The largest insurance intermediary firms benefitted most in 2021 as revenues in the market grew – but professional indemnity insurance (PII) costs soared by £141m.
Revenue from insurance distribution rose 3.9% to £19.35bn last year, however PII costs rocketed as advisers in the sector paid £342m in premiums, up 59% from £241m in 2020.
Figures from the Financial Conduct Authority’s (FCA) latest Retail Mediation Activities Return (RMAR) also revealed that it was the largest advice firms which saw the greatest reward from the growing market.
Commission again remained the main source of revenue for insurance intermediaries, accounting for 84% of revenue in the sector.
Small firms see revenue slide
Overall, the number of firms operating in the insurance intermediary market dropped to 4,182 from 4,339 – but this fall in numbers was only seen among the small and medium sized firms.
Only those firms earning more than £10m in revenue held steady in number.
It was a similar story concerning revenue where the two categories of smaller firms saw drops in income, but the larger firms grew.
There were 1,263 firms earning less than £100,000 revenue in 2021, with total insurance income of £46,904,375 and average insurance revenue per firm of £37,138.
This was down from 1,330 firms in 2020, with total insurance revenue of £49,808,645 and average insurance revenue of £37,450.
Likewise 1,278 firms earned between £101,000 and £500,000 in 2021, with total insurance revenue of £322,085,415 and average insurance revenue of £252,023.
This was down from 1,348 firms in 2020, with total insurance revenue of £345,800,066 and average insurance revenue of £256,528.
There were 1,432 firms earning between £501,000 and £10m revenue in 2021, down from 1,453 firms in 2020.
However total insurance revenue of £3,151,325,404 and average insurance revenue per firm of £2,200,646 were up slightly from £3,142,699,016 and £2,162,883 respectively in 2020.
Finally, there were 209 firms earning over £10m revenue in 2021, on par with 208 firms in this revenue band in 2020.
There was a notable 4% jump in total insurance revenue to £14,530,045,178 and average insurance revenue per firm to £69,521,747, compared to £13,909,719,364 and £66,873,651.
Mortgage and investment advice
The FCA analysis also showed data for mortgage broker firms and investment advice.
Compared to 2020, revenue from mortgage broking increased by 16% to £1.41bn while retail investment intermediation income rose 22% to £5.4bn.
The share of retail investment revenue accounted for by commission continued to decline, down from 14% in 2020 to 13% in 2021, but for mortgage broking it rose to 80% from 78% in 2020.
The value of professional indemnity insurance paid by financial adviser firms was £128,946,875 in 2021, up from £119,142,117 in 2020.
For mortgage broker firms in 2021 it came in at £17,462,711, up from £12,683,569.
FCA charts include data from all intermediary firms, not just those operating in that sector.
