Brokers will survive, just wait for the SME soft market to arrive, says Andy Cook

Not for the first time, Andy Homer has caused quite a stir. His comments last week that only 100 brokers and four networks would be left following regulation and ensuing commercial consolidation have touched a nerve.

While most of the people who have been in contact with Insurance Times branded the statements as nonsense, there have been many more supporters of the view than might be expected.

At face value, the prophecy seems reasonable when talking about networks. The Broker Network, Folgate, Towergate, Total Broker Solutions, Oval and many more exist now, but it is feasible that just four will survive.

But 100 brokers, surely Homer was joking. Let's take a look at the evidence. There are around 4,000 or so brokers in the UK. Each of the four networks will absorb hundreds of brokers. So perhaps 500-1,000 brokers could be networked.

Of the remainder, independent personal lines brokers may well find the future difficult. The rise of banks and affinities is inexorable. Just look at Halifax, it will be underwriting its own book of 150,000 plus policies from next year (see page 16). The underwriters are revising their strategies.

Norwich Union would rather small books of personal lines be underwritten direct and R&SA is driving forward More Th>n and looking hard at the profitability of books it is underwriting. And the high street chains keep on buying.

Brokers with books skewed to commercial lines will find life

easier. Insurers are queuing up to write SME business and a lot of this could be written electronically - especially when imarket comes on stream in January 2004.

It is in this market that Homer's comments look most ill-at-ease. As long as brokers can give their clients supreme service and while insurers remain interested in cutting costs, commercial lines brokers will survive.

Whether they can remain independent is highly dependent on their being able to trade electronically, so that trading remains profitable when the SME soft market arrives, as it surely will.