Brokers should ask what a network can do for them, says Grant Ellis
There has been quite a bit in the press recently about the value that networks do or do not add to the distribution of insurance products via brokers.
Indeed a number of insurers have been publicly questioning the value of some network offerings to them, but in all this there has been little said about what the value of a network is to its broker members.
I guess this is because there is little dispute about the fact that it should be easy for a network to demonstrate added value to a broker - after all the scale of the operation should take care of that. But when a broker is considering joining a network (or indeed switching networks) what should he expect to be on offer?
Any network worth its salt should be able to offer three core services. The first and most obvious is enhanced agency facilities with insurers. This is relatively easy to achieve with a couple of 'friendly' insurers, but to provide a near blanket enhancement is much more difficult. This needs established scale - after all there are so many more 'mouths' to feed.
But perhaps even more important is demonstrating real value to each insurer. Some insurers are becoming increasingly sceptical about the value they receive from the fledgling networks and this translates into a "show me real benefit and then I'll think about improved agency terms" attitude.
So, shop with care - check claims about 'top' agency facilities, and don't simply take someone's word for it.
In addition to enhancement of existing agency terms, a network should also give access to specialist agencies and facilities, and indeed bespoke products, and there should be demonstrable competitive advantage to all.
Second, given impending regulation, compliance should feature heavily as a 'must have' service from a network to its members. But let's be clear, provision of such a service does not mean that you have to be an appointed representative of the network. It simply means that the network provides the regulatory framework under which all its member firms can work.
And it's an obvious 'win-win' with the network doing all the donkey-work at the centre and, once completed, cascading this down into each member business.
The service should include all the necessary training and record keeping to ensure compliance, and also HR regulatory support. These are inseparable from the core FSA compliance service, so make sure that any network offering includes these components.
Part of the FSA compliance burden is the requirement for a trust account for client monies, with an obligation to balance monthly, and minimum capital adequacy (which if you want to allow client credit stands at a not insignificant £50,000).
A network should be able to offer help with all these - from taking responsibility for trust account maintenance and balancing, right through to providing umbrella capital adequacy which covers all members and satisfies the requirements of the regulator.
Finally, all networks have a vested interest in the growth of their member businesses, so marketing is the other area where there should be real added value. Scale should allow the network to provide a full suite of marketing services, from database mining and lead generation, to PR and design.
Let me leave you with one final thought. If you are thinking of joining a network the bigger that decision is, the more likely that there will be real benefits. If it's a small and insignificant decision, then don't expect too much from it.
