With six months to go until FSA regulation begins, what once seemed so far away is now suddenly upon us Application forms are being processed and compliance plans are being implemented, but with so much focus on the short term, are brokers thinking about where their businesses will be in, say, 2010, or indeed about anything beyond 14 January 2005? Insurance Times took a straw poll.
The prediction made by Shaun Godfrey that the industry is moving towards offering complete financial intermediaries is a trend the broking industry continues to see, as brokers attempt to offer clients further added value. It was in its continuing quest to deliver this composite strategy that Opus set up the health and safety consultancy three years ago.
It is vital, however, that this trend is managed correctly as, in the pursuit of offering all services to all men, the quality of service doesn't become diluted.
The industry needs to strike a balance between providing clients with a composite service without slipping into the 'jack of all trades, master of none' mentality.
The insurance industry has seen its fair share of crises over the last couple of years, but I believe that the efforts of the FSA and the improving quality of the industry's operations mean that trust is being rebuilt and our image has improved considerably. It could be disastrous if we revert back towards working as the less regulated 'general' practitioners of 30 years ago.
Opus is keen to improve the quality of service provided - not only for our company's sake but also for the wider industry. Our philosophy is to provide a seamless service for clients and over the past couple of years we have adopted a strategy that strives to deliver a composite service for the corporate sector. We retain the benefits of the one-stop shop without compromising quality by offering a strong co-ordinated, corporate structure, with specialist knowledge in each of our disciplines and local knowledge where necessary.
It is crucial for the industry to continue its work to improve its reputation and I believe the way forward is to offer an all-encompassing service, while maintaining specialist areas that ensure the premium quality service provision and competitive pricing, whatever the discipline.
Michelle Hannen, Chief reporter, Insurance Times
From 14 January 2005, insurance brokers, mortgage brokers and independent financial advisors (IFAs) will all be regulated by the same organisation. The rules for mortgage and insurance brokers have been developed concurrently and are relatively similar. The FSA classifies all of these businesses as high-street firms, and it has indicated that the regulations for these disciplines are likely to evolve to become more alike.
For brokers this means that commission disclosure and formal qualifications, which are required in the other sectors, are probably only a matter of years away. Shaun Godfrey, group sales director of Bankhall Investment Associates, a service support provider for insurance brokers, IFAs and mortgage brokers, believes that converging regulation will lead to the rebirth of composite intermediaries.
If the future sees small and medium-sized enterprise (SME) business go direct, many believe just two types of brokers will survive: the large and the specialised. In this case, merging with the local IFA and mortgage broker to form a super firm on the high street will be the best chance of long-term survival for many small broking firms. What's more, a diversified business is better equipped to ride out market cycles, as one part of the business is likely to be performing well at any one time, and is the solution customers have been waiting for.
Doubters may care to glance in the direction of Oval, the broking group comprised of RP Hodson and Bland Bankart, which provides IFA, mortgage and insurance services and is aiming to consolidate the industry and then float.
Many brokers already do IFA work, but with talk of acquisitions again likely to feature at this year's Biba conference, who is thinking outside the box and casting an eye across the mortgage market?
Paul Robertson, Midway Insurance Services managing director
Midway is a family-owned general insurance broker specialising in property owners' business.
Much speculation has been aired about the potential reduction in numbers of brokers and the possible emergence of super brokers, however little has been said about the changing face of technology required to support the needs of compliance and changing customer demands.
By 2010, the sales process to customers will be driven by technology, with brokers balancing the need for transparent reporting processes and data capture against offering the client true advice. Clients of the future will, however, expect internet portals that allow them to handle their affairs.
Access to broker and insurer information directly by the client will be commonplace, enabling the end client to view financial information, claims handling and details of their policies from their own computer.
We can expect far more interaction with clients who, using the internet-based platforms of the future, will be able to effect minor changes themselves.
The broker's role will subsequently be far more focused on advice and they will charge fees for their services to reflect this.
Brokers will no longer have large filing repositories, as document imaging will be universally adopted. Risk presentations will be served to clients electronically, who in turn will be able to verify them on screen. Paper copies will become obsolete as electronic copies will be shared by insurer, broker and client alike.
Email will supersede the fax machine as the chosen method of communication, with an ever-increasing exchange of information by electronic means.
Electronic trading will have reduced phone traffic to insurers and contact with underwriters will be relegated to their email addresses.
Both client and regulatory demands will force the industry to embrace the latest technology although, if we are not careful, we will simply become slaves to our systems and limited by their shortcomings.
And in 2020, the whole of the internet will reach meltdown, by which time the quill and inkpot will be a long forgotten technology.
Chris Batten, Group300 chief executive
Group300 is an IFA network and compliance support services group.
Going forward, small businesses in the financial services sectors need to understand that regardless of regulation, de-polarisation and the advent of desk-based reporting to the FSA, they need to start thinking about a new model and making time to work on their business at least some of the time rather than in it the entire time.
If you look across most of the small businesses in the sector you will find businesses without any determinable strategy for the future and development of their business. It is commonplace for the broker to use the defence that there is no time to work on the business as all their efforts have to be directed to the servicing of clients. This may be in part true but it is not a defence that I would subscribe to. With a little more planning and investment, state-of-the-art technology, such as customer relationship management systems, could be used in conjunction with portal-based applications to enable and empower the client to undertake many service functions themselves.
The biggest competition is going to come from those businesses who grow by stealth and use smart technologies to shape their business for the future. These are the businesses that do invest time and money into the business and take great care while developing their service to ensure that the design includes strategies, succession planning, change management and, above all, a regard for what the client of today actually wants.
The successful broker of tomorrow will be strategic and tactical in their thinking, will understand the importance of technology, will have no sensitivities regarding online transactions and will understand the importance of creating value chains. They will also actively seek to create a customer journey that promotes repeat business, with links to other services to enable them to own the client's entire experience. They will recognise that compliance is, in fact, just good business practice and compliance controls can easily fit into the customer journey in the form of the sales process.
Will it happen? It will, and quickly, but from unexpected corners of the market. The broker of today must now choose to be quick or dead.