Bluefin boss Stuart Reid is positive about the future of start-up brokers
IMAS’s recent FSA quarterly review report has revealed that insurance broker start ups are still alive and well, indeed on a upward curve, with 10 commercial lines and nine personal lines brokers authorised by the FSA in Q1 2009 alone. The insurance sector accounts for the largest percentage of new businesses receiving FSA approval (47%), whilst the report reveals that other subsectors within the broader Financial Services sector are not faring so well, with numerous cancellations and low start up levels. To be honest, this doesn’t surprise me in the least! The insurance sector is seen - rightly - as a safe haven in a recession, and there are still fantastic opportunities out there for the hardworking broker to start up his or her own business. After all, having a business that revolves around providing an essential service with annually renewable contracts is an enviable model in these uncertain times.
This industry will only survive if there are start ups. Without a regular injection of new, innovative thought – which is often driven by healthy market competition - the pool of ideas and innovation risks drying up.
Of course, jumping in at the deep end of this pool alone can be daunting, especially in the current economic climate. Were I to start up tomorrow, I would look to buy an existing broker rather than start a new business from scratch. Prices are likely to be the lowest that they’ve been for last three to four years and buying an existing business would likely be a relatively cheap acquisition. In addition, buying an existing business gives you a strong start with infrastructure, agencies etc already in place.
However there are, naturally, inherent dangers with starting up a broking business. It doesn’t necessarily follow that a good broker makes a good businessman. There is a subtle but distinct difference. Running a business and being good at insurance are two very different things. Not only is a good business sense needed but a grasp of the competition out there such as direct writers, aggregators, nationals, consolidators, to name just a few.
The competition in this space is immense and the challenges are many. However, one must remember that, ultimately, personal service is key to a brokers success. If your new business can provide informed and educated advice; offer competitively priced products, backed by a decent insurer, all with the aforementioned vital ingredient of personal service, how can you lose?
Stuart Reid is chief executive of Bluefin Insurance Services.