Joining a network is one way of ensuring a future post-FSA. There are plenty of networks to choose from. Francis Higney looks at which networks to back

Champion racehorse trainer Martin Pipe has a new novice in his yard, it's called Comply or Die. Coincidentally that's the prospect facing general insurance intermediaries as they face the spectre of statutory regulation in 2005.

The horse had its first ever visit to a racetrack in October. But Pipe had the horse well prepared and running against other animals in front of a baying crowd didn't overawe it.

On the contrary it was quickly out of the starting gate and soon into its stride. That is exactly what brokers must be doing. They should be preparing to take the decision as to how they want their business to operate going forward. Companies need to ensure their intermediaries are authorised if they want to continue using them after regulation.

The new challenges posed by compliance and the approved persons regime may even tip some brokers over the edge and see them sell up and move out of the industry - a valid option given the average age of principals of firms is around 55.

But brokers, by and large, are a hardy breed and many will accept the challenge and look to redesign their business to cope with the rigours of the new regime.

Inevitably it is the larger operations that have the commercial muscle to wrestle the best deals from insurers, not just in commission terms, but access to products, rates and service levels.

Not all networks are the same and all have some question marks hanging over them. At one extreme there are the local affinity groups, at the other the networks that attempt to emulate the IFA model.

The key is to have a clear idea of what is on offer. There are some things that are best brought to the table by the network and others best left in the hands of the members.

The smaller regional groups are sometimes dismissed as a 'dinner club' for the owners of brokerages in a particular locality. However, these organisations cash in on their intimate knowledge of the local marketplace and offer a distribution network that product providers will pay a premium for.

One drawback is that often there is no clear command structure and competition is rife and opportunities for growth limited.

There are a small number of true franchises. Here network members truly do work together, but there is an inevitable loss of independence that many find unappealing.

The biggest issue for brokers at present is compliance. Networks seek to take the headache away from individual members by providing a simple road map and on-site support. Similarly, the majority of independent brokers placing business in the traditional way are finding it increasingly difficult to compete on costs and covers and are finding access to markets increasingly squeezed.

Succession planning and IT support are increasingly high on the agenda as are what exit routes are available should you decide to throw your hat in with a network.

For some the worldwide representation of a strong brand like Willis might therefore be worth considering. However, you will have to decide how much control you want to have over your own business.

For others, independence is key. Broker Direct is an insurance management company in which a nationwide network of professional brokers are shareholders in partnership with one of Europe's largest insurance groups - Allianz Cornhill.

Its current membership base is derived from the old IBRC list but is keen to recruit brokers of all sizes and business orientation.

There are also a number of new players coming to the table. One of these is Total Broker Solutions. It boasts the experience of former BIBA chief executive Mike Williams and successful regional broker Bob Beckett at the helm.

It has also enlisted former GISC head of communications Catherine Nicholl and the respected Robin Wood Associates head up its compliance side.

This new venture has recently taken its offering on the road and has elicited a great deal of interest from brokers countrywide.

However, it openly admits that it is not the panacea for all brokers and insists on firms undergoing its compliance health check and restricting recruitment to brokers primarily conducting commercial business.

Camberford Law is another soon to bring a network proposition to the marketplace. Naturally, these new ventures have no track record to benchmark against.

One that does is the Broker Network. It is the oldest established network and was formed as an umbrella organisation for insurance intermediaries. Its primary aims are to provide a range of centralised services that maximise the opportunities within the industry and to secure an improved profitability for its membership.

Members are obliged to place all their business through the network, and the network in turn takes a small percentage of the premium derived to pay for the centralised services.

But you might want to question the economic basis of an organisation that has almost as many staff as members - or you may think a high staff count is what's needed to service members.

Whatever direction you wish to take your business, it's imperative that you act with speed and seek out support to help achieve your goal. Comply or Die had the backing of the best yard in the country and romped to a seven lengths victory in his first race. Make sure you get the right support to make your business a winner also.

FSA key facts
CP160: Covers insurance selling and administration and is the FSA's high-level approach to regulation. Covers disclosure to customers about firms and products; training and competence and complaints handling. Consultation period ended in March and draft rules being discussed.

CP159: Sets out proposals to extend Appointed Representative regime to include general insurance and mortgages. Appointed representatives are firms not authorised by the FSA but can do regulated activities as a representative of an authorised firm (a principal).

CP174: Covers the high-level standards and financial safeguards that firms will need to have in place. These include: compulsory PII; segregated client minimum capital resource requirements for all new firms and extending the Financial Services Compensation Scheme to insurance intermediaries.

CP180: Sets out the proposed approach, which includes discounts for early and electronic applications, to setting fees for authorising firms carrying out mortgage and general insurance business.

Layton Blackham Business Solutions - (16 members)

"Layton Blackham believes fundamentally in the value of the traditional insurance broker who is able to provide a personal, local service. Quantum Leap is an exciting initiative providing business solutions, by way of acquisition, merger or partnership, for composite insurance brokers who want to maintain their traditional values and strengths but add all the advantages of being part of a market leading group."

Chris Blackham - managing director

Offers: Partnership option.

Costs: Membership Fee £500 with ongoing charges - dependant on business mix. Broker commission dependant on business mix.

Period: Minimum period of two years.

Restrictions: Member brokers must have a commercial bias.

Benefits: Exclusive access to LB's Partner Insurers; access to the LBBS exclusive commercial and personal lines product range; broking support into London and specialist markets; costs savings and efficiencies through use of auto-rated commercial and personal lines products; improved quotation turn-a-around times through electronic submissions of commercial risk presentations to insurers; direct costs reductions through LBBS accounting process; simple and comprehensive business performance reporting.

Access: All brokers have direct access to all major insurers where preferential terms have been arranged. Access to other insurers is via a central broking team.

System: Acturis - new members must put all their business through it.

Exit: LBBS offer a range of exit options tailored to the requirements of the seller allowing the seller to exit immediately, or over a period of time and allowing for a reduced work commitment by the seller over whatever period is deemed appropriate.

Other: Full compliance system and procedure training. Technical insurance courses and assessments and record keeping. Access to Broker Human Resources suit of documentation. Investment Option. SA Venture capitalist Capricorn major shareholder.

The Broker Network - (130 member firms £270m premium income)
"We are not new to the game like other networks. We have over 100 staff working to serve our members. We know we must add value to both brokers and insurers to justify our existence."

Grant Ellis - chief executive

Offers: Membership

Costs: Application fee of £500. Takes percentage of premiums written ranging from 2.5% to less than 1%.

Period: Minimum two-year period and six months' notice thereafter.

Restrictions: Must demonstrate that applicants are "full time brokers" running financially sound businesses. Welcome provincial brokers, from sole traders upwards, who aspire to service the commercial sector.

Benefits: Negotiates with insurers centrally and provides agencies for members. Arranges most suitable administrative arrangement with insurers. Each member has their own set of Broker Network guaranteed agencies. No geographical exclusivity.

Access: Access with enhanced terms to niche markets and London market as well as to all major insurers. Own underwriting agency.

System: Will announce in February. No compulsion for members to channel business.

Exit option: Exit route - will buy business should member decide to leave industry.

Other: Cradle to grave compliance help from in-house team at no extra charge. In-house marketing team and branding/design team. Website hosting.

Westinsure - (13 offices £47m premium income)
'We are a self-funded club that provides a tailored solution to west country brokers and extracts beneficial rates from insurers through increased buying power.

Bob Parkins, - managing director

Costs: No set charge - takes minority equity stake of around 10%. No application fee.

Period: Minimum two-year period and six months' notice thereafter.

Restrictions: Must be West Country based and predominately commercial brokers but with some members 50/50. Potential members must have premium income of over £1m.

Benefits: We negotiate with insurers centrally and provide agencies for members. Arranges most suitable administrative arrangement with insurers. No geographical exclusivity.

Access: Access with enhanced terms to niche markets and London market as well as to six major insurers. Own underwriting agency.

System: Common IT platform in development - no immediate compulsion to transfer business to it.

Exit: Exit route - will buy business should member decide to leave industry.

Other: Cradle to grave compliance help from in-house team at no extra charge. In-house marketing team and branding/design team. Website hosting.

Total Broker Solutions - (new start up)
"We don't want to take membership of your business and we are not a safe haven for someone looking to divest themselves of the rigours of running their own business. We are looking to help them become more professional."

Mike Williams - chief executive
Cost: Firms with up to 10 staff pay £70 for compliance review plus £15 for each member of staff above ten. Commission at 2.5% of gross written premium.

Period: Initial three years then notice period of a year.

Restrictions: Potential members must undergo and pass the TBS Compliance Review, deal in mostly commercial lines and have over £2m gross premium income.

Benefits: Enhanced 'partner' status with Big Five insurers; a full range of niche/specialist markets for non-core business; superior service standards with partner insurers. Members continue to run their own businesses.

Access: The Big Five - Allianz Cornhill, Axa, Norwich Union, RSA, Zurich but brokers retain their own market relationships.

System: Yet to be decided and will be financed on a pay-as-you-go basis

Exit Route: A variety of exit routes are offered.

Other: Minimum central overhead - efficient in property and staff. Brokers retain their own market relationships. Operation will be 'live' by year-end. Access to Robin Wood Associates for compliance and Jennifer Jarrett of IMC 2000 for successor planning at 'significant discount'. Full sales, marketing and human resource support; 24-hour helpline, bespoke claims handling and administration systems.

The Folgate Partnership - (£275m in premium income)
"We have been researching what brokers really want from a network proposition since our launch in April 2002. There is no 'one size fits all' solution. We have developed a series of propositions to meet different broker needs. The range of Folgate network propositions provides the flexibility for brokers of all shapes and sizes to benefit from this winning formula. We believe in the independence of local brokers within a federation backed by a strong national brand."

Andy Homer - chief executive

Offers: Folgate Broker Partnership; Folgate Appointed Representative Network; Folgate Broker Network; Folgate Broker Alliance.

Partnership: 'hub and spoke' structure for regional provincial brokers of all sizes trading in commercial business. Full acquisition of the broker.

Network: For brokers who register for FSA licenses. Option to sell.

Alliance: For brokers with over £1m premium income leading to eventual purchase of firm

Appointed Representative Network: Folgate takes full responsibility for FSA as licensing principal. Option to sell

Costs: Broker Network: Full acquisition of the brokers, involving acquisition of minority stake of around 25% of company shares and put and call options enabling the acquisition of outstanding shares within an agreed time scale (generally between 3 to 5 years) There is no fee for the Partnership or Alliance.

Period: Annual membership for Broker Network and Appointed Representative Network.

Restrictions: Detailed "due diligence" process to ensure that any potential member of our networks is a quality broker with a profitable book of business.

Benefits: Insurer partner relationships plus specialist schemes access and Lloyd's and London markets. Enhanced Folgate products, wordings and commissions. Own Lloyd's broker.

System: Sirius for Broking. Folgate Masterplan Network - a "marketing" network made up of Sirius and Policymaster systems users.

Exit: Option to sell to Folgate with Appointed Representative and Broker Network.

Other: Compliance support; central HR support; central marketing support and a knowledge-sharing network with other Folgate brokers.

Broker Direct - (£275m in premium income)

The power of a network with the freedom of an alliance"

Terry Stanley - managing director

Costs: Must become a member of the IIB @ £41 per month. Must agree to become a shareholder in Broker Direct

Membership period: Can pull out at any time - simply put shares up for sale.

Restrictions: Agency application process. Compliance left to members.

Benefits: Brokers retain full independence and any size firm accepted. No geographical exclusivity.

Product provider: Brokers remain total independence to place business in the market though Broker Direct closely aligned with Allianz Cornhill and Zurich for motor products. Commercial agency facility. Negotiated pooling arrangements with major insurers and significant minor players expected in 2004.

System: Not proscriptive; accepts feeds from all systems.

Exit Option: Share dealing service to dispose of shares in Broker Direct.

Other: Badged products; in house ULR; in-house premium financing.

The Broker Alliance - (500 people £160m gross premium income)

"We felt the idea would only work effectively with four or five firms. We may expand our numbers in the future, but this is unlikely."

Paul Meehan, group managing director of Harrogate based Smart & Cook

Cost: The Broker Alliance is a limited company in which each firm has an equal holding.

Membership: Membership limited to sizeable northern-based companies.

Restrictions: Currently closed to new members.

Benefits: Each firm retains its own brand and identity. Pooled resources remove duplication in both technical and non-technical areas. This has generated cost savings for all parties. Another key area has been to benchmark activities to the highest common denominator. This has worked well in assessing how risks are dealt with and in marketing activities.

System: Shared IT resources help to reduce duplication leading to greater IT support from insurers.

The Willis Commercial Network - 57 members
The Willis network is committed to working with brokers who want to remain independent and want to take ownership of issues like compliance but who see the value of sharing knowledge with like minded organisations to create best practice and excellence."

Mark Radburn - managing director

Offers: Full membership. In-house externally validated compliance manual available to members at cost of around £200.

Costs: Free to join. Takes percentage of commission which varies according to amount and class of business

Membership period: Five-year contract

Restrictions: New members considered only if falling into Willis regional plan. Keen to recruit in Scotland. Primarily commercial lines brokerages of between £3m and £18m annual premium income sought.

Benefits of Membership: Network membership enables a broker to continue to offer their clients all the benefits of local, independent, unbiased and professional advice, while also accessing the buying power of Willis.

Product provider access: 'Premier' status with Big Five insurers. Access to international markets.

System: SSP. In-house Grapevine and CLEO - broking presentation and policy production systems that members must sign up. Members fund their own IT costs.

Exit Option: Acquisition by Willis or other network members. Some third party sales considered.

Other: Access to wide-ranging client services including risk management and specialist insurance support, state-of-the-art trading systems and full-time marketing and HR assistance. Funding body helps members make acquisitions.

The Eastern Alliance - (7 members, £90m premium income)
"We feel retaining independence and access to markets to be important factors for many brokers going forward and the trading basis of the Eastern Alliance to be well suited to continue to achieve this for its members."

Grant Taylor - managing director
Cost: Undisclosed.

Membership: Considering how it may respond to potential interest in membership but is keen to stress that any initiative would be on a 'bespoke basis' and not the 'one size fits all' approach

Restrictions: Membership numbers have remained constant since formation six years ago. Based in south and east England.

Benefits: Will address regulatory concerns, while allowing its members to enjoy access to a wide range of markets, facilities and schemes that deliver real business advantage.

Product provider access: Works in partnership with insurers and suppliers of insurance related products.

Other: The founding principles of the EAL remain to represent the interests of the member's clients to maximum advantage.

Unitas - (11 members £200 premium income)

Membership: Alliance of eleven large regional brokers Formed in 1997.

Restrictions: Only interested in large regional brokers

Benefits: Use leverage to gain the best cover and price for clients and commission for members. Members work together and share resources to deliver specialist products and high quality professional advice. An extranet and regular meetings allow members to share experiences and co-ordinate efforts.

Other: Unitas has appointed Searchlight Solutions to work with members on regulation,compliance and training issues.