it took the best part of 20 years to reach the point where it seems ubiquitous. Just because imarket has been in existence for six years and is not at the same point for commercial lines does not mean that the whole concept can be ignored.

Second, brokers want to access a variety of SME products in one place without having to rekey details repeatedly across several portals. As McLachlan points out: "The process is more efficient, rapid, cost-effective and profitable. This is what will make brokers use it."

Vivek Banga, head of business development at NIG, believes that imarket has proved an important starting point. He says: "Where imarket has worked well is in getting insurers and software houses to agree standards for products."

NIG has invested in help desks to assist brokers making the switch to transacting electronically. Banga continues: "The majority of our new business is online and the majority of that is through our extranet. In some cases, there is a referral system that is also dealt with online. As brokers become familiar with extranets, it is taking them less time to use the sites."

Customers' rekeying information has been a stumbling block, a problem that becomes a double whammy because electronic trading often requires information to be rekeyed into the back-office computer.

Ken Hutchinson, head of e-commerce at Groupama, argues that ongoing technological improvements are part of the answer. He says: "The technology has moved on leaps and bounds and we only build after asking the brokers what they want to use and how they want to use it."

New technology can lead to confusion. What is suitable for one trade may not be for another but addressing the smoothness of the process for the user was key for Groupama when it launched its service in February 2009 with a range of products for shops, office, tradesmen and property owners.

Alongside making sure that every product is full-cycle, the insurer made certain that, regardless of which area a broker requests a quote for, its online service's pages look and feel consistent. Hutchinson says: "All products are built dynamically, so you only see the professional questions pertaining to the trade. This makes for a better customer journey as you travel through the site."

Mark Armitage, managing director at Powerplace - a standalone company within Towergate - believes that, despite the imarket, there is still a huge opportunity to fill a space in the market by providing an alternative third-party comparison service.

"It has always been difficult to have insurers agree a stance; you need lots of interested parties to make an agreement," he accepts. Powerplace has worked to create such question sets and uses a panel including Zurich, Fortis and Groupama among others. Available to Open users with internet access, the service - which provides major SME products - was piloted in September 2008.

There does appear to be demand for the service: Armitage points out that Powerplace has more than 300 brokers already using it and that a further 30 join each month. He sums up: "Powerplace gives brokers control of the service. Rekeying is saved, removing frustration and cost and saving time."

Direct online sellers provide an alternative to electronic trading. At the smaller end, technology is driving products to become standardised and more accessible to online sales: what Direct Line did for motor sales by phone is now happening for SME insurance in cyberspace.

Simon Ball, chief executive at Coverzones - an online price-comparison policy management service aimed at selling insurance to SMEs - believes that the sector is "in the first stages of commercial lines evolution".

He continues: "Brokers offer a tremendous service to the business community in the UK but there's a horses-for-courses situation in which the bottom end is becoming standardised. I would raise the question of how efficient they can be at the micro end of the SME sector."

Great potential

While the existence of online SME insurance is still in its infancy, there is a strong belief that the demand will be high. Figures from the Department for Business, Innovation and Skills show that, of the 4.7m businesses in the UK, only 1.2m have employees and for these customers, as Ball points out, access all day every day is a particular strength that online has to offer. He says: "The SME community is time-poor. We sell a considerable amount out of hours - if you are a pub then it is when everyone has left that you have to do your paperwork."

Coverzones works by presenting the user with question sets after ascertaining the profession for which cover is required. Ceta, which has a variety of SME online channels, offers a different approach, providing 32 customer-specific sites such as insuremynewsagent.co.uk. David Quick, managing director at Ceta, explains: "We've specialised each site for the profession in the title, which is one of the reasons we get a high click-though rate."

Ceta's job-specific sites are backed by a linked telephone service to offer a multi-channel sales approach, a concept for which Quick foresees a strong future: "You should offer both avenues. You can't just sell online otherwise people will go back to the internet the following year and may go elsewhere."

Customers' unrelenting demand to deal with humans is perhaps the greatest comfort to brokers in the face of the online trading onslaught. As Hutchinson points out, there will always be limiting factors to website demand: "People are talking about their livelihoods [when arranging cover] and I'm not sure that people want to go to a website without a voice. People want expertise and advice, particularly at the bigger end of SMEs. It is not the same as getting a motor quote."

Davey concurs: "Your business represents your livelihood, pension and lifestyle - it is more than the metal parked outside your house. You might not be comfortable with your own understanding of insurance to protect that asset and, as a consequence, want advice from a broker that can tell you what you need."

The technology, both broker-based and consumer-facing, is developing regardless, so if necessity really is the mother of invention then perhaps it really is just a question of time until an efficient, multi-insurer comparison service causes lift-off in the SME broking.