With another difficult year now behind us, will building your business be any easier in 2010? Only if you are willing to get creative
Many brokers will have breathed a large sigh of relief that 2009 is over, and that the year’s challenges have been dealt with. I would say that any business seeing their income moving upwards compared to 2008, minus the benefit of any new acquisitions, should be fairly pleased with itself.
The question now is where any organic growth is going to come from over the coming year. Here are some potential areas:
- Increasing commissions: This is unlikely for the vast majority of brokers. Many will have maximised earnings, and 2008 was the year when insurers hardened their stance in this area.
- Cross sales: Lovely if you can get them, but how many brokers are good at grasping the opportunities? You ideally need a reasonable spread of products, and a structure and system that allows this form of development to happen. Perhaps only the smaller brokers are really able to develop in this way, and do they still have the product range to capitalise?
- New client development: 2009 was a tough year for most in this regard; new business development can eat precious cash just when brokers are looking to control costs as much as possible. Broker competition is still intense, and soft rates and dual pricing are producing lower commission/fee earnings on new clients won. Brokers making a real impact on their top line through new client acquisition in 2010 will be those with the strongest sales and marketing skills.
- Rate increases: This seems very unlikely unless you are a broker who specialises in one of the industry sectors that’s been hit badly by increased loss ratios. Even then, clients will focus on the broker earnings element to keep this as low as possible, and any increase in income will have to be justified. Each year sees an expectation of rates being impacted by increasing reinsurance costs, but again I understand that any effects will be small and targeted on distinct areas of the market.
- Growth of existing clients: Most industry sectors seem to be entering 2010 in a marginally more positive way, and with the hope that economic conditions will slowly improve through the year. I can’t see many clients expanding their businesses rapidly, however. There will still be sectors that remain under pressure, and where activity levels will actually be down on 2009. Caution still seems to be prevailing, and this will inevitably lead to a continued focus on expenses – including the ‘insurance spend’. Commission and fee growth from buoyant clients will be hard to come by.
While this all looks pretty negative, and I do think that 2010 will continue to be tough for brokers, many will show their resourcefulness by making the most of the opportunities that exist, tweak their own businesses as necessary, and will continue to grow their revenues and serve their clients well.
Let’s hope that my views are overly downbeat, however, and that things do pick up more quickly – with an election now looming, it’s going to be an interesting ride. IT