Less talk, more action for 2004

The year 2003 was one of debate, consultation and speculation. 2004 looks set to bring more of the same, though with more action than speculation as Financial Services Authority rules and agency agreements are finalised.

Regulation by the FSA will be upon us by the start of 2005 and brokers must use 2004 to prepare. Applications must be sent to the FSA in good time to allow the regulator to iron out any problems. No one wants to reach 15 January 2005 with an outstanding application, and if they do they will simply not be able to trade.

Broker consolidation was discussed exhaustively last year, though the FSA is concerned these discussions are unhelpful and premature, particularly if used to market the many network offerings available. While some consolidation is likely, brokers are a resilient bunch. I often hear that two thirds of brokers' principals are aged 60/65 with no natural successor. As far as I can see this has been true for the past 20 years.

The real change in 2004 will be the relationship between brokers, insurers and their clients. Brokers need to get used to the idea that the commission earned is received from the client, not from the insurer.

Insurers are also trying to change the relationship. For many years brokers have been told to run their brokerages as businesses and insurance companies should do the same. Let's just hope they do not dive into a soft market in 2004.

Critical mass with insurers has been an increasing issue for the past two or three years but we are now entering into critical profitability.

If you do not make money for an insurer it doesn't matter what size your account is (unless you are a national, no doubt). Agency agreements, profit share agreements, settlement authorities, commissions, and credit terms will all come under strict review. Some insurers are even starting to write commercial business direct.

I believe 2004 will bring hard negotiation in preparation for the new regime for 2005. So I hope you enjoyed your Christmas break, because busy times are coming.