Brokers must be getting really confused. Not only are they trying to come to grips with what regulation means to their business, but also the myriad of network offers that are now available to them. There is one thing that is certain: there will be too many networks and some will fail.

All purport to be unique but are linked by a common thread. They are all almost exclusively dedicated to attracting and adding value to the broker.

Some do this very well, but the customer and insurer benefits are unclear. Despite the hype, most rely on premium aggregation to extract more commission and 'special servicing arrangements' for their members. How will this be paid for? Unfortunately there are only two answers:

  • Dumb capacity - in the hope that the x % will be clawed back from a differential claims performance or reduced expenses. There is no sustainable precedent for this - especially if a large proportion of the 'vanilla' UK commercial book follows a similar path

  • The poor customer, who has to pay for another finger in the pie for what added value?

    • Some networks will be very successful. But it will be those who concentrate on adding value to the customer, not those who focus too heavily on making a profit from supporting those brokers, who cannot face regulation or the commercial reality of the market.

    At Zurich we will be working with those networks who believe in value creation and not simply aggregation. Such networks, together with larger regional brokers and smaller entrepreneurs who have faith in their sound business practices and customer focus, will prosper.

    Regional brokers tread carefully. Make sure the option you choose will add value to your customers. Don't mistake a silver tongue for a silver bullet.

  • David Smith is head of market management at UK Commercial, Zurich

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