Mark Grice considers the findings of a recent UK broker survey.
Conducted shortly after the one year anniversary of Financial Services Authority (FSA) regulation, the fourth broker survey conducted by Mazars' Broking Group provided an interesting insight into the current state of the UK market.
Consolidation continues to be a key issue with 87% of respondents expecting the number of insurance brokers in the UK to decline further over the next 12-18 months. Interest in mergers and acquisitions has increased substantially, with 43% of respondents citing acquisitions as part of their growth strategy (compared to 28% in 2005). There was also a noticeable rise in those looking to increase their geographic spread, from 17% in 2005 to 30% in 2006.
In terms of competition, the survey indicated that the middle market is being squeezed at both ends. As the larger intermediaries appear to be trading down in the size of the accounts they are handling, 47% of respondents said that larger brokers represent the biggest threat to their business (a sharp increase from 12% in 2005). At the other end, 38% believed direct and internet insurers would pose the greatest risk (up from 22% in 2005), as their impact on the bottom end of the market continues to grow.
Perhaps not surprisingly, regulation was the issue to generate the most ire. At the time of our 2005 survey, the authorisation process had just been completed. Twelve months later, 81% of respondents felt that regulation has had no impact on client confidence in the industry and over half of those surveyed believe that the Financial Services Authority's principles of treating clients fairly are not adding value to their customer service. Moreover, 53% believe that regulation is actually having a negative impact on clients. Increased regulation has also directly impacted the bottom line with nearly a fifth of brokers surveyed saying it has had an impact of more than 10% on profits. It is not all bad news for the FSA, however – only 8% claimed to have had a bad experience when dealing directly with the regulator.
Although worrying, it is hoped that the current frustration felt by brokers will eventually subside to a more respectable level.