The major insurers are courting independent brokers more than ever. Mike Keating explains why AXA is one of them
Trying to sum up the independent broking sector in a single phrase can be difficult. After all, how often have we been told that its future is in doubt?
We know that more technical and soft skills are needed to maintain competitiveness. These demands, combined with regulatory deadline pressures, and the threat from new forms of distribution, leads some research to suggest that small independent brokers will make up only 15% of the market by 2012.
But research isn’t always right, so how can we help to retain a diverse and independent market?
The industry has been guilty at times of having a dig at the independent broker. They’re too old. They have no succession plan. They won’t cope with the cost of regulation. Direct writers and the threat of online will put them out of business.
However, instead of folding under the challenges, independent brokers have shown resilience and entrepreneurial flair.
The changes in the market have forced them to reappraise how they deliver their services and the nature of the services they offer. They have had to embrace technological advances and further understand the level of service their customers expect.
Within the personal lines market, where further commoditisation has led to an increase in electronic trading, brokers have had to change their work practices to keep pace. Those that have managed to do this still have an important part to play in the market.
There is no doubt that independent brokers have not had the focus they have deserved over the past three years or so and have had to fight to hold on to their share of the cake.
But when it comes down to a fight, who is more motivated than the management teams at independent firms? The more the market has changed, the more independent brokers have demonstrated that the service, expertise and client understanding they bring to the table add significant value.
Therefore, it’s no surprise that many large insurers have recently stated their commitment to the sector. Although insurers have always understood the need for a varied book of business, the rise of aggregation and the changes within the direct market have renewed their attention.
As the market shows signs of hardening and investments suffer from the recession, insurers want to boost their underwriting profitability, even if that means sacrificing volume from their more marginal consolidator relationships. Increasingly, insurers are courting brokers for the relationships that can be developed and the quality of business they can provide.
The growing pressure to increase profits and efficiency make a balanced market portfolio essential. AXA’s significant investment into the independent broker segment is only now bearing fruit, such as full-cycle electronic data interchange (EDI) that is now available for most of our personal line products.
We have also invested in a dedicated telephony team to support independent personal lines brokers with day-to-day trading issues. We have been piloting this with 350 firms and, as a result of the excellent feedback we have had, now plan to roll it out to more.
We have been keen to ensure that we get the basics right, such as consistency in our relationships, underwriting expertise and support, as well as a focus on relationship management at all levels within AXA. In return, we ask that the brokers trade exclusively electronically with us and maintain a profitable book of business. This compromise has benefited all parties over the past year.
Increasingly, insurers are fostering relationships with brokers of all shapes and sizes. Independent brokers have always been very attractive; the quality of the business they deliver and the strength of the relationships they provide has never been in question.
They may not control the same amount of gross written premium as they once did, and there are undoubtedly mounting challenges to face. But time and again, the sector has shown that it is capable of meeting and overcoming these. If anything, it seems to thrive and flourish on the change it constantly has to cope with.