Tim Wilson says economic pressures will put a lot of strain on smaller brokers
The start of any new year is a favourite time for a little crystal ball gazing. So what are likely to be the issues affecting brokers this year?
We can all agree that the forces driving consolidation seem unstoppable and, if anything, the pace will quicken as brokers become fewer, and the big consolidators race to pick off the larger targets.
But life is likely to be tough in 2008 for small brokers aiming to raise funds for acquisitions of their own, or to buy out retiring owners. The credit crunch will frustrate many ambitious people in this area.
And while the jury still seems to be out
on premium rates, this surely must be the year when we move towards some form of turnaround, if only a levelling off of premiums, rather than just hearing insurers talk about it.
But what about the wider economic picture and its consequences for brokers? Whatever your politics, the past 10 years or so has seen an unparalleled period of economic stability, or at least the illusion of it.
Easy access to consumer credit, and the confidence brought by apparently never-ending (until now) house price growth has driven an economy which, if it never actually boomed, always had the feel of being on
the up. In the run-up to Christmas however, things started to go a little pear shaped, with the national mood changing to one of pessimism, and a raft of gloomy predictions and bad news stories moving from the business pages to the front page.
I’m not going to buck the trend on this one – I’m an economic bear at present and believe the UK is waking up to the mother of all New Year hangovers.
We’re all conscious of the inflationary pressures on fuel prices, commodities, food and travel, all of which have their origins in the inexorable industrialisation of the Far East.
When you add into the mix the psychological effects of the global warming debate, Northern Rock, the pressure on land in the South East, population growth, and the credit crunch, we could be forgiven
for thinking that the UK is not currently the master of its own destiny. What does this mean for brokers? Well, the knock-on effects in the medium term are likely to be an increase in client insolvencies, both personal and commercial. Brokers are likely to see a sharp deterioration in their cash position as clients seek to pay later, or in extremis, can’t pay at all.
In these circumstances, premium finance becomes not just a valuable tool, but a lifeline, ensuring that premium payments are guaranteed, and on time.
It’s also more important than ever that brokers credit check their larger clients, and set out very clearly the terms of credit they expect them to meet.
One thing’s for sure, our famously taciturn new Prime Minster is unlikely to be smiling much more in 2008 than at the end of 2007