Do networks really still offer value or is the model outdated?

The network rollercoaster came to another grinding halt this week and the wheels are hanging on by a thread. But how many more knocks can it take?

Network bosses have been on tenterhooks ever since the Aviva and Broker Network fallout. It raised that old chestnut of ‘do networks really offer value?’, and insurers have once again been considering which networks they want to deal with.

Then this week, Broker Network, the oldest and largest network in the market, suffered a shock to the system when its managing director Nick Houghton announced his resignation to join regional broker JM Glendinning. Meanwhile, the Cobra Network has also bled more staff since its buy-out by chief executive Steve Burrows. Throw in falling revenues and profits, as reported in Towergate’s network division half-year results, and many believe networks have reached their crescendo.

The network model is built on growth and they have been under scrutiny since their rapid ascent has seen the number on offer reach double figures.

The reality is networks are not dead. To the smaller broker, their support is often overlooked. It’s time networks stopped over-relying on exclusive commission deals with insurers and started focusing on how they can add value in the back-office with compliance and training support.

Simply, insurers want to see that networks are providing a far greater breadth of value in the broker market other than offering costly distribution. If networks can prove this, insurers will continue with their backing.

Sorting out the network division is just one of the things Towergate chief executive Mark Hodges has on his ‘to do’ list, as we report on page five. Despite an improved first-half performance, the consolidator is also likely to face pressure from insurers to encourage price increases and lower commissions in this difficult market.