Brokerbility’s Ian Stutz and Ashwin Mistry reveal in a joint interview with Insurance Times that they would consider offers of investment in response to the network’s declining membership
Brokerbility is in dialogue with potential investors about adding an acquisitions arm to its model to turn around the trend of members selling up to consolidators.
Having seen its membership fall from 39 to 26 in the last few years, managing director Ian Stutz conceded the network had to “evolve” to meet the challenges of a second wave of consolidation.
Along with considering an acquisitions arm, this includes looking to restore its membership by targeting brokers that are part of rival networks.
In a joint interview with Insurance Times, Stutz and network chairman Ashwin Mistry revealed Brokerbility had turned down offers from investors in the past, and would only deal with a partner that shared the network’s vision.
Mistry said: “We’re not naive. There is an awful lot of capacity out there. Lots of people with deep pockets looking to get into anything and everything.
“Are we an attractive proposition to private equity? 100% yes. Have we been approached? 100% yes. Are we in dialogue with these people? Yes we are.
“But if you just want to become another consolidator in the market that’s not us.”
And Stutz said a deal could only be done if the investor supported the way Brokerbility and its members operate as independent brokers.
Stutz added: “We would be happy if we could find a model that acquired independent brokers that following acquisition maintained the values that we believe in, both for the customer and for our relationship with the insurers.
“My feelings are at the moment that most capital that comes in to independent broking comes at a price and it seems to affect the behaviour of those brokers.
“If the capital that comes in says, ‘I totally understand why you say independent broking and the mechanisms of independent broking and the partnerships you have with insurers is a winning formula, we’re going to back it and leave you to run it’, absolutely we’d be delighted to do that.”
But networks losing members to consolidators is nothing new. Broker Network’s Des O’Connor recently told Insurance Times the network started on its own acquisitions strategy in direct response to a declining number of members.
The acquired Broker Network partner is given funds to purchase members looking to sell up, enabling the member to remain part of the network and maintain its independence.
Stutz said Brokerbility would not replicate the exact same model as Broker Network, consisting of around 600 generally smaller members, but that it would give Brokerbility members a viable alternative to consolidators.
And Stutz added: “It doesn’t necessarily have to share the Broker Network regional hubs model.
“All it has to do is give us the opportunity to say when an independent broker decides it’s time to go, that we have the financial power to say we’ll maintain you as an independent broker through our own entity. And this would be as Brokerbility.”
But Stutz said there are plans in place to replace those members that have left with members currently part of rival networks.
Brokerbility has a list of 35 brokers between £3-10m GWP it is targeting to bring the network’s membership to the optimal number of 36 brokers.
“We have to evolve and we recognise we have to evolve,” Stutz said.
“We were effectively full for many years and we didn’t need to go and approach anybody, but the fact is that the market has moved at a pace and now we have openings.”
The network generally has two periods for introducing new members – in January and June.
Stutz indicated bringing in new members for June had proved difficult, but he was confident the network would have new members to announce before January 2019.
“We are talking to a lot of brokers, but a lot of those that we are talking to are in other networks and have long notice periods, so they’re working their way through some of that,” said Stutz.
Network market “turmoil”
He said he expects many members of those networks to “draw breath” in the next few months to discover what these changes will mean for their independence.
He added: “We’re also talking to other brokers who aren’t in groups, but they’ve been independent and outside of those groups for about 12 years and there will be reasons.
“It’s about us being compelling in our arguments for how we can support them.
“There’s lots of good conversations going on, but because we are confident in where we’re going and because we have absolutely 100% support from the market we don’t have to rush into it.”
Mistry agreed that despite seeing GWP fall from £625m to £500m as a result of the falling membership, there was no rush in introducing new members.
“We’re not desperate, that’s the beauty of our model,” Mistry added.
“When you see our year end numbers in the next few months it will reveal that we have grown significantly, so we’re not desperate.
“When you get desperate you do weird things that distort behaviour, but if you just do like you would have done normally results come.”