Challenges Ahead For Broker Market:

Five Key Aims To Help Smaller Brokers Survive

The next two years are likely to be very difficult for the smaller insurance brokers in the UK. So how can a broker survive, and how can an insurance company identify a successful broker? Whitespace has over 19 years of experience in the insurance industry, and has identified some of the key challenges affecting brokers - and some achievable solutions.

  Reduce Inefficiency

The pressures faced by small brokers can lead to some major inefficiencies being overlooked. For instance, staff costs are the main overhead - and yet many employees are spending valuable time on basic manual tasks (such as re-keying the same data many times) that could easily be automated.

  Streamline Administration

Some brokers still depend upon an administrative process that is largely paper-based. This is a costly approach in terms of money, time, storage space and manpower. It is also a high risk option, as manual processes are error-prone, and paper-based records could easily be lost or even destroyed in a fire - causing massive disruption and perhaps even the closure of the business.

  Personal Lines - A Changing Market

The market for Personal Lines is changing, and it is unlikely to be a very profitable area of business for small brokers in the future. At the moment, many brokers use one of the leading software packages linked to panels of insurers. Although they often claim to offer a personal service and a competitive premium, this isn't strictly true: if they are accessing the same panel of insurers as other brokers, they cannot truly offer a competitive edge.

Some customers are therefore starting to turn to the Internet for a more competitive insurance quote. This is gradually becoming a more reliable, simple and friendly way of buying personal insurance - to the detriment of brokers.

  One Possible Solution - Broker Networks

If smaller brokers are to survive, one option could be to join a Broker Network. This is a particularly popular solution for brokers that have neither the resources nor the inclination to ensure their own compliance with the new FSA regulations. A network also offers economies of scale in terms of compliance costs.

However, if a broker is unable to comply with the latest rules, should they really be operating at all? The risk is that networks become shields for less capable brokers - which is neither healthy for the brokers, nor for the network.

  A Better Way - Through Differentiation

In the past, life has been relatively easy for the smaller brokers. However, to survive in the future, they need to start focusing on developing their strengths. Most brokers are inherently entrepreneurs, and now need to hone their business acumen so that they can develop their own offering - which must be genuinely different from that of their competitors.

  A Strategy For Survival

Here are five key aims that will help smaller brokers to survive in an increasingly difficult market. They can also help insurers to identify the most competitive brokers:

1.	Realignment - Develop a strategy that enables your business to withdraw from the mass market Personal Lines sector, as this is already becoming a much less profitable area.
2.	Specialism - Devise interesting and attractive ideas for specialist insurance schemes that will add real value to your chosen niches of insurance buyers. If you are unable to specialise, you might be wise to sell your business.
3.	Investment - New computer systems don't have to be hugely expensive, and will soon pay for themselves. Indeed, automation will enable you either to reduce your staff or redeploy them so that they can focus on mission-critical activities. A computer system is not really an option - it is an essential item. In the future, insurers will only want to deal with brokers that have a true electronic capability.
4.	Software - Once you have selected your specialist niche, purchase the specialist software that will help you to administer it with maximum effectiveness. Systems such as Whitespace's 'SCHEMATIC' can significantly reduce your personnel costs and increase efficiency.
5.	Compliance - Take compliance seriously - and make sure that you address this issue now. The FSA has not developed regulations that are impossible to keep, so smaller brokers should be able to achieve compliance without having to join a network.

Ultimately, the best way for a broker to 'survive and thrive' is to gain competitive advantage with the efficient execution of a focused strategy.

For more information please call Whitespace marketing on 020 7240 0208 Alternatively, you can email us with your request at info@whitespace.co.uk.