Specialist knowledge, personal service and fleetness of foot are helping brokers survive in tough times, says Adrian Colosso. Can insurers follow suit?
Debt recovery has taken on a new meaning over the past few years. Long gone are the days when two burly men in dark glasses would appear from the back of a Ford Transit with few words and firm fists. Earlier in the downturn a Mercedes would draw up carrying men in sharp suits and designer glasses, with arms full of paper: documents in which the words “financial covenants” would be prominent.
Things have got so bad, though, that the Mercedes has been replaced by public transport.
Profitability is only one gauge of a company’s financial strength but what will become clear this year is that cashflow will determine the demarcation between organic growth, fresh business growth and acquisitive growth.
In a recent Sunday Times list of the most profitable companies, the consolidator model was shown to bring triple-digit profit growth over the past two to three years for a number of acquisitive brokers, but the pressures of the bottomline cost base (namely infrastructure, people, and the commission pressure from insurers) will be draining this year. And let’s not even start with the pension issues in the UK economy.
To say the first quarter of 2009 has been competitive would seem trite. Since Christmas there have been a few metaphorical bare-knuckle fights among the global, national and regional brokers at which even Len “The Guv’nor” McLean would have raised an eyebrow.
Retention and churn are all part of the ebb and flow of broking. The sector can expect more musical chairs this year than ever before both with its own people and with clients. What has become more obvious is that over the past 10-15 years intermediaries have cut and streamlined the cost base to suit the needs and to reflect the sectors within which their clients work. However, insurers have not adapted, nor taken out the costs commensurate with the increased levels of commission. The product suite is often limited, not to mention dealing with clunky systems. All the brio has been in the broker space, while the insurers have been overly cautious or monolithic in approach.
But being a broker is fun. Let’s not forget that. The long-standing relationships with clients that brokers have is unique against the backdrop of the tarnished reputation of certain parts of financial services. Heath Lambert is an independent broker with corporate and commercial clients. We hit above our weight with Crossrail and more recently the Post Office Financial Services (POFS) deal with insurance partner Fortis to sell SME commercial insurance products.
The reason it achieves these successes is the fundamental reason brokers survive in a world dominated by the internet. Specialist knowledge, personal service and fleetness of foot. Any broker worth his or her salt will know that when the client rings, whatever time of day or day of the week, we listen and then deliver. Mutual respect for both the client and the insurer (which is often forgotten as “the client”) is tantamount to longevity of the industry.
As a long-suffering West Ham supporter, I believe that this year could be very much like watching the ’ammers – moments of sheer joy coupled with frustration that the true potential may only be reached in years to come.
At the beginning of the year, Insurance Times named former West Ham manager Harry Redknapp as one of its top ten mentors for the industry. There are two quotes from the great man which stick. First, when asked whether he took work home: “I sorted out the team formation last night lying in bed with the wife. When your husband’s as ugly as me, you only want to talk football in bed.” The other is on managing talented players. Redknapp said: “The sad part is that the ones who do well want to go, but you cannot move the ones who are useless.”
Brokers must make sure the talent stays in their business. With unemployment rising, Heath Lambert is keen to retain staff and hire new staff from across the UK. In Birmingham, expansion plans are under way and new opportunities will continue over the coming months.
We want to continue to be big enough to deliver and small enough to care.