Distribution disaster?

It is an understandable reaction that such an intermediary is just a 'front' for the acquiring insurance company to build its own book of business but that this proposition is unlikely to enable the broking firm to grow.

However, if the FSA had not been comfortable with the deal, they would not have sanctioned it. Do not forget that any proposed acquisition is a notifiable event to the regulator.

Secondly, the brokers will have substantial accounts with carriers other than the acquiring firm. Bearing in mind TCF and the broking firms' conflicts of interest policies, it would be disingenuous for these firms to simply switch large swathes of business to the acquiring carrier. Such an action would no doubt soon become known to the regulator, which would closely look at the practices of the firm.

Brokers by instinct will still want to demonstrate to clients their independence with access to the whole market. To do otherwise would be a threat to their credibility.

However, the lines of distribution are being blurred. Both retail and commercial customers can source insurance from brokers, banks, supermarkets, trade associations, direct writers etc, and I suspect that what we will see is these brokers being in a position to offer a best of breed contract in small SME areas, backed by their owning company.

Some years ago, Peter Cullum realised successful growth was down to distribution. It has just taken the rest of the market a few years to work this out and play catch up.

- Ian Ritchie, Managing director, RW Associates.