CGU ADVISES BROKERS TO GIVE THEIR BUSINESS A CUTTING EDGE
CGU's new marketing pack urges brokers to emulate champion fencers' combination of attack and defence. It also analyses the industry and details the types of broker likely to survive. Andrew Pring reports.
Comparing themselves to champion fencers may not be the most obvious analogy in the minds of hard-pressed brokers as they struggle to bring home the week's commission. But for CGU Insurance, the symbolism is apt - and it forms the central imagery in an exciting and innovative marketing pack called The Cutting Edge, which the insurer is issuing to 2,700 brokers and intermediaries next week.
As the pack's foreword points out: "Champion fencers use their minds, bodies and foils in a perfect combination of attack and defence. The top brokers of the new millennium will think along the same lines, sharpening their skills and honing their expertise to win in the cut and thrust world of the future's insurance markets."
While most marketing packs for brokers tend to dress up pretty basic home truths and purvey them as top strategic thinking, The Cutting Edge does actually stand out as offering valuable insights into the business.
Rather than re-package the usual platitudes, the CGU marketing team has commissioned marketing consultants to analyse 20 of the top brokers in CGU's Club Elite - and report in-depth on what makes them "best of breed." And drawing on that research, The Cutting Edge identifies five distinct types of broker which will succeed in the next century.
They are:
1 The Industry Specialist
Brokers which focus on a particular sector and develop in-depth knowledge and service for specific clients. For example, a broker who specialises in supplying advice and products to the motor trade would be on excellent terms with car manufacturers and distributors, owners' clubs, parts and accessories dealers, and roadside organisations and garages.
2 The Added-Value Service Provider
Brokers which offer the ultimate in hands-on service. They concentrate on clients for whom service levels are of paramount importance, for example, high maintenance industries and wealthy personal clients.
3 The Flexible Relationship Manager
Brokers which offer freedom of choice and superb value for money, with their flexibility based on the service needs of a segmented client base. They offer highly competitive rates for basic products and services, with discounts for repeat purchases and cover upgrades. They may employ multi-tier charging systems based on the level of service required, and offer individually priced added-value services.
4 The Community Broker
Well-established figures in their area, they build long-term relationships with local clients and achieve extremely high standards of customer loyalty.
5 The Virtual Broker
One for the future, virtual brokers will work through web sites at the cutting edge of the insurance industry, focusing on delivering convenience and accessibility through advanced technology and only providing referrals to human operators in exceptional circumstances. They will work with insurers who pre-agree the functionality and rules for underwriting and pricing.
If you don't fit in to those categories, then CGU advises you to think hard about the direction you're business is going. To help brokers develop a realistic view of themselves, The Cutting Edge contains a broker's quiz. This self-tests on features like organisational structure, performance monitoring, insurer partnerships, competitive differentiation, use of IT, client service, and so on. Score under half marks, and you're unlikely to survive. But get to 75%, and says CGU, "with a little work you will be a real winner in the millennium."
Growth averages 5-10%
The Cutting Edge pack takes the form of three separate documents, sent out consecutively in September, October and November. Each is packed with good sense tips on strategy, good management practice, and how to grow the business efficiently.
The firms studied by CGU's consultants employed, on average, 72 staff - and the average commission earned from general insurance sales was £2.64 million. This gives an average figure of £37,000 for commission income generated by each employee. The graph reproduced above shows that as the number of staff increases, so should the commission increase by a similar proportion. It demonstrates that well managed and progressive brokerages can take on more staff without reducing their profits because of the increased costs.
There is also useful data on critical mass and growth rates. According to CGU, the majority of brokers have achieved growth over the past few years averaging around 15-20%, but ranging from zero to 35%. Large growth has, inevitably, been due to acquisitions or mergers, and the background growth trend is between five and ten per cent.
In order to beat the competition, CGU's 20 best-of-breed have all achieved a minimum critical mass. Estimates of this range from commission income of £500,000 to £2.5 million, averaging at around £1 million, However, the report notes that the critical mass required by a brokerage is increasing. The message is clear: grow, or die. So pick up that foil.