Small brokers may be the flavour of the month, but for how long?
It’s been a rough time for brokers. Some may have come through the recession unscathed, but most are still licking their wounds. Take a moment to think about the small independents. They’ve survived the worst, but what next?
Small brokers are the flavour of the month, with about a dozen networks competing for a slice of insurers’ pies. They can’t argue about a lack of support, that’s for sure.
But with that ultimately comes the challenge. In a market packed with consolidators and regional mega brokers – and don’t let us forget the aggregators – competition has never been so fierce.
How can small brokers compete? For many, it is about continuing to offer the traditional services that their clients know and love. But according to Biba’s Graeme Trudgill, the key is the ability to differentiate.
“The most successful small brokers at present are those that specialise in a certain area,” he says. “Some smaller guys are doing well: anyone that has a good niche and expertise, or a particular market on their doorstep that they are good at. We are seeing a lot of success.”
But how can a small broker without a stack of cash make an impact? A good starting point is the internet. “If they can get a brand and get it out there, they don’t need a massive office and loads of people,” Trudgill emphasises.
“There are massive opportunities. It is a challenging atmosphere, but there are always opportunities for a smart broker.”
Also in their favour, he says, is the ability to maintain close relationships with clients. “That ties in with the local theme – offering local, immediate personal service – which some larger brokers aren’t so easily able to do because they don’t have a branch in that village or small town. They are often a small, focused team and they know their customers. Service is important and the customer often gets to meet the boss.”
The rising cost of regulation – such as the £1,000 minimum fee to the FSA – is a major burden. As is the threat from the Financial Services Compensation Scheme, which has raised its levy pot to £61m in the next financial year.
But Aviva’s intermediary and partnerships director Janice Deakin urges small brokers “not to be scared” of the issue. “They need to deal with the regulatory environment in a way that is efficient with their business because it can cripple them.” She predicts a bright future for brokers because they are “amazingly resilient” and “have an ability to regenerate themselves”.
In summary, Trudgill admits that small brokers will need to “have a plan.” He warns: “We see people struggling from day to day, but you have to think beyond that and say in two, three years, how is the market changing? Consumers are migrating to the internet and so if you are not selling on the net now, how are you going to cope if your customers aren’t walking through your door?”
But he says that in a changing world, brokers – known for their entrepreneurial spirit – will be quick to identify the next big opportunity. They’ll be around for a while yet. IT
Peter Smits, managing director of Ashbourne Insurance
Ashbourne Insurance is an independent local broker based in Hertfordshire, with two offices and more than 20 staff. Managing director Peter Smits says the business has switched focus solely to the high street in recent years. “We’ve become incredibly introverted over the past 18 months to two years. Whereas before we were out there fighting tooth and nail for any piece of business anywhere, we’ve almost reined in what I call mainstream insurance.
“The whole focus now is our own high street. The one massive advantage we have, that no one else can compete with, is that we are on our own high street.”
He says the broker, with gross written premiums of around £5m, could become niche oriented, targeting areas including taxi insurance and high net worth household.
“There are niches within what we are doing, but that wouldn’t stop me servicing my local car or home owner,” he adds.
He says the broker has actively taken steps to build its profile among its local business community. He wants it to achieve growth of about 8% this year and claims the major challenge is insurer commitment. “The biggest threat is declining markets. But I’m really encouraged that a lot of the larger insurers are coming back and saying ‘we want to talk to you’.”
Neil Grimshaw, director of Ravenhall Risk Solutions
Neil Grimshaw founded Ravenhall Risk Solutions in 2006. In the more than three years since, the West Yorkshire-based commercial broker now employs 10 staff with GWP of about £4.5m. Grimshaw says the business has stuck to its guns as a traditional broker while launching a handful of specialisms, including the design of a product for pregnant travellers. Ravenhall also entered into an affinity partnership with the Association of British Riding Schools that Grimshaw says has gone from “strength to strength”.
He claims the company’s strategy includes employing “the right people that fit our profile of the way we do business” and “using technology to its upmost”.
And the key to survival? “Not to continue to be a small broker. We hope to get out of that bracket soon.” Competition also ranks high among potential challengers, he says. “We are going to become a target in the next two years – people are going to see us as a company that they want to take business off.”
Robert Marshall, chairman of Trident Insurance
Trident Insurance is a small broker based in Ilford, Essex, with 10 staff and GWP of around £2m. Chairman Robert Marshall says one of the key successes behind the business – which offers quotes online and doesn’t consider itself a ‘local broker’ – was the move into wholesale broking, such as fleet. “We’ve now got 200 brokers signed up to us and it makes a lot of difference to the way we do our business,” he says. “It’s brought us into contact with other brokers who, hopefully, we can do more things with.”
The broker deals with predominantly SME and private clients. Marshall hopes to pick up more commercial business, but admits that it is “really hard grafting”. The company has, however, established a link with the Tennis Industry Association, where anybody that has business through it can quote through Trident.
“It’s very hard to find your so-called unique selling point when there are thousands of brokers competing with you for effectively the same customers,” Marshall says. His plan is to be flexible and look at new areas “where the level of competition is not so outrageous so not to be worth the time and effort”.