As we sit here, in 2011, UK plc is still feeling the combined after effects of the recession and increased costs for all sorts of commodities, fuel, power and other items that businesses need to survive. Business and commercial insurers are no different and have seen their costs increasing over the past few years, with many looking to pass these costs onto their customers.

As an independent business insurance broker, we deal with many different insurers and to be honest, we have seen this (the price increases) coming. Over the past 5 or 6 years, insurers have been happily piling on the business at uneconomic rates. At times, us brokers are accused by insurers of fuelling this under-pricing as we look for ever more competitive deals. Whilst this may be true in some instances, in the main the insurers are to blame because they set the prices according to how much business they want to get. If all insurers are charging £500 for annual cover in respect of say, shop insurance for a butchers, in Bromsgrove, with £10,000 contents and £10,000 stock and another comes in at £400 (with comparable cover) then they are going to pick up the business.

You would think this is true and in most cases it would be. But, some commercial insurance companies are chasing the market down by offering to compete with the market rate. If one of these insurers quotes us £1,000 and we get a quote at £500 from one of their competitors on an agreed list, they will undercut this by 5%. Now, we do not want to chase the market in this way, but we know the deal is not exclusive, so if we do not do this, then someone else will. This happens day in, day out and when you apply this to their renewal premiums, whereby they will compete with almost any alternative, there is a downward spiral on rates. Going back to the £500 butchers shop, there is a reason why the “market” as a whole charges a similar price and this is because they believe at this price they can make money, if they charge 20% less then they are not going to make as much money, this is economics at it’s basic level.

Now, some of the insurers are starting to hurt because of this under pricing and as we have said, you would have to be blind not to have seen this coming. But, instead of gradually increasing the prices, as they have been gradually decreasing them, they go into panic mode. Panic mode for the insurers covers two areas. Firstly they increase their prices at double digit percentages and expect us to sell this to our customers and secondly, they pull out of notoriously un-competitive business lines such as van, fish and chip or takeaway insurance.

As a result of this, many customers are now receiving renewal premiums at huge increases and as a result more an more are looking around for alternatives. With the internet now available for so many, this is one of the first ports of call. As we all know, the internet is a brilliant way of bringing businesses at opposite ends of the country together. This is how Businessinsure has grown so quickly and so well, we offer a first class service to customers no matter where they are in the country.

This causes some of the traditional business insurance brokers to panic and sweat an bit. Sometimes they are lazy and complacent and just assume that you will renew with a 13% increase. This is where we get a lot of customers calling us for quotes, we treat every customer the same and usually will turn a quote around within hours. Where we do this and undercut a customers current renewal, by going to a more competitive insurer, the existing broker the tries to denigrate what we do, but saying that dealing with an internet broker is fraught with difficulties because they are not “just around the corner”. But, does this really matter? The truth is that no, it doesn’t matter for most businesses with a turnover under £2/£3,000,000. Any claims are dealt with by the insurers and they have loss adjusters on site within days. We, as a broker, do not need to physically be there in the event of a loss. So, if you are deciding to look for an alternative, now is the best time to use the internet to it’s maximum capability.