Beckett and Williams join forces with small commercial brokers
After nearly eight years at Biba, outgoing chief executive Mike Williams says he still believes in the role of independent brokers. And he says the oppportunity has arisen for him to do something to aid their survival.
He considered a number of factors which threaten their future. These include consolidation of capacity, IT developments, an aging broker population, regulation and the number of brokers looking to sell, merge or acquire.
Williams says that in order to save small brokers, he had to look beyond Biba. In autumn, Williams will launch a network, Total Broker Solutions, that will target 500 small commercial brokers with premium income of £2m-£6m.
Williams is confident about the value of these brokers. "Between them they control huge swathes of commercial insurance business, which is extremely important to the insurance market and extremely profitable. Nobody is as good at doing this as brokers are."
He says it was early in 2002 when he began to contemplate the threats brokers were facing.
"Should consumer choice be limited by the fact that the brokers won't be able to stand the heat of all these pressures going forward? Is it fair to expect hundreds, if not thousands, of firms simply to disappear, with all the impact that has, particularly on choice for the consumer?"
For Williams, the answer was clear: "You have to find a way of leveraging all that buying power, all that expertise, all that professionalism and all those client relationships. It struck me that the way to do it was to build a really powerful network."
In February this year, he shared his views with Bob Beckett while working on the BrokerAssist product being developed by the CII.
"Talking to Bob [Beckett], who happens to be a broker with a very substantial share of the SME market, it struck me that our thinking was exactly the same and he was extremely enthusiastic and extremely receptive," he says.
"Bob said, 'I Your analysis of the market is right, Your analysis of the trends is right and the solution you're proposing is right'. So way back in February we started trying to work the idea up into something that might actually fly."
Jump forward four months and Total Broker Solutions, owned by Williams and Beckett, takes its first tentative steps in the market, launching its website (www.t-b-s.info). This contains information and application forms for brokers interested in joining.
Williams says Total Broker Solutions is different from anything in the market, offering members: access to enhanced service and support from insurers; increased revenues through increased commissions or profit shares; improved efficiency; marketing; human relations and IT support; and cost effective compliance solutions.
He adds, mysteriously, that a unique selling point of the network is a new way of dealing with premium collection. "We have a novel way of dealing with premium that will take huge chunks of costs out of the equation, both for insurers and brokers." He says that to maintain a competitive advantage, he will not say more.
Insurers have rallied behind the network. So far, Total Broker Solutions has secured the support of AXA, Royal & SunAlliance (R&SA), Zurich, Norwich Union and Allianz Cornhill. Williams says these insurers have agreed to provide network members with preferential terms. "That means better products, better service, better terms and better support than they have any right to expect as individual businesses."
"These insurers are working with us to refine and develop the offering. It is a move towards a partnership between brokers and insurers."
Many of the network solutions will be delivered through technology and Williams is currently in discussions with both Software Solutions Partners and Sirius to become the network's IT partner.
Each provider is working on enhanced versions of existing broker software packages for network members, who will not incur development costs, but will pay for IT on a per screen per month basis.
"There will be a single IT platform solution for all members of the network and that will hugely reduce the frictional costs of transactions."
Providing members with business exit strategies is another plank in the network's offer, and is one of several functions that will be outsourced to external partners, in this instance to former CII
Society of Fellows president Jennifer Jarrett. She will provide brokers with advice on exit options, including valuations and business consultancy support.
In addition, Williams says the network has lined up capital providers that are willing to fund sales.
But he says his strategy does not involve the ownership of network members. "I'm not particularly interested in owning any broker or broking distribution at all. Our concept is built around leveraging the strengths of existing firms."
Assistance with upcoming FSA regulation will be a key attraction for potential members, and Total Broker Solutions will outsource its compliance function to Robin Wood Associates (RWA).
Williams says the service will range from an initial health check and assessment to assisting firms with their FSA applications, ongoing implementation of compliance systems and continuing support after regulation. But it is not yet decided whether members will be directly regulated.
Williams says the current appointed representatives regime, as proposed by the FSA in CP159 is not attractive, because of the restrictions on appointed agents' activities.
But he says the FSA will refine its proposals, and has not ruled out the possibility of the network applying for principal agent status. The alternative will be for members, with RWA's support, to be directly regulated by the FSA.
Williams does not see the decision these brokers face as hard. "This delivers a broking business that is healthier, more profitable, compliant, and able to either stand on its own two feet or realise the value of the investment ,so it's a really, powerful proposition. They have absolutely nothing to lose and a huge amount to gain."
As do he and Beckett. "We're not in this as benevolent uncles, there's something in it for people who own the network too."