Reviewing the situation

The comment by the managing director of Continuum in regard to "reviewing growth" raises questions about the future of brokers (Broker Network adds first member of year, Postonline, 4 January), including whether size is all that important.

This is a perception given by insurers who, in turn, offer increased discounts or greater commission to larger entities. Size also gives the client the security they feel may not be offered by smaller companies.

But there has never been any substantive evidence that larger companies benefit the end consumer. In fact, the reverse is very much the case.

In the event of a takeover, a few directors may benefit, sell on and restart again, but the consumer is handicapped from the start by larger and mostly inadequate bureaucratic support and administration and less access to real-time information. There is also the likelihood of software needing major adaptation.

It is not for anyone to devalue a firm seeking to grow but the way some insurers execute growth strategies should be brought into question.

For example, management cohesion normally works because someone is getting paid to sell out, but at the lesser levels cultural distortions never work well until all of the weaker group's staff have literally been removed.

Finally, the level of debt is a major worry that cannot be ignored. Many firms are leveraged up to the eyeballs and that is not healthy. Today, more than ever, it is all about what is on and off the balance sheet. And when taking into account the natural reduction of clients at renewal, financing purchases does not show itself at the bottom line unless the most creative accounting mechanisms are used for years after.

Returning to the principal issue of reviewing growth, my firm feels such an ideal is right but it is the present approach and the formulae used to get there that we feel is doomed to failure - simply because there is a finite client base.

We see establishing numerous sub-broking arrangements as the most successful approach. Why? Because it generates the least number of problems for end-customer service as continuity of access, processing and brokers maintain real-time independence with no loss of control to a faceless head office.

Should the brokers then decide that working more closely is a better proposition, they could choose to do so having already worked indirectly together. Upheaval is kept to the minimum so the end client is better served and more likely to stay.

Robert Marshall, Director, Trident Insurance, Advanced Insurance Centres, Ilford, Essex.