2008 is destined to be the year of the network. As more contenders enter the ring, Danny Walkinshaw assesses the heavyweights.

The stakes are high. As Towergate continues to dot the i’s and cross the t’s on its £95m acquisition of The Broker Network, the other contenders in the burgeoning network market are squaring up for the fight of their lives.

2008 is set to be the year of the network – but competition is fierce and only the strongest will survive. With the might of Towergate behind it, Broker Network may look invincible, but challengers including Cobra, Willis and Layton Blackham Business Solutions are keen to take its mantle. They also face the major threat of consolidators and the dark horses – alliances. Which networks are set for success in the year ahead?

The contenders

Grant Ellis, chief executive of The Broker Network, said “there is no question” that networks have become more popular. “The attraction to brokers is at a higher level than it has ever been. In my mind, 2008 will be the year of a significant growth for network business,” he says.

But the networks themselves admit that they need to grow if they are to step up to the plate in 2008. Some have already made a promising start.

In the last six weeks, Layton Blackham Business Solutions (LBBS), the broker network owned by AXA, has announced ambitious plans to become the leading network within three years, and take on the likes of The Broker Network.

Willis is also planning a major drive to grow its network in the coming year.

The market has also seen new entrant The Purple Partnership, run by the Jelf Group, set to launch in the New Year under the leadership of former Westinsure managing director Bob Parkins, with big promises.

Ellis says that talk is cheap and some networks may struggle to meet their targets. “The new ones have got some catching up to do, quite frankly. I don’t see from most of the new offerings that are mooted that they have all understood that,” he warns.

“The new networks will be saying ‘what can we offer that provides an alternative to the networks that are established?’”

Those established networks, including Ellis’ own Broker Network and major rival Cobra, will look to build on the success that has driven them in the past, and with healthy memberships they will consider themselves the obvious choice for brokers.

They will face their own battles, with Ellis currently anxious to reassure members that the Towergate deal will not affect their independence, with his rivals keen to capitalise on those very fears.

Steve Burrows, chief executive of Cobra, says: “It is going to be the year of the networks because all brokers will have to turn somewhere. I think we have all got a lot to learn and certainly next year Cobra will look different as we develop new facilities.

“The problem with networks is that they don’t have a secure membership. There will be a drive next year in products for members to stay in the networks.”

Burrows admitted that competition between networks is fierce, and in the past there has been poaching between

competitors.

He also reiterated the importance of retaining members. “In the first year a member costs us money and if they end up leaving after a year it will cost us even more,” he says.

“The last thing networks want is members jumping from network to network.”

Willis is certainly keen capitalise on disenchanted members of other networks.

Brendan McManus, chief executive of Willis UK & Ireland, said the company would be looking to play on fears that other networks could become acquisition targets. “The Willis Network is not going to be sold,” he said.

He added that Willis would help brokers who wished to leave a network to join Willis Commercial Network.

Members moving networks is not the only threat. As well as rival networks, broker alliances are eager to step in and spoil the party. Described as a “group of like minded independent brokers”, alliances are controlling high premiums and creating a huge broker base around the UK.

Denis Morgan, managing director of Westinsure, itself an alliance, said: “We are working together to defend our position against the super consolidators. We have a great affinity and community amongst our membership and we believe we have a

unique position in the market, with the vast majority of our shares being owned by

member businesses.”

“For our own part, we will be working hard during 2008 to make our proposition even more compelling for our members and insurer partners.”

It will be well into 2008 before it becomes clear whether Towergate was right to pay such a high price for the Broker Network. But one thing is for sure: further consolidation and acquisitions in the network arena is on the cards.

For a start, Towergate has not ruled out buying another network – in fact, upon its bid for The Broker Network, it stated that the purchase would “be the foundation upon which the Towergate directors expect to continue to expand the Towergate Group through additional network acquisitions.”

Grant Ellis agrees there will be more deals in 2008: “It would not surprise me if there was some consolidation in networks. I don’t think the current crop will stay still,” he says.

The arena is well placed for 2008, and with a line-up including a number of big-hitters ready to step in to the ring, competition will be red hot.

The gloves could come off at any time, and it could get messy.

As the bell for the first round gets ready to ring, there is only one thing left to say: Let’s get ready to rumble.