Strategy
Part of A business insurance strategy for English small businesses
Business insurance channel strategy: choosing a route
A practical business insurance channel strategy for comparing cover, advice, evidence, service and total cost before choosing a route.
A business insurance channel strategy sets out where a business will seek cover and how it will verify the result. Direct insurers, advised brokers, non-advised intermediaries, comparison sites and affinity schemes can each be appropriate in England. The choice depends on risk complexity, advice needs, market access, evidence and after-sale responsibility.
What to take away
- A channel strategy decides where a business seeks cover and how it verifies the result.
- Test each route with the risk description before setting a rule.
- Record the total cost, including fees, finance and excesses.
- Include operational resilience by testing how evidence is issued and claims are notified.
- Set a channel decision rule that scores coverage fit, advice, evidence, service and cost separately.
Compare the operating models
Potential fit
- Direct insurer
- A well-understood risk fitting one provider's appetite
- Advised broker
- Unusual activities, several covers or a need for a recommendation
- Non-advised intermediary
- A business able to decide from clearly presented options
- Comparison website
- A reasonably standard risk requiring an initial market view
- Affinity scheme
- A defined trade or membership group
Question that must be answered
- Direct insurer
- Is advice given and which alternatives are unavailable?
- Advised broker
- What market analysis and specialist competence support the advice?
- Non-advised intermediary
- How does the journey establish demands and needs without a recommendation?
- Comparison website
- Which insurers, products and fields are actually compared?
- Affinity scheme
- Is the arrangement optional, and who designed and services it?
These are decision prompts, not performance rankings. A digital route may provide human advice; a broker may use a narrow panel; an affinity offer may be placed by another intermediary. Confirm the actual service and entities.
Compare the operating models
Direct insurer
- Potential fit
- Well-understood risk
- Key question
- Is advice given?
Advised broker
- Potential fit
- Unusual activities
- Key question
- What market analysis?
Non-advised
- Potential fit
- Can decide from options
- Key question
- How are needs established?
Comparison site
- Potential fit
- Standard risk
- Key question
- Which insurers compared?
Confirm advice and market scope in writing
The FCA's guidance for SMEs and insurance brokers explains questions about advice, fair personal analysis, limited panels, alternatives, commission and premium finance. Ask the route to state its basis in writing.
Advice and market scope checks
- Ask route to state its basis in writing
- Capture personal recommendation explanation
- Establish assistance if no recommendation
- Confirm who decides if option fits
- Check FCA ICOBS 5 demands-and-needs rules
Where a firm provides a personal recommendation, capture the explanation and information relied upon. Where it does not, establish what assistance is available and who decides whether the option fits. FCA Handbook ICOBS 5 contains current demands-and-needs provisions and rules for advised sales, subject to application.
Advised routes typically cost more. A broker may charge a fee, commonly £150 to £500 for small commercial policies, and receive commission, often 10% to 20% of the premium. Direct and comparison routes usually have no advice fee. The price may exclude help with complex disclosures or claims advocacy.
Ask for the fee and commission in writing before you choose.
Test each route with the same risk
Create a verified business description covering activities, turnover, payroll, locations, assets, contracts, claims and required limits. Give each suitable route the same effective date and preserve its questions. Compare:
Test each route with the same risk
- Create verified business description
- Give each route same effective date
- Preserve each route's questions
- Compare insurer and legal entities
- Compare policy wording and version
- Compare limits, excesses and aggregation
- Compare exclusions, conditions and warranties
- Compare premium, fees and finance cost
- insurer and legal entities;
- policy wording and version;
- included activities and covers;
- limits, excesses and aggregation;
- exclusions, conditions and warranties;
- premium, fees and finance cost;
- adjustment, cancellation and claim contacts.
Worked example (illustrative, not a quotation). A two-van electrical contractor with £180,000 turnover, two staff, £15,000 tools, £2m public liability and no claims is run through four routes: a direct insurer, an advised broker, a comparison site and an affinity scheme. Examples of these four routes include Direct Line for Business, Gallagher, Compare the Market and FSB Insurance Service.
Cover and limits
- Direct insurer
- £1m public liability, tools £10,000, excess £500
- Advised broker
- £5m public liability, tools £15,000, excess £250
- Comparison site
- Mixed limits, one quote at £1m public liability, one excludes tools
- Trade affinity scheme
- £2m public liability, tools £15,000, excess £250
Cost pattern
- Direct insurer
- Lower quoted premium, no advice fee
- Advised broker
- Higher quoted premium, typical broker fee £150 to £500 plus commission 10% to 20%
- Comparison site
- Free to use, admin fees may apply
- Trade affinity scheme
- Member discount may apply, check eligibility and servicing
The differences appear in limits, excesses, included tools and whether advice is given. Record the cost and cover for each route.
When comparing policies, compare policy cover rather than price alone. An apparently cheaper quote may rest on a different trade description, lower limit or missing section.
Test evidence, disclosure and claims notification
Ask how evidence of cover is issued, a mid-term activity is disclosed and an urgent claim is notified. Identify whether the customer speaks to the brand, intermediary, insurer or outsourced handler. Test documentation and contact routes without fabricating a claim.
For complex risks, a primary and contingency route may be sensible. The contingency is not a duplicate quotation obtained at the last moment; it is a documented alternative if the first channel cannot place a changed risk or respond before a deadline.
Score and weight the channel decision
Score coverage fit, advice requirement, evidence quality, service ownership, total cost and unresolved assumptions separately. Give greater weight to fields whose failure creates serious loss. Record why rejected routes did not fit.
Example weighting: coverage fit 30%, advice requirement 20%, evidence quality 20%, service ownership 15%, total cost 10%, unresolved assumptions 5%. Score each field from 1 to 5. Multiply the score by the weight.
A direct route might score 4 for coverage, 1 for advice, 5 for evidence, 3 for service, 4 for cost and 2 for unresolved assumptions, giving a weighted total of 3.35. An advised broker might score 5, 5, 4, 4, 2 and 1, giving 4.15. The rule then points to the broker for this risk.
Review the choice after a major contract, new activity, acquisition, difficult adjustment, claim or material service failure. A channel strategy works when it preserves an accountable route to suitable evidence throughout the policy period, not merely when it produces a quick initial price.
Set the next review date when the route is approved. Keep the service disclosure, panel description and responsible contacts with the policy so a staff change does not erase how the decision was reached.
Before you act
- Create a verified business description covering activities, turnover, payroll and claims.
- Check the FCA Register for permissions.
- Compare insurer entities, policy wording, limits, excesses and exclusions.
- Ask how evidence of cover is issued and urgent claims are notified.
- Score coverage fit, advice requirement, evidence quality and service ownership.
- Set the next review date when the route is approved.
Common questions
What should a business compare when testing different insurance routes?
Compare insurer and legal entities, policy wording, included activities, limits, excesses, exclusions, premium, fees and claim contacts. Record where terms differ.
How can a business assess advice and market scope for each route?
Ask for the basis in writing. If a personal recommendation is given, record the facts relied on. If not, confirm who decides suitability. Check FCA guidance and ICOBS 5.
Why include operational resilience when choosing a channel?
Test how cover evidence is issued, how mid-term changes are disclosed and how urgent claims are notified. Confirm who handles each step.
