Simon Cooter says that brokers can still prosper despite insurer takeovers.
Our market is seeing fresh attempts at vertical integration, with more insurers buying insurance brokers and more brokers establishing MGAs. There are pros and cons to each of these initiatives, but one thing I would predict, with some certainty, is that there will be some significant successes offset by many that don’t achieve what they set out to.
It is fair to say that the track record of insurers buying brokers isn’t great. History tells us that insurer involvement and the success of a broking business is an inverse relationship. Something that looks good in a Powerpoint presentation in an insurance company boardroom could easily destroy the things that make an insurance broker strong in the first place.
However, there is no reason why quality brokers who are owned by insurers can’t continue to prosper. For many, the investment made will enable them to develop and grow their business. They will be able to keep the people who made them good in the first place and they can continue to offer their clients the independent advice and service that they need.
The moment an insurer’s hand appears on the tiller is when things can get interesting. This is the time when clients, staff and insurer partners may start to see the business in a different light.
Whether this will happen will depend largely on the motives of the insurer, and whether they see the acquisition as a pure investment play or an attempt to control distribution.
The recent proliferation of MGAs is another interesting development. There are many examples of longstanding MGAs that have been a success for all parties, not least the clients. The most successful appear to bring genuine underwriting expertise, generally linked with knowledge and understanding of specific market segments. One of the reasons brokers are attracted to this solution is the ability to control the customer experience which it entails.
At a time when revenue growth is difficult, where office closures have reduced underwriting capability for some, and where service has become strained as a result, it is also easy to understand why some insurers would see the attraction of working with multiple MGAs. But is it the right motive?
Don’t get me wrong – we deal with a number of MGAs, and we are always willing to talk to those who have a strong proposition and where we clearly bring something to the party, but it shouldn’t be at the expense of service to our other brokers.
The best and most sustainable way of growing a business is to focus on underwriting and claims service. This means listening to brokers, organising your business around their needs and those of their clients, and making sure that you have underwriting and claims professionals who are empowered to get on with their jobs.
When I speak to brokers they constantly bemoan the service they get from the market. It shouldn’t be too much to ask for calls to be answered quickly, to be able to talk to people who can make decisions, to resolve issues quickly and so on – but too often it is. Brokers and clients are loyal, but that loyalty can surely only be stretched so far.
Who tomorrow’s winners will be remains to be seen. Will the lasting successes be the ones who heed the call for better service, putting execution and customer experience at the heart of everything they do?
