Running a start-up is a challenge in any sector, but, as Matthew Stringer highlights, the obstacles facing a brand new brokerage can be particularly tricky
I am 22 years old and have been running Bloomhill Insurance Solutions (my brokerage) for a year now. We are in such a different place to where we were at the beginning. I remember day one: walking into the office, turning on the PC and just staring at my empty filing cabinet for about five minutes, thinking: “What on earth am I going to do now?”
First thought: agencies. I had already arranged an agency with my previous employer, but this only helped with property owners. I applied to several direct markets, all of which wanted to see our business plan, including financial projections. Knowing that the process of direct applications isn’t normally quick, I decided to apply to a few wholesale brokers for assistance, which went without a hitch and I generally received my log-in details and agency number the same day.
Two months passed, however, and not one direct agency had confirmed their position. With new business coming in that I just couldn’t place competitively, I didn’t know what to do, and decided to turn to the networks.
I had already spoken to one network regarding their offering for start-ups. Unfortunately, as we weren’t predicting £1m gross written premiums within three years (a requirement for the scheme), it was a total non-starter. We were then contacted by another network that had been recommended to us. It had a very good offering, but the minimum fee of £1,000 per month was too much for a ‘one-man band’ start-up business to commit to, so again this was not pursued.
A few days later, we received a marketing email from Westinsure, a broker alliance that I had not previously heard of. I met with one of the development team members a few days later and it all seemed perfect: a minimum fee of £125 per month, greater access to markets, enhanced commissions, full compliance support from RWA Group, and access to the other members for advice and support via an online forum. We wanted to trade as independently as possible, so not being forced into using Westinsure branding was also a big bonus. We signed up straightaway and within four weeks had three very good direct agencies, with more applications pending.
In all, we managed to get agencies with most of the major insurers, but it was a real struggle. We were interviewed, spent seven months chasing other applications, and still haven’t been given a definitive answer on some. There were also certain insurers that were point blank not accepting start-ups.
This was something I found impossible to understand. We weren’t asking for delegated authority, binders or 90-day credit terms; just a standard agency with a normal 30-day account. We are fully authorised by the FSA and meet all the requirements to trade, so surely this, along with our sound business plan, would be enough?
Some feedback from insurers referred to their exposure to the credit risk when looking at new businesses. But we had signed personal guarantees personally indemnifying ourselves to all outstanding debts, so I really couldn’t see what more we could have done. Surely the current climate is testament enough that credit risks affect the large as well as the small!
In an industry with so many new start-ups surely access to markets is key? The new brokers of today are tomorrow’s insurance industry, but without the support of the insurers, how are we meant to succeed?
New brokers need to succeed or surely this market will stagnate. By not accepting start-ups into the industry, insurers are limiting the longevity of their broker income stream, leaving easy pickings for competitors more willing to look at the longer view.
Although no written response referred to age, I’m sure that being only 21 at the time had some influence. Even on a client-facing level, when you’re presenting your terms against that of an older broker, you can often tell from the client’s responses that they have made their mind up in favour of age.
Don’t get me wrong, there have been cases where my age has impressed clients and worked to my benefit. Likewise, I know a few insurers were also very impressed and keen to form solid trading relationships, but there have also been some obvious negative reactions.
Decisions should be based on aptitude, financial resources, quality of the management and the business plan, not age.
I remember being told by a very experienced underwriter that somewhere in the market there will always be terms for that “awful” risk, it’s just about managing that risk and offering terms appropriately. I am not calling for agencies to be offered to anyone without merit, only that they are not restricted to the biggest and oldest of the industry. Otherwise, the new broker of today just won’t survive. IT