Broker-only insurer surveys the market

The Professional Broking roadshow toured the UK in October, visiting Leeds, London, Birmingham and Weston-Super-Mare.

Enjoyed by visiting brokers and exhibitors alike, the roadshow saw a wide range of speakers including intermediaries, insurers and the Financial Standards Authority.

Mike Bowen, managing director of QBE (Stafford), explored the economics of the market for the future of brokers in a seemingly endless soft market.

He said it was imperative for brokers to remember that broking "operates under the same law of economics of supply and demand" as other businesses, adding that the current state of the market was due to over-capacity and a lack of differentiation in offerings.

The soft market was also having an adverse effect on policy-writing, according to Bowen, who warned: "Some underwriters are living on borrowed time, and even after the (reserves) releases the figures aren't adding up. In some cases, only investment income is making life worth living."

Bowen noted the trend that many insurers were now buying other brokers to "gain premium volume and therefore enhanced commission deals".

He added that while insurers buying brokers wasn't "an entirely convincing strategy" in his opinion, it was improving their profits and could benefit the brokers too, providing they could still make legitimate claims to be operating independently.

Looking to when the market eventually hardens, Bowen questioned whether insurers will use brokers associated with their rivals, alleging that the brokers will have become tantamount to tied agents if they do not.

On a more optimistic note, Bowen predicted that, whether or not aggregators continued to expand, there would always be a place for the broker because commercial insurance buyers will still require professional and independent advice.