Sentiment Survey

Welcome to the second PB Sentiment Survey of 2008. We think that this is an important industry barometer, so thank you to all that took part.

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As usual, the PB Sentiment Survey makes for fascinating reading. It is immediately evident that brokers are experiencing challenging times; market conditions are highly competitive, rates are under pressure, insurer service seems variable at best and clients are now feeling the impact of the credit crunch. Add to this the competition from direct insurers and internet players for small to medium-sized enterprises and it is not surprising that brokers have plenty to concern them.

Although half of the respondents believed that rates in personal lines are now moving up (see graph one), the situation in the commercial market remains gloomy. There still seems little evidence of much-needed market hardening and 35% stated that prices are falling. With almost two thirds having reported plenty of available capacity, the recent media talk from some insurers about increasing prices has yet to materialise.

The credit crunch is now starting to bite. Almost 95% of those who responded said that clients are being squeezed (see graph three) and so are looking to cut back on their insurance expenditures, while over half reported that clients have ceased trading. The survey suggests that retaining business is now the priority for most brokers and, with clients shopping around, this is fuelling fierce competition. Over 90% of respondents said that clients seek alternative quotes from competitors either regularly or occasionally.

If this is not worrying enough, 40% said that clients now investigate internet options for commercial insurance routinely and that this behaviour is becoming more common. When we consider the recent activity from direct insurers in the SME arena, it is obvious that the commercial broking sector is more challenging than ever.

The survey also revealed some interesting views on insurance fraud and how it is being managed. A significant majority of respondents expected a rise in fraudulent claims resulting from the current economic climate. However, while most believed that insurers are responding well, there is a belief that brokers have a role to play as the first line of underwriting, especially given their valuable client knowledge. Respondents want more openness from carriers and greater information sharing for mutual benefit. More communication appears to be the clarion call and it is one for insurers to think about.

From a regulatory viewpoint, there is mixed news. Of those that took part in the survey, 95% believed that they are confident of meeting the next TCF deadline and 97% said that they are demonstrating the Financial Services Authority's six TCF consumer outcomes consistently (see graph seven). It is encouraging too that 82% now see TCF as central to corporate culture. Sadly, however, while there is an appreciation that regulation will improve professionalism, almost 80% of respondents feel that their commitment will not improve client experiences (see graph eight). Concerns remain about unnecessary bureaucracy - something highlighted in previous Sentiment Surveys.

Of the old bugbear, poor service, brokers still feel that insurers need to be more responsive and agile, although there is more positive news in terms of satisfaction with insurers' claims services. Almost 50% now rate service as good or excellent. Insurers mentioned in dispatches score highly for getting the simple things right and being quick and efficient.

In summary, this latest edition of the survey illustrates that a lot of brokers are experiencing tough times. However, those with true entrepreneurial spirit continue to adopt a glass-half-full attitude and regard current market challenges as opportunities, supporting the view that it will always be a good time for high-quality brokers.

Laurent Matras, managing director, Groupama Insurances.