SRG group chief exec says SMEs are ‘the lifeblood of the economy’ and that competition from startup brokers is ‘healthy’
The amount of consolidation between broking businesses is “something of a concern” and “reduces client choice”, according to Warren Downey, group chief executive of Specialist Risk Group (SRG).
Speaking exclusively to Insurance Times, Downey explained that the cycle between business consolidation and the emergence of new startups is imbalanced because “it’s quite difficult now to break away and set up a small specialist or generalist insurance broking business in the UK”.
He fears this will lead to a reduction in choice and competition within the broking market, especially as this trend can also be depicted “at a global level, with very, very large brokers acquiring one another”.
He explained: “The amount of consolidation, I think, is something of a concern. What would have happened in the past would have been that you have a lot of startups. You’d have that phase of consolidation, then you’d have a break-out of startups.
“But, it’s quite difficult now to break away and set up a small specialist or generalist insurance broking business in the UK. The barriers to entry are getting higher and the number of firms providing that independence of advice and service are reducing. That is a challenge that the industry faces.
“[This trend] reduces client choice – no question. There’s not argument you could make that it increases client choice.
“Right the way through the ecosystem, it’s healthy for there to be startup businesses, new ideas, new impetus, new homes - and we see ourselves in some ways as being one of those - but we are conscious there are an insufficient number.
“I do hope that after this period of great consolidation, there will be new and emerging, not just consolidators, but new and emerging specialists and new and emerging generalist players up and down the country and in the other markets we’re interested in because small and medium enterprises are the lifeblood of the economy.”
Although Downey hopes more startup brokers come to fruition, he does acknowledge that insurance is a hard sector to break in to.
“Some of these barriers are completely understandable. Risk and compliance is not an area to be taken lightly. But it’s hard to start a small broking business now,” he added.
Integrator of specialists
Despite these views on broker consolidation, SRG has made five acquisitions itself this year, as well as recruited a team of 16 staff from commercial lines broker AFL Insurance Brokers.
Downey explained this is because SRG views itself as “an integrator of specialists” rather than a consolidator, with the business having “a limited impact on the overall universe”.
He continued: “SRG is a relatively new entity in terms of the industry consciousness – we’re made up of lots of brands that people have known for many, many years. But as a group, it feels new.”
From this stance, Downey added that he would like SRG to better support broking startups; “not buy them, but support them” to “punch above their weight” and “survive” in order to offer end customers that all-important choice.
Facilitating “the natural cycle of the market, where after a period of consolidation there are startups and new ideas and entrepreneurs and the next generation [coming] through” is a macro challenge for the insurance sector, Downey noted.
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