Nigel Payne is Managing Director of Assurant Intermediary
One of the biggest advantages of my job is getting to meet lots of different brokers.
Even though we all operate in the same industry sector, it never ceases to amaze me just how diverse individual business models are and the different approaches individuals take to doing business. This is certainly true when it comes to selling general insurance and this means that brokers can experience very different penetration rates.
Time and again, I am asked what does ‘good’ look like when it comes to GI penetration. Sadly it’s not a simple question to answer because of the different approaches people take when it comes to selling GI products. What I can do, however, is give you an idea of the sort of penetration rates you should be aiming for.
Take mortgage payment protection insurance for starters. Where you have a client who is taking out a new mortgage then, according to Datamonitor, the average penetration rate is 22.3% and brokers account for 27% of all MPPI sales in the UK. So if your penetration rate is less than 22.3%, then you certainly have some room for improvement. I have seen penetration rates in some businesses closer to 40% and some individual brokers who are pushing 60%. Despite the changes taking place in this sector of general insurance, the MPPI market is still worth over £500 million per annum with potential broker commissions available of £37 million per annum. Not a bad market to try and get a bigger share of, is it?
And what about building and contents cover? This is slightly different in that every mortgage case has to have this product. According to Mintel, 39% of home insurance policies are sold through intermediaries, of which 14% are from aggregator websites and 11% via a mortgage broker, an IFA or an estate agent. The B&C market is worth over £6 billion annually so even 11% of that equates to two million policies being sold or renewed annually through the broker channel. Put that in commission terms and we are looking at brokers potentially sharing around £181 million in commission per annum. While there’s no doubt it’s a competitive marketplace, that’s a pretty big pot to go for!
Penetration rates for B&C on new mortgage business are harder to come by for the UK as a whole but evidence from large firms indicates an average of around 20% to 40% would be normal. This does disguise some big variances though. I have heard of some firms regularly looking at 50% and some individual advisors getting to 80% plus!
These penetration rates are heavily dependent on the turnover in the UK mortgage market as it is the point at which someone takes out a new mortgage that is the best time to sell them both MPPI and B&C. But with a potential £218 million of commission income up for grabs each year, it’s no wonder that general insurance has become a big focus for a lot of brokers - and should remain so for the long-term.
