As a fledgling new broker, securing an agency with an insurer can be daunting, especially in the midst of a downturn. We outline some tips to get your first foothold

One of the biggest challenges facing a start-up broker has always been winning an agency from an insurer. And in this tough recessionary climate, when insurers are increasingly sticking to the tried and tested, this can seem even more daunting. But it is not impossible. Here, Insurance Times presents ten ways to overcome that first hurdle.

1 Have a robust business plan

Presenting a comprehensive and detailed business plan is crucial. Insurers want to see that a broker has spent time and effort in developing a strategy that complements their own business and customer profile. Fortis’s distribution and development director, Chris Dobson, says that start-up brokers need to clearly outline what their core products and service areas will be.

“We will look for a good understanding as to what their business plan is and how that aligns with our own business strategy. We would be very interested in, and would treat very positively, the sight of a thought-through, fully developed business plan that covers the next 12 months, or even better, the next three years. That always puts a tick in the box,” he says.

2 Invest in marketing

Supplementing a good business plan with a sound marketing strategy will help a start-up broker to score some extra points. Insurers want a clear understanding of how the broker plans to target their customers. “We want people who have put thought into how they are going to achieve their aims and how they plan to acquire new customers,” RSA’s sales operations and strategy director, Kevin Roberts, explains. “If we are going to invest some of our precious time and resources into these people, we want to make sure that they are taking it seriously.”

Investing in a marketing consultant could also reap some substantial benefits. Mike Butler, general manager of Ignition, a broker marketing company owned by AXA, says this route offers an invaluable prop to smaller brokers. “We write start-up brokers a 12-month-long marketing action plan. We define for them what their target markets might be, what their growth aspirations are, and more importantly how they are going to achieve that,” he says.

3 Set realistic targets

While announcing that you can write £200,000 worth of business in a year may grab some attention when you are starting out, it is unlikely to impress if you only manage to write £60,000. Ravenhall Risk Solutions’ managing director Neil Grimshaw set up a brokerage five years ago, going on to scoop the Insurance Times Young Achiever of the Year award in 2008. He believes that outlining achievable targets played a role in his success.

"When you achieve or exceed your targets, you obviously look better than someone who has set unrealistic targets and failed to achieve them. If you meet or exceed your targets like we did, it can lead to more priority relationships with insurers.”

4 Flag up your CV

Be warned: while there are exceptions to the rule, most insurers are unlikely to look favourably on a start-up broker with relatively little experience in the industry. But demonstrating evidence of success in previous brokerages or other sectors of the industry is a sure-fire way to gain credibility. “We would want directors with a proven track record in the industry. It is difficult to get an agency without any track record,” Groupama’s head of commercial lines distribution, Allison Andrews, says. Roberts adds that a director must have a “clean” financial history, with no hint of business failures.

5 Join a network

Joining a network is an obvious route for start-up brokers, especially those with a slim CV in the insurance industry. Networks can offer invaluable help when it comes to devising business plans, sorting out compliancy issues, regulatory support and – most importantly – securing agencies with insurers.

Broker Network’s insurer relations manager, Luke Proctor-Wilton, says: “Without agencies, it is impossible for a new brokerage to trade. The less access to markets a broker has, the less ability they have to compete and win business.

“There is a great synergy between start-up propositions and networks. Networks offer start-ups the knowledge, experience and advice that is critical to successfully starting a new business and crucially, at the same time, they should offer insurers’ security in the knowledge that the business has been set up in line with necessary quality controls and safeguards. It’s mutually beneficial to all parties.”

Grimshaw does not think this route is the only way to succeed, however. Five years ago, he bypassed the network to go direct. “Going down the direct agency route is feasible and possible. It is about contacting the right person; it is about selling yourself and your business as well as doing a lot of hoop jumping,” he says. “Broker networks are going to be right for some people but it is possible to do it yourself.”

6 Know which network model is right for you

A new broker needs to think carefully about what type of network will help them achieve their business goals. Some networks require members to put their entire business through a select number of insurers aligned with the network, while others allow brokers to develop their own agencies with an insurer independently.

Furthermore, brokers need to be able to explain to an insurer exactly why they have chosen a particular network.

“There are a number of different models and it is dependent on which network the broker chooses to join whether any insurer, including us, would be able to make a decision on that broker’s attractiveness. It is not necessarily the broker’s fault, but it is dependent on how that network is working and the propositions that are made available,” Dobson explains.

7 Be persistent

Twenty-two-year-old Matthew Stringer, managing director of Bloomhill Insurance Solutions, admits he came across a few raised eyebrows from insurers before winning his first agency. “A lot of insurers will say ‘yes, we will support start-ups’ but believe me, I have applied to half of them and it is not as easy as that,” he says. Stringer believes that refusing to take no for an answer was a key factor in his eventual success. “Don’t give up. Go back in six months’ time and tell them why things have changed. There are insurers out there willing to support new brokers,” he says.

8 Demonstrate financial commitment

Insurers want to see evidence that a start-up broker is sufficiently committed to the business. Grimshaw points out that while it only costs £1 of share capital to set up a business, such a limited investment is unlikely to earn that coveted first agency. “If you start up a company with £2,000 worth of issue share capital, you are effectively saying ‘this is something I want to do; it is what I want to do in the long term’. That is something insurers do look for.”

9 Do your research

Keeping tabs on developments within your chosen market segment is a must. Zurich’s head of distribution, John Dawson, says: “It is important to demonstrate alignment to current and future market dynamics. According to Datamonitor, 80% of motor new business is being traded via the web, so any broker projecting significant growth in standard private motor that is not using that technology could quite understandably be viewed as less credible.”

Stringer points out that simply asking the advice of successful start-up brokers, accountants and local business support networks can offer a fresh insight without generating significant extra costs. “There are plenty of people out there who can help. Don’t just presume that you know everything that is going on,” he says.

10 Be different

Developing a unique selling point can help in setting yourself apart from the competition. “We are approached quite often, so we want to know how they are going to wow us, what is different about them and why they are going to be a success in the market,” RSA’s Roberts says. He points out different approaches, such as charging customer fees rather than commission, can help make start-up brokers more attractive to insurers. “They have taken a different angle.” IT