On the record
David Sweeney, UK Development Director ofHiscox UK Retail, offers his predictions on the future of the UK broking industry
The demise of the local broker has been talked of for years. It did seem that the new FSA regulations might be the final straw, leading many smaller brokers to throw in the towel. Many have, but it seems that every day a new intermediary springs up, be they people disillusioned with or displaced from the larger brokers, or those emerging via management buy-outs. The national brokers have had their share of issues to sort out and this has enabled the better brokers to capture some of their people and accounts.
More forward-looking brokers appreciate that the business landscape will change and that they have to adapt to changing consumer behaviour to remain successful. For example, consumers will have more control through self-service and self-packaging via the internet. More sophisticated consumers will have even greater expectations of solution providers, seeing them as more than just intermediaries who source cheaper insurance. Other drivers of change include ageing owner-managers at many brokers, the 2008 FSA capital requirements (which state that goodwill cannot be included as an asset when a business is sold), the growth in consolidators and technological advances.
In future, there will be more transparency and fewer of the current inefficiencies, but customers will continue to be attracted to the major brands. Having said that, I expect brokers will still control the vast majority of commercial insurance purchases; indeed, brokers’ penetration of this sector has increased over the past ten years. However, they will be focused more at the mid/large sector unless they can find a way of competing with the soon-to-emerge direct (internet-based) commercial insurers.
My prediction is that brokers will have little involvement in standard personal lines – but that they will dominate the mid- and high-net-worth sector of this market and specialist personal lines sectors. The growth in fees will continue and, with the advent of work sharing, the line between brokers and insurers will potentially become blurred. While brokers will dominate certain sectors or territories, there will be fewer of them (say, 2,500 versus the 4,500 that are estimated to be trading at the moment).
As brokers, you need to be alert to the opportunities and threats that the changes in the market will create. At Hiscox, we will stay close to our brokers and offer solutions that will help you adapt to these changes and take advantage of the opportunities.