Brokers and startups will turn to reinvention in the long-term, but for now, consolidation is ‘here to stay’

The impact of broker consolidation on the market is “sad” and not “a good thing for the future”, says Kennett Insurance Brokers managing director Luigi Maggio.

“The way we’re going, it’ll be one major insurer and one major broker, which is sad,” he told Insurance Times.

“I can see continued consolidation in the market, but I don’t see that’s a good thing for the future, but I think it will do a full circle. In time, we’ll go full circle to more brokers or startups reinventing themselves, but certainly in the shorter-term, it does look like consolidation is here to stay.”

For Maggio, consolidation hampers the ability for brokers to offer a personalised, customer-centric service as it often requires more centralised business functions.

He says that consolidation, therefore, can lead to “dictatorial” processes in how brokers place business and who they place business with.

Group benefits

Despite this stance on broker consolidation, Kennett Insurance Brokers itself has gone through quite an acquisition journey.


Luigi Maggio

In November 2017, Kennett was bought by fellow broker Willis Insurance and Risk Management (Willis IRM) as part of its growth plan.

Post-acquisition, Kennett retained its organisational brand, as well as its geographical focus on Yorkshire.

Then, last December, parent company Willis sought to further expand its British footprint with the acquisition of Hale Kavanagh Insurance Brokers – Maggio confirmed that although no restructuring is due to take place as a result of the acquisition, Hale Kavanagh will be rebranded between April and June this year to join the Kennett family.

Maggio says this branding process is hugely important as it offers stability.

He continues: “We’re an independent business owned by [a] second generation family where essentially, we want to give clients and staff the stability moving forward of a brand rather than having numerous, diverse changes to brand.

“We just want to be clear that we’re building something for the future that gives stability to all parties.”

Speaking of Kennett’s own acquisition by Willis, Maggio adds that this process changed the broker for the better as it bought a host of different, new elements to the organisation.

This included employee benefits, risk management functions and an accident investigation service.

“In smaller businesses, you don’t have that many strings to your bow,” Maggio explains.

“We now have the ability from a team based in Willis to actively manage our risk moving forwards, so we are able to utilise that as a true value-added service.

“Price is king in our days, but in reality, you need to add value to your service to win and retain clients. You can’t simply come down to the price.”

Maggio confirmed that Willis is “open to acquisitions” as long as the business fit is right.

“We need to acquire the right type of business with the right type of people,” he explains.

“It was important for us to find a business that really sat with our core values about putting the client first.”

He adds that “we are looking into a couple of exciting partnerships, which could be game changers to the business in new areas and products”.

Challenges ahead

Alongside the consolidation-acquisition conundrum, Maggio predicts that brokers’ agendas for 2020 will focus on emerging risk profiles such as cyber, financial crime, climate change and – of course – how Brexit plays out.

He further notes that insurers withdrawing from the UK market also raises a capacity problem that brokers will need to handle.

This relates to the fact that many insurers are facing increasing pressures around their profitability and combined operating ratios (COR). “The market is absolutely hardening in certain areas now,” he adds.

Maggio cites talent attraction and retention as a further industry issue – this is especially pertinent for Kennett as it is seeking to expand its people numbers.

He says: “This isn’t just a simple case of financial – this is an environment with work-life balance and how we treat staff and engage with staff, that’s vitally important moving forward.”

Another challenge for brokers lies in client education, Maggio says, particularly as technology-driven products could be causing an advice gap that brokers are striving to fill.

“We’ve seen the client mentality change,” he explains.

“We’ve sat in a market for over a decade where clients are expecting reductions every year, so we’ve really got to understand how we educate clients to understand the value of our product beyond just our price.

“Their thought process needs to change around risk and that’s something that takes some time.

”The education piece is absolutely important to us, but it’s to understand the pressures that they’re under, to understand their business, not just what we’re trying to get out of it.”