Savvy brokers are bucking the trend and responding to an ever-changing and challenging marketplace
The death of the broker has been predicted for many years now, as their numbers continue to decline and aggregators, consolidators and retirement take their toll. Yet there is a strong core of brokers out there who have shown themselves able to survive whatever has been thrown at them, and thrive by adapting to changes in the market.
Take Keychoice members. One grew by 44% over the past two years to reach £13m gross written premium (GWP) a year. Another grew by almost 60% to reach more than £6m GWP a year. Both of these brokers are great examples of how to respond to change, and both offer lessons in how to market and cross-sell effectively, as well as how to squeeze costs out of their businesses. It’s brokers like this that have thrived, and they are by no means isolated examples, with members growing 15% faster than non-members.
Brokers still account for about 35%-40% of the personal lines market, and 80% of the commercial lines market. And while much of this is controlled by the big boys, a sizable, and importantly, profitable proportion, is still controlled by small- to medium-sized community brokers. And Datamonitor forecasts don’t suggest this is going to change over the next few years.
If feedback from the latest Keychoice broker survey is anything to go by, successful brokers aren’t going to let the challenges ahead phase them, and are looking eagerly to their industry partners for support.
Our recent research highlighted a wide range of business areas where brokers want advice. It also pointed out some key areas where, if the industry doesn’t invest, they feel they could fall behind.
One-third of our brokers told us that their biggest challenge was competing against online channels – whether aggregators or direct writers. That made online competition second only to that perennial pain in the neck: how to deal with compliance. This was our brokers’ top challenge, with 52% of them mentioning the issue.
When it comes to support from the industry, our members pointed to several areas that could be improved. One of these was integrated commercial e-trading. The market has become increasingly competitive as direct writers, aggregators and large brokers have entered this space. And while brokers recognise they can improve their efficiency by up to 70% by e-trading directly from their broking system, they still want access to a wider range of products, and ones that will quote consistently rather than referring. Insurers, please take note!
One thing that illustrated the tenacity of brokers was their response to the take-off of telematics, one of the biggest developments in the motor market for many years. Having already spoken to a number of brokers about telematics and registered their concerns, I was expecting a negative response about the impact this could have on their business. But the response was far from it; most of our brokers want to know how and when they can access these products, and seem keen to make the most of the opportunities they offer, rather than run away in fear.
The tools to compete
Unfortunately, I’ve no doubt that brokers will face another challenging year in 2013 – with personal and commercial lines rates remaining soft, and brokers ancillary income streams from referral fees, and possibly other add-ons, under pressure.
But if insurers, software houses, networks and industry bodies listen to their customers and develop solutions around their needs as we are, then brokers will continue to thrive, whatever the future brings.
Jonathan Davey is managing director of Keychoice