A new study has revealed the most profitable schemes for insurance brokers.
The most profitable lines for brokers are excess of loss, employers’ liability, and public liability, according to data from SchemeServe’s first annual schemes premium index. Meanwhile, the least profitable lines are household and caravan.
The insurtech firm’s index spans 24 separate lines of insurance as managed on its platform during the period between May 2018 and August 2019.
The study showed that an average first premium for excess of loss liability was £84.99, with renewals at an average of £302.41. Brokers’ commissions also increased here from £15.52 at first placement to £52.69 at renewal – an increase of more than 240%, making this the most profitable scheme for brokers based on this data.
Meanwhile, data on employers’ liability schemes showed that brokers earned a little over double the commission (229%) at renewal, with renewal premiums averaging £963 up from the first premiums of £419. This makes it the second most profitable scheme for brokers during the period.
“The increase of premiums at renewal on excess of loss could be driven by businesses growing and increasing the number of staff over the first year of trading,” said John Price, chief operating officer of SchemeServe. “Those increases in staffing levels are reflected in employers’ liability product figures as well. It’s well worth nurturing these businesses particularly when one considers the commission increase. Excess of loss liability appears to be a good news story for small businesses in the UK and brokers alike.”
The study also revealed some surprising renewal figures for cyber – commission rates are 20.1% at renewal, up from 4.9% at inception, but, despite this, of 170 policies sold a year ago, only two renewed and they renewed at a lower value.
“The figures clearly show that cyber policies are suffering widely,” said Price. “In my view this is because no-one really understands the implication of having the cover. Often there is an element of cyber cover in liability policies and people believe that enough cover is already in place. Some basic policies only cover the cost to fix the attack, but not the repercussions more widely of loss of trust by customers in businesses that suffer data breaches, for example.”
“The profession needs to work much harder at explaining the high risk and balance the ‘it couldn’t happen to me’ thinking with the importance of having appropriate cyber cover in place. It needs to be very near the top of businesses’ lists of things they need, and not at the bottom as an afterthought.”
