Smaller directly authorised insurance brokers, who have focused on delivering a personal, quality-filled service to clients rather than on their brokerage’s growth, have become the victims of the soft insurance market in the UK.  The prediction, however, is that the soft market will still be with us for around 13 months to come.  So where, over the next year, can these dedicated directly authorised insurance brokers find shelter from the storm?

The struggles faced by smaller directly authorised brokers

The struggle for such brokers, during soft market conditions, typically emanates from three causes.  The first is intense market competition coupled with cut-throat pricing.  The second comes from their lack of access to market and the insurer agencies that could allow them to compete with this constant threat.  The third is their level of commission, which falls dramatically when the market is soft.

Rates have been slashed to such an extent in the soft market that even the most loyal of clients can be tempted to move their insurance arrangements, so as to secure the tempting offer.  The book of business of smaller directly authorised brokers is under severe attack and, with another year of this to come, may not recover.  Lost business may remain lost business for at least 12 months, by which time a smaller brokerage could have suffered significant, irretrievable losses in business.

Smaller directly authorised brokers and pension planning

For many such brokers, the insurance brokerage’s business is intrinsically linked to their pension planning.  In the same way, their social life is linked to their brokerage and their clients.  If they lose both income and clients, there is a hole in their retirement plans and a big gap to fill in their social life.

These are worrying times for brokers with just a few million pounds of premium income on the books.  They have become too small a proposition for consolidators and buyers, so are trapped, watching their business decline and come under constant attack.  With all the other pressures they face, such as compliance reporting, accounting, PI and IT, the storm is pretty much a perfect one.

How to move from directly authorised broker to appointed representative

However, there is a solution and it is one that smaller directly authorised brokers have already found and benefited from.  The answer for these brokers was found in switching their status and becoming an appointed representative with the Gauntlet AR Network.

In doing that, they have levelled the playing field. They instantly gain access to the hundreds of insurers that Gauntlet Group has at its disposal and become beneficiaries too of the Group’s tremendous buying power.  That provides them with a choice of attractive premium and policy wording combinations for clients, enabling them to fend off competitive threats and retain business.

Their systems become slicker, making their customer interface more professional, thanks to Acturis IT systems.  They can devote more time to client relationships and selling, because they do not have to tackle the compliance, accounting and administrative tasks any more.  Instead, the Gauntlet head office team take over these chores.  Furthermore, if they do not wish to do their own broking, they can ask Gauntlet’s brokers to handle that.

The financials behind switching status to AR

Costs can be reduced, because there is no need for an office or staff.  Meanwhile, commission rates go up and the broker is likely to place more business, more than compensating for the commission split that is part of the appointed representative arrangement.  Brokers who have taken a de-authorisation route and become an AR with Gauntlet have found themselves better off.  Rather than believing that switching and becoming an AR will reduce their earnings, the likelihood is that it will increase them.

The broker exit route provided by the Gauntlet AR Network

Then there is the opportunity to secure an exit route, by becoming a Gauntlet AR.  Various ARs have already taken advantage of the offer to sell their book to Gauntlet and seamlessly transition their clients over into its direct sales team.  For the client, this is an optimal solution, as clients are already used to Gauntlet systems.  For the broker, it opens up options to fully plan when they want to sell the book and  allows them to decide if they wish to do this in stages.  There is no sitting around hoping that some buyer will make them an offer and there is no falling off a cliff edge when it comes to retirement, if the broker wants to keep their hand in a bit.

Of course, a hard market will come around again but Gauntlet is already preparing for that, reinforcing the relationships now that will come fully into play when the London markets and niche insurance providers become key to success. Gauntlet has all bases covered for its ARs, no matter how complex or technical their risks.

What should smaller directly authorised brokers do to survive?

If you are a directly authorised broker desperately seeking some shelter from the storm, time could be of the essence.  In around six to eight weeks, if you make the move to Gauntlet and become an appointed representative, you could have found the safe haven you seek.  Gauntlet De-authorisation Fast-track was a process pioneered by Gauntlet with the FCA and one that it has now fine-tuned and got down to a fine art.  That means that your brighter future is just an enquiry away.

If you need to do something quickly to turn your brokerage’s fortunes around, do not delay.  Rather than pessimistically viewing your future, or throwing in the towel, a switch in status from directly authorised broker to Gauntlet AR could be the answer you seek.

Email NigelLaw@GauntletGroup.com to find out more, today.

Photo by Scott Graham on Unsplash