Being a big broker isn’t all it’s cracked up to be – and there appears to be a genuine appetite in the market to find an alternative
There is a real need and appetite for an alternative to the big three brokers – Willis Re, Aon Benfield and Guy Carpenter. The independents that once represented a different offering have been absorbed into the big enterprises and that has left a chasm. The market is keen to see someone filling the space at one time occupied by the likes of Blanch and Benfield. It wants the independent option that has the drive, ambition and dynamics to bring truly client-centric service and solutions.
When talking to clients, I constantly hear about their desire to deal with organisations that are committed to delivering the best products and solutions and continuous improvement.
Yet the larger organisations, particularly those with external ownership, are under a lot of pressure to focus on enhancing profitability year on year, which can often be at the expense of focusing on and providing excellent client service.
In addition, there is a propensity only to respect large revenue accounts, making all other clients feel second class.
But an independent broker of the right structure would have the ability to take a longer-term perspective, allowing it to focus on delighting the client and using that as the pathway to sustainable performance.
Size doesn’t always mean you’re the first to innovate. The advantage of not being as bulky is that you are nimble and can react quickly to market conditions. It is much easier to mould a smaller number of people than it is of a staff of thousands.
This is also often the case in areas such as IT, where new technology and systems can be deployed to add benefit to clients. BMS’s use of the iPad in the first fully electronic placement in Lloyd’s has demonstrated the speed at which businesses of our size can implement new technology.
From initial idea to implementation, the project only took about nine months because we had no distractions to push us off course. While we might not have the financial resources of the big three, we were able to move ahead faster than them on this initiative.
Response to Bribery Act
The much-debated Bribery Act will be introduced in July and I am sure all brokers, be they large, medium or small, are working hard to operate within its confines.
It is inevitable that a mid-size broker will find this a little easier to control because they have fewer transactions and do not have a cast of thousands to police. But in an industry where trust and integrity are a given, I believe everyone will be working hard to ensure they conform with the act.
One of the big players recently drew more attention to itself with the introduction of extra commissions on London market placements, which has raised a furore in the market.
But the big guys are in a similar position to the rest of us – we are all constantly looking to improve our market share and grow our profitability. In a mature market, where it is increasingly difficult to grow profitability, one of the last options available for larger operators is to go into the distribution chain and take additional margin out of it.
I understand what they are trying to do, using their influence in the distribution chain to obtain a greater proportion of the cash flow. For me, it is not about ethics or whether is it right or wrong; it is part of a wider strategic dilemma over how to continue to grow business. As the biggest in the market, these companies must constantly defend their position and this is one way they can exert their influence.
Time will tell whether it will work for them or not, but in my experience no one likes to be pressurised or pushed into a corner. If another option is made available to the people being put under pressure, they are likely to take it up.
Which brings me full circle, back to the reason why people want an alternative, why they want another option. They want something that offers them a valid alternative to the big guys, and that puts some much-needed competition back into the market. GR
Carl Beardmore is chief executive of (re)insurance broker BMS