Taking back control

Today's insurance market has, as many of you would agree, something of a fixation on the UK's small to medium-sized enterprises. For a variety of reasons, SMEs have, in the past few years, become deeply attractive to an increasing number of underwriters. However, what is intriguing about the deep interest in this sector is that insurers often forget that most of the brokers with whom they deal in this market are, of course, SMEs themselves.

The point is that, while insurers are all too familiar with the notion of brokers as business partners and as distribution chains, they forget that these businesses are susceptible to the same pressures and risks as the SMEs they spend so much of their time thinking about helping. Indeed, last year NIG organised a series of events around the UK specifically for brokers and SMEs - under the banner of the NIG Business Academy - with the specific intent of assisting these businesses with some of the key entrepreneurial decisions they face on a daily basis.

The hosting of the event last year encouraged NIG to get involved in the Professional Broking Roadshow 2006, in order to further develop this theme of growth in the SME community.

Earlier this year, NIG decided to conduct a major study of SMEs in Britain in order to gain a greater understanding of the mindset of the entrepreneurs that run them. It researched more than 600 businesses around the country and was surprised by what it learnt.

Lack of planning

Contrary to popular conception, NIG found that relatively few SMEs have exit strategies of any kind, while most have no plan for non-organic growth - other than relying on developing an innovative idea or service that would provide a route to expansion. In short, SMEs do not seem to be as strategically minded as many insurers might have believed. The question, therefore, is if brokers are considered to be SMEs, do these important business partners also need to develop a more strategic approach to their future development?

You will hear more about this at the PB Roadshow 2006 as it visits five locations in England and Scotland. Based around the theme of Taking Back Control, the degree to which brokers are able to plan for their futures is clearly going to be put under the spotlight. As headline sponsor of this year's event, NIG is keen to turn its attention to the specific issue of how brokers can achieve sustainable growth in the current market. Clearly having a clear vision for the future of their business is going to be one of the key factors that make such growth possible.

According to anecdotal evidence collected during numerous conversations with other industry sources, it appears that many brokers still continue to rely on networking and local contacts alone for their business strategy, with little or no idea of how to take a step beyond this comfort zone. Unfortunately, it appears that many also still ultimately perceive insurance to be a distress purchase and make little or no attempt to convince clients to take a more sophisticated approach.

Now this may not be the most scientifically based appraisal of broking businesses today but the mere fact that such opinions exists in people working so closely with brokers is enough to raise questions.

As mentioned earlier, the theme of this year's Professional Broking road show is Taking Back Control, and a focus on a lack of strategic direction must be central when we get together.

A particular malaise

Broking today is affected by a particular malaise of the mind - the sort of mood that exists among the supporters of a lower division football team that has been losing games for months, if not seasons, on end. It is almost a sense of resignation - of acceptance that market share is going to continue to decline. However, is that necessarily the case? Are there not brokers out there making a real success of their businesses - and growing them at the same time? This is not just the consolidators but businesses growing through their drive and enthusiasm and enterprise - businesses with ambition.

The lack of strategic planning is not the sole problem; it is also symbolic of the wider malaise. The highly competitive and rapidly changing conditions brokers face today mean that, in the longer term, only the most disciplined businesses will survive and prosper.

Take, for example, the proliferation of the internet and its impact on the UK economy. How many brokers have a strategy for using the internet to their advantage, in terms of either their marketing or actual business processing?

In terms of marketing, the brokers' traditional reliance on guides like Yellow Pages and Thomson may well be coming to an end. A simple straw poll in any workplace shows most people now find phone numbers and other local information online. Press advertising is also in decline - many younger people simply do not read them any more, preferring online content instead.

So, how can brokers advertise services now? Clearly using the internet could be an extremely effective way. E-mail campaigns are an obvious and low-cost answer - as long as the quality of e-mail address data held or purchased by the business is good.

Search engine optimisation - engineering the website so that it appears much higher up in search rankings, or even paying for sponsored links - can be a cost-effective way of improving e-marketing. The quality of content on a website can also be a significant factor in search engine optimisation and attracting browsers and there certainly is plenty of scope for brokers to add content. We may not yet be in the era of the broker blog - indeed, some say they hope we never will be - but content that provides advice for commercial insurance buyers, particular in start-up businesses that may never have been through this process before, could be of real value. Advice can also be delivered online via an interactive question and answer session.

Another critical issue for brokers to consider is how many of the customer insurance transactions they handle could be processed faster and more cost-effectively online. With price increasingly a factor for buyers, as insurance becomes more commoditised, moving transactions online has the capacity to cut costs, providing a more level playing field with the direct writers and automatically captured management information.

Call centres are another example of how some of the more proactive brokers are beginning to take greater control of their own destinies. Only a few years ago, call centres were something that most brokers and insurers decried as adversely affecting customer service standards and was anathema to the long-held belief that face-to-face was all. However, something began to change - brokers actually started to see the potential of call centres for both in-bound customer calls and out-bound sales calls. Suddenly, one or two more proactive brokers began to use the call centre model and with considerable success.

Call centres and internet strategy are just two of the opportunities now available to brokers, and there are many more. The point is this is not a stagnant market in which the power lies in the hands of the direct writers and the consolidators. It is in the hands of any business that chooses to plan for its future development and growth - growth being the key word. Businesses that do not plan leave their fates in the hands of others, while businesses that plan do so with the express purpose of choosing growth rather than hoping it might happen.

There is a positive side to all of this. NIG's research into SMEs told it that an overwhelming majority of the managers of these businesses feel that the rewards and benefits they reap are commensurate with the risks they have taken. They believe that society as a whole recognises the value in their enterprise and wealth it creates. This is a much more upbeat message and one that should be reflected among the broking community too.

Taking control

So how are we going to plan to take control? There will no doubt be many differing views being debated at the roadshow, but the mere fact that the industry is planning to consider the issue is a first step on the right path. Certainly, it seems that a greater degree of conscious effort needs to be made by both brokers and underwriters to evaluate the true potential of their businesses and develop the strategic thinking in a way that perhaps was not so necessary 20 or 30 years ago. There are undoubtedly opportunities that brokers can still seize - but only if they can rise above the day-to-day worries of operating as small business to take a more holistic view of their market. The PB Roadshow 2006 is one such occasion - let us all of us make the most of it.

- Charles Crawford, Managing director, NIG

- David Parker, NIG director of distribution will be speaking in Glasgow and Bolton, and Mike Crane, NIG director of operations will be speaking in Leicester, Weston-super-mare and London at the Professional Broking Roadshow.