There was a broker network boom in 2003, but few of the companies had the knowledge to live up to the hype, says Grant Ellis
It's plagiarism I know, but the song "where have all the flowers gone?" seemed apt in the circumstances.
If 2003 was the year of the new network, then 2004 is the year of the reality check. Reminiscent of the dot com boom of the late 1990s, networks were the business opportunity that everyone had to get into. Throughout 2003 it seemed each week a new network was launched, publicly announcing its intent to sweep away all before it, and in the process attract "hundreds" of brokers to its new and supposedly unique proposition.
In fact, if you added up all the "members" these fledgling businesses were expecting to recruit, they'd probably come to more brokers than were actually trading. How many of them have fulfilled even a small proportion of their rhetoric? Very few, I would suggest, but I have to say that I'm not really surprised.
They all seemed to make the same two fundamental mistakes. The first is fairly obvious - they assumed that simply by being there and promising to become big players, insurers would loosen their purse strings and give them more money, which of course they didn't.
The second mistake, and by far their biggest, was that they underestimated the scepticism of their target audience. These newly-formed businesses were frankly ill-prepared and inexperienced when they launched, and hence didn't have the answers to all brokers' awkward questions when asked. Brokers are justifiably cynical when it comes to sales patter, and are deeply suspicious of people who purport to be expert, but clearly aren't when faced with hard questions.
I'm a bit surprised they were all caught out, because we've seen it happen before. In 1995 General Network launched itself in a blaze of publicity at football grounds around the UK. It too expounded the virtues of its revolutionary proposition to general insurance brokers. Unfortunately, General Network underestimated its audience, and fell into the trap of promoting hype over substance. Brokers gave it a massive thumbs down from which it never recovered. Despite throwing substantial sums of money at it in subsequent years, its parent, the Greatminster Group, finally admitted defeat and closed its doors in 1999.
The only other general insurance network around at the time was The Broker Network, which launched very quietly in September 1995 with a small number of pilot firms. Like all new businesses, it made a number of mistakes in those early years, but learned from them, and when, in 1997, it felt able to truly "fly the flag" it had two years to iron out the wrinkles.
So as we consign all the 'promissory' networks to the scrapheap, just remember that it wasn't the internet that was to blame for the dot com boom, just people's blind greed in trying to exploit it. Just so with networks - established firms have shown that there's nothing wrong with the concept. It's just that you need to know what you're about. So don't be put off by those who have failed - just make sure you back the right one which will, or indeed already has, stood the test of time.