Research by Aviva also signposts Brexit as the potential cause of an economic decline
Brokers in the UK state that a hardening market and the economy are the two biggest issues currently facing their business, according to new research from insurer Aviva.
Its Broker Barometer survey, which polled 200 professional British brokers in September and October 2020, found that 51% of respondents expect a moderate economic decline to ensue, compared to 21% who believed this in February. More brokers also predict a deep economic decline, with 19% agreeing with this in October compared to 6% back in February.
Additionally, Brexit is now more front of mind for brokers. Aviva’s survey found that 77% of brokers think Brexit will lead to zero growth or an economic decline, however only 61% believed this in February.
This negative economic outlook has also hampered brokers’ perspectives on their own business performance. In February, 64% of brokers expected their business to grow, however this has shrunk to only 40% believing the same last month.
As for a hardening market, 15% of respondents expect this to impact their growth rates, versus 12% who thought this in February. In particular, one in five national brokers state the hardening market as their biggest concern.
Phil Bayles, Aviva’s chief distribution officer, said of the findings: “It is clear that the remainder of 2020 and much of 2021 is likely to present a challenge to brokers as the market continues to harden and we continue to face the uncertainty that Covid-19 presents.
“For many brokers, this will be their first experience of a hard market. These circumstances, along with the new trading situations that come when we leave the European Union at the end of the year will mean that brokers will need to remain flexible but also diligent in how they plan and respond to their trading environment.
“The resilience that we have seen from brokers throughout 2020 will continue to be tested but I am confident that their adaptable nature will help them navigate the challenges ahead and continue to provide exceptional service to their clients.”
Due to these market changes, brokers believe their customers will need different advice from them too. Around 30% think their customers will want advice on competitive pricing – a huge uptick from the 6% of brokers that thought this back in February.
Naturally, 25% of brokers believe they will be giving pandemic advice moving forward, while 10% of survey respondents expect to see adequacy of cover queries, up from 3% who agreed with this in February.
Brokers bounce back
Despite the detrimental economic impact of the national lockdown affecting most businesses, brokers – on the other hand – remain mainly positive. Nearly two-thirds (64%) do not believe that the current economic environment this year has had a negative impact on their business, versus 36% who think their companies have been detrimentally affected. More than half (55%) said that there has been no impact on their organisation from the economic environment, while 9% have even noted a positive effect.
One in eight brokers further commented that they were able to develop better relationships with their clients as an unforeseen opportunity resulting from the pandemic. This was particularly true for regional brokers (16%).
Internally though, brokers are tightening their belts in order to continue to weather the coronavirus storm. For example, 21% of brokerages are currently looking to recruit externally – broken down, this consists of 34% of national brokers, 19% of local brokers and 10% of regional brokers.
The same pattern can be noted for internal promotions. At the start of the year, 17% of brokers had intentions for internal promotions, however this has now fallen to just 7%.
Bayles said: “All businesses have had to reassess the way they operate during 2020, so it does not surprise me to see brokers adapting too.
“Brokers are acutely aware of the challenges ahead as they continue to help their clients adjust to the current version of ‘normal’. But they have shown time and again that they are incredibly resilient and adaptable. By ensuring they are in the best position to continue trading they are well placed to help their clients as they prepare to tackle the same challenges.”