Filling the gap

The broker wholesaler - an essential part of the landscape in the aftermath of insurer consolidation and the approach of statutory regulation.

A frequent question for any wholesaler is whether to launch a network for the regional broker. It often seems as if the whole insurance world believes the only way a regional broker can survive these days is by either joining a network or selling up, although the network option has fallen from favour in recent months following the closure of a couple of high profile ventures.

But there has always been an alternative to the traditional network. Regional brokers can use a wholesaler's products, facilities and services as and when they want - and still retain their total independence. That's not to say structured networks aren't the best way to go. Indeed some of the existing solutions are excellent and wholesalers must provide similar support mechanisms to those who fit in with their philosophy. But there's more. The consumer, business or individual will always be better served by the local independent agent who retains his entrepreneurial skills and insurance expertise, without imposing a 'one size fits all' regime.

Consequently the regional broker now demands a range of modern wholesale products and risk management solutions that encircles the whole vista of the many different types of risk clients now face. A good wholesaler can fill the gap left by market consolidation when it comes to the current lack of underwriting expertise and capacity. It can pool on its own collective expertise, allowing better access to otherwise restricted markets, including offshore, reinsurance and Lloyd's.

Naturally the wholesaler must be backed by underwriters willing and able to offer a spread of premium capacity across a broad range of UK regional business, with most risks capable of acceptance with minimum fuss. And, wholesalers need to respond to the changing market by becoming more of a solutions provider as opposed to just a 'placer' of difficult risks.

But these days of course, regional brokers need more than just insurance products. There's equal demand for 'best of breed' solutions for issues such as FSA compliance, training, and marketing. These facets have become a day-to-day need, warranting ready-made solutions. If the wholesaler doesn't have one, then it must work hard to either find one, or develop a new one!

Relationships with insurers are crucial, and have to be built over the long-term with all the Lloyd's and non-Lloyd's markets. The wholesaler must ensure a fine balance between volume and technical profit, although we all should have learnt the lessons of the hard market and recognise that technical profit is fundamental to the success of the relationship if there is to be longevity and consistency of approach. This explains the importance of the expansion of risk management and health and safety services. If claims can be prevented, then everyone wins.

The relationship between wholesaler and agent has to change -partly to reflect the issues surrounding FSA rules but also to respond to mutual needs of profitability. The retailer needs a wholesale broker that can solve problems most of the time and the wholesaler needs an agent that can deliver an appropriate volume of profitable business. In this respect wholesalers will become even more specialist in their approach to ensure expertise, service and capacity can be best utilised.

Above all, the ideal wholesaler must be an innovator, and that means everything it stands for relates back to the understanding of what brokers need to enable them to develop their business - while simultaneously retaining their total independence.

The Lloyd's and London market has so much more to offer the regional broker other than just the 'market of last resort' and with a move to balance volatility with stability and more direct access the traditional wholesale market has to adapt to new opportunities.

In an era when so many services can be delivered to consumers in real time, it is still a source of concern and often frustration that most commercial insurances take weeks or even months to resolve. As an industry, we have largely failed to fully embrace the real benefits of fast connectivity and having real-time access to instant policy decisions, allowing the wholesale broker to fill the gap by delivering new and relevant solutions backed by expertise, efficiency and, of course, friendly service. This is the next major challenge for the wholesale market - to deliver low cost access to more sophisticated longer term capital. Watch this space!