Despite the principal of broker independence, insurers are actively pursuing broker acquisitions, says Geoff Kinsella
Listening to Alanis Morissette singing “Isn’t It Ironic” always makes me smile (probably because most of the examples she gives are not particularly ironic!). But if irony, as the dictionary says, is “incongruity between what might be expected and what actually occurs”, then our industry must surely be one of the world’s most ironic.
Take the principle of broker independence. The buyers get very excited about the need for brokers to act in their best interests and prevent undue influence on them to use one market over the next. The
EU has also focused on this issue from the angle of transparency of broker remuneration. The ownership of brokers by insurers and vice versa are activities that potentially fuel these fires of conflict.
So in light of all these drivers for impartiality and transparency, one would expect underwriters to be divesting themselves of potential ownership conflicts.
You would think so? Actually, what is happening is the opposite! Insurers are actively pursuing broker acquisitions. Smart & Cook, Stuart Alexander,
Layton Blackham and more recently SBJ have been snapped up by AXA. Allianz and Norwich Union bought into Jelf, while Groupama bought Lark, and Allianz bought a stake in Oval.
And now Lloyd’s is proposing the removal of the so called “divestment” provisions of the Lloyd’s Act to allow links between managing agents and brokers.
Hmmm...Ironic? I think so.
It is also ironic that “the world’s largest brokers”, have been permitted to collect commissions on acquired-broker business for up to three years under agreements made by the very regulators, including Eliot Spitzer’s replacement, who stopped the practice in 2005. Hmmm…ironic? I think so.
It happened despite RIMS members saying that contingents contain inherent conflicts of interest!
Anyway, as Alanis says: “… life has a funny way of sneaking up on you when you think everything’s okay and everything’s going right”…
Geoff Kinsella is group business development director of Cooper Gay.