24% of brokers fear effects of consolidation

The growing dominance of 'super brokers' and FSA regulation will be the biggest threats to UK brokers over the next three years, brokers have warned.

A survey carried out by Lloyd's and Biba has also revealed that changing distribution trends pose the greatest challenge for both large and small brokers.

The research found that 24% of brokers saw the formation of so-called 'super brokers' through consolidation as a threat, with direct writers and the rise of the internet also generating concern.

Colin Lees, managing director of Lymm Insurance Brokers, told the survey: "Super brokers are without a doubt the biggest challenge we face.

"As these companies get bigger and swallow up larger percentages of business, they get more control over distribution channels and prices and can exert more pressure on underwriters, skewing profitability but with no risk."

Lees said that although smaller brokers could not compete with the marketing budgets of the 'super brokers', they could address the threat by offering a unique brand and specialist knowledge.

Regulation was the single most significant challenge for smaller brokers.

They warned that the cost implication could be "substantial to a small business to the point of being prohibitive", also smaller brokers questioned whether there was enough understanding and flexibility in respect to their situation.

Overall, 17% of those questioned cited the increased regulatory burden as their biggest threat.

The survey also revealed that more than 80% of brokers saw maintaining profit through the insurance cycle as the "greatest challenge" in the next year.

In line with a recent underwriting opinion survey, carried out by Lloyd's in February, UK brokers agreed that the industry needed to manage the cycle more over the longer-term.

Meanwhile, brokers expect little change in pricing conditions as the UK market continues to experience a period of relative stability over the next 12 months.

The research was carried out at this year's Biba conference.