Broker focus - Biba/IIB merger: Let's get together

When the British Insurance Brokers' Association and the Institute of Insurance Brokers announced their plans to merge in May, the initial response from the industry was overwhelmingly positive.

It was thought that the banding together of the bodies as a lobbying power would be a force to be reckoned with, challenging European regulations and rising fees that are crippling insurance brokers.

Now the dust has settled, questions about the effectiveness of the new body are being raised. Is bigger really better? Can the two bodies really create a lobbying super power greater than the sum of its parts?

Both Biba and the IIB decline to divulge information on the proposed merger, claiming the finer details are yet to be decided, but brokers and association members are busy pondering whether this really will be the start of a beautiful relationship.

Malcolm Lee, managing director for broker network Ten Insurance Services, which is a member of both Biba and the IIB, says some of his brokers are not entirely convinced.

He says: "There will be a fear that the merged body will lose sight of the interests of the small independent broker and I hope that issue will not be ignored by those involved in the merger talks."

Biba currently has around 1700 regulated firms, while the IIB represents some 1000 brokers. "Our belief at the time was — and still is — that the IIB more closely represents the interests of the smaller broker," Mr Lee adds. "We would expect — and hope — that in the proposed merger, those interests are not lost."

Break-off factions
Mr Lee suspects that if the two bodies complete their merger there would be a smaller broker network division, perhaps regionalised or nationalised. However, he warns, if the merger fails to work out, it would not be long before factions separate to form an alternative association, similar to when the London & International Insurance Brokers' Association split from Biba in 2008.

Robert Ingles, managing director of Riordan Eabry and its smaller sister company and virtual brand Robert Campbell, is also questioning the merger.

Mr Ingles, whose firms are also members of both organisations, says: "I don't think it will make much difference. When an issue is important to the industry both bodies campaign.

"The Financial Services Authority and [regulators in] Europe are doing everything they can to force brokers to close, retire and amalgamate."

But he says a merger was always on the cards, despite the previous personality clash between the late Andrew Paddick, former IIB director general, and then Biba chief executive Mike Williams: "In five years there will be half the number of broker firms and consequently there will be fewer resources available and only enough to support one association. The merger is inevitable."

Similarly, Peter Elliott, head of marketing at Bluefin, says the late Mr Paddick's "robust personality" could have scuppered merger plans, adding: "He was a very strong character." He recalls how the two organisations were a "classic double act" with the formal Biba on one side and IIB, led by the "maverick" Mr Paddick on the other.

But he praises the bodies for their consistently good work and believes that as "their interests are now much more closely aligned it was inevitable the two would get together".

Nick Houghton, managing director of Broker Network and Countrywide, owned by Towergate, says the merger would be a "sensible move because one voice speaking on behalf of lots of brokers carries more heat".

He comments that personality would no longer pose an obstacle to the issues that the bodies should tackle. "It would be less about ego and whose organisation is biggest or best but about speaking with one voice on behalf of lots of brokers."

One-man brokerage firm and IIB member Victor Akisanya believes the union is in the best interest of small brokers. As a director of Extol Insurance Brokers in South London, he is keen for the merger to work out: "Having one body and one voice will have its advantages. What we need to do is make sure that it influences government policy more than ever before. The bigger brokers do not feel the effects of financial issues like us smaller brokers do. Any little problem with the law protecting consumers can really impact on a small broker."

Biba member Jelf also thinks it is a step forward. Alex Alway, founder and chief executive, says: "It will be a great lobbying force. I think people like [Biba chief executive] Eric Galbraith are very skilled in addressing the needs of everyone. The merger provides a real platform for the industry. We are not half as effective as other trade organisations and we need to raise our game."

Samuel Wong, commercial account director of Will Insurance, is backing the merger 100%. The 15-year old firm has a very niche market focusing on commercial and personal lines in Turkey, Eastern Europe and South East Asia. Mr Wong believes that, for small specialist firms, the merger could deliver improved representation.

"The proposed merger would mean a better and louder voice when it comes to lobbying government," he adds.

Mr Lee says the issue the merged body would need to address is regulation: "The IIB was created because the smaller broker felt its voice was not being heard by the only broker association at the time — Biba — and the issue that really led to the creation of the IIB was regulation."

A single voice
He adds that due to the "massive regulatory cost and interference" the industry needs to have a single voice to defend its corner, adding there is no other reason for being a member.

For Mr Wong, the issue of transparency is problematic: "We have to declare every single penny to clients, so they know exactly how much we are earning. In other industries, businesses don't have to do that.

"We have to declare everything, including how much we make from policies. So our clients — business people — definitely know how much commission we are making and they want to pay less."

Although the industry is still in the dark as to the structure the new body could take, this does not concern Mr Wong. Rather, he is more interested in its cost. He says it would not be a good idea to have full-time staff, currently the case at Biba, as this could lead to higher membership fees.

These views are shared by other intermediaries. Mr Akisanya explains: "A lot of insurance brokers are affected by regulations that protect the consumer but adversely affect the broker.

"We are in the business of needing to make a profit and this should be recognised. Where the law protects the consumer they are not looking at the impact on providers. If they did, it could attract more start-ups to the industry."

At the top of Mr Ingles' wish list of issues to be tackled by the merged body is the controversial issue of Financial Services Compensation Scheme fees. Some brokers are currently paying for the failure of products they did not sell.

"Products like payment protection are things we said no to 20 years ago and we are now paying for them. This issue should be the associations' objective."

The first thing the two bodies should address is lobbying the government for "fair and proportionate regulation", says Mr Houghton. "There are different types of insurers and the FSA regulates many organisations that are not insurance brokers. The FSCS fees are a great example. Independent insurance brokers should not bear the brunt of things going on in that area. It's outrageous."

The potential changes to membership fees if the merger is given the go- ahead are the least of Mr Ingles' worries.

He is more concerned that the small broker schemes created by the IIB may fall by the wayside: "IIB is the small broker voice. It has developed good schemes for the small broker and I would hate to see those lost. Biba has always had a small firms committee to try to create a voice.

"As long as Biba and the IIB continue to provide for both small and large brokers it should not be a problem. They should be the voice of all broker firms and not just based on size and accessibility."

Neil Wyatt, marketing manager at Higos, believes the merger would improve the reputation of both organisations. "Hopefully by having one voice we might be able to lobby the FSA and government and it might have a bit more credibility and improve the reputation of the industry because it will have more weight behind it."

The brokers have some final words of advice for the two trading bodies: "Don't look down on smaller brokers," Mr Akisanya advises. "We should be protected. Government policy affects us negatively most of the time. The trading body should protect more than ever before."

Mr Alway adds that a merged body would need staff dedicated to focusing on different sub-groups of the brokers as they are so diverse. But he warns: "As long as the associations don't get buried in internal reorganisation and focus on brokers' interests, then they should be fine."

Not seeing eye-to-eye: past biba and IIB spats
The British Insurance Brokers' Association and the Institute of Insurance Brokers may be set for a merger but the two groups have not always been in agreement. Here are details of three clashes between the bodies from the Post archive.

January 2001 — The IIB seeks legal advice over potentially defamatory comments made by then-Biba chief executive Mike Williams. The IIB said that Mr Williams had wrongly stated that the institute's invitation to all currently individually registered insurance brokers, to apply under grand fathering arrangements, to be entered on the Institute Register of Insurance Brokers, "may be against the IBRC's regulations and the law".

September 2001 — Biba attacks the IIB for having "done the insurance broking profession a great disservice", in the duo's battle over the General Insurance Standards Council's rule book.

January 2003 — Biba rubbishes concerns raised by the IIB that the current Financial Ombudsman Service will be made compulsory as "speculative and premature".

History of the merger
The British Insurance Brokers' Association was founded in 1977, with the aim of representing independent insurance brokers following the promotion of the Insurance Brokers Registration Act.

In 1987, the rival Institute of Insurance Brokers was founded in the belief it could better promote service standards and the independence of insurance brokers.

Independent financial advisers were permitted to join Biba in 1988, after the introduction of the Financial Services Act, with the organisation changing its name to the British Insurance and Investment Brokers' Association.

However, six years later, IFAs created their own association dedicated to representing their interests, with Biba sister organisation the IFA Association created.

In 1999, the organisation removed the word 'investment' from its title, and reverted to the name Biba.

In 2008, the London Market Insurance Brokers' Committee decided to break away from Biba, and set up a new trade organisation exclusively for London market brokers called the London & International Insurance Brokers' Association, prompting calls for Biba and the IIB to combine.

In May 2011, Biba and the IIB confirmed that the two bodies were in formal discussions over a potential merger.