Draining the Marsh: Preparing for Increased Fragmentation in the Mid-Commercial Market

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12 April 2005


New York, NY, USA April 12, 2005

Celent estimates that Marshs recently announced decision, and the potential for similar actions by Aon and Willis, could put as much as US$720 million in commercial premium in play.

Last month, Marsh indicated on an investor conference call that it would attempt to transition, or outright abandon, thousands of smaller commercial accounts that would no longer be profitable for the company without contingent commissions. A new Celent report, , examines the potential impact if the big three brokers (Marsh, Aon, and Willis) were to walk away from these smaller accounts and put them into play in the open market for distributors.

"We estimate that Marsh may be jettisoning almost 11,000 US-based small commercial accounts with combined annual revenue of US$75 million. If Aon and Willis were to undertake similar steps, these totals would roughly double to 20,000 accounts and US$143 million in revenue," comments Donald Light, a senior analyst in Celents insurance group and coauthor of the report.

"While it is possible that Marsh may jettison fewer accounts and that the others may not follow suit, or that bulk buyers could emerge for these accounts, we believe it is likely that small brokers and independent agents will grab a significant portion of this business," adds coauthor Matthew Josefowicz, manager of the insurance group at Celent. "This chain of events could put as much as US$720 million in P/C premium in play, and that would represent approximately 4 percent of the total small/mid-commercial market. This is both a market opportunity and an operational challenge for commercial insurers. Instead of relying on a few high-volume channels of communication to large partners, insurers may find themselves dealing in smaller volumes with smaller distributors. In such a scenario, there is less margin for inefficient communications and business practices."

The report notes that these smaller distributors rely less on a national brand and more on their local reputations for product expertise and attentive service. Insurers that want to be competitive must support these reputations with well-designed program business and frictionless communication channels, both online and offline. Insurers must also make sure that their systems help them to be competitive by enabling rapid product development and adjustments, streamlined underwriter workflow, and online communication channels for agents.

This report draws on Celents continuing research on the commercial lines market and insurers use of technology to support distribution. It also draws on the results of a virtual panel of more than 20 agents and smaller brokers conducted the week of Marshs initial announcement. The report provides insight into their expectations for this new opportunity and examines what they need from their preferred carriers to take full advantage of it.

The 17-page report contains five figures and two tables. A table of contents is available online.

of Celent Communications' Property/Casualty Insurance research service can download the report electronically by clicking on the icon to the left. Non-members should contact for more information.

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