While teaming up with a rival broker may sound counter-intuitive, the bottom line, explains Mike Crane, is the added benefits it can bring to the client, and ultimately to your own business
Brokers by nature are a competitive bunch and they have to be. It is a crowded marketplace, and one made no easier by the advent of soft rates and direct writers only too willing to use commoditisation as a way of cutting costs. For brokers this means that every piece of business is critical to their success. So why then might a broker pick up the phone to a rival to see if they want to help out on a new piece of business?
It sounds unlikely, but this is starting to happen in the UK market as brokers realise there is a different way to deal with the competitive pressures they are facing - by teaming up.
Partnerships have always been critical to winning business - working with the right insurer, the right risk manager - but now that relationship is extending itself to rival brokers. Although this flies in the face of popular thinking, the reality is that there is nothing to stop brokers working with each other to win business. This is not a reference to sub-broking but about brokers with different strengths coming together to create a formidable team.
We can work it out
Take a case recently dealt with by NIG. Two brokers were going for the same piece of business: one had a local relationship with the managing director of the insured; the other had specialist knowledge of the client's industry. The client - a catering group with multiple premises across the UK - had its business with a large broker. The turnover of the business was £50m and the total sum insured for the whole group was £400m. Clearly an attractive piece of business.
It was highly unlikely that either of the competing brokers would have been able to win the business from the holding broker on their own but, by pooling their respective strengths, they were able to present a very strong case. Coupled with the right insurer and risk managers to provide a seamless package, this turned out to be a winning formula for a piece of business worth £275,000.
While the partnership between the brokers is clearly the most significant aspect of a case like this, the role played by the insurer can also be pivotal. In the above example the risk was presented by both brokers independently to two different NIG branches.
Once the brokers had made the decision to work as a team, a judgment had to be taken as to which office was best equipped to win the business. The selected team then worked together with the two brokers to ensure they had everything they needed to give a solid presentation - including a pre-cover survey and client recommendations.
The essence of this case was the willingness of several parties to compromise and collaborate in order to achieve a common goal. If any party had been precious the chances of anyone winning the business would have been very slim.
Key to the success of this strategy was the recognition by one broker that there were certain strengths lacking in its own proposition, and that the most effective way to fill this gap was to partner with a broker with complementary strengths. By identifying the right partners it was possible to leverage specialist knowledge, expertise and local relationships to the benefit of all parties, including - most importantly - the client. The result for the client is better advice, a better product and better service.
Such an outcome is nothing but favourable to all concerned. So is this strategy worth consideration by any broker wishing to quote on an interesting case that falls outside their internal expertise or capabilities? The case being illustrated involved a small broker who did not have the industry expertise, the internal processes or systems to cope with the case, and a specialist broker who did not have the client relationship. On paper the holding broker had everything. Therefore the choice was simple - either both brokers lose the business individually or they take a chance of winning it together. In fact, the price proposition of the broker partnership was exactly the same as the holding broker's, but the business was won on the back of a professional presentation that focused on each individual company, what they would bring in terms of knowledge and how they would work together.
A bright future
Landau Manson was one of the brokers involved in this partnership. And managing director David Noble sees a future in this type of strategy. "We would certainly consider this approach again where there was potential for mutual advantage," he says. "But it's essential to work with partners with the same beliefs. That way you can really get to a solution that benefits the client."
Of course, such an approach would not work in every case. The agreements involved are primarily based on trust and there has to be a confidence that every party will fulfil their side of the deal. And individual roles must be well thought out and defined before approaching the client, or the end result could be disastrous.
Heavy reliance needs to be placed on doing all the preparation work well ahead of renewal. When various third parties are involved, it takes longer and a thorough understanding at every level is essential. But this case proves it can work to great effect.
The whole idea of a partnership is for people to work together to achieve a better result. With a bit of lateral thinking, market knowledge, and honest engagement with the client, a truly win-win result can be achieved.
Mike Crane is head for of SME sales and services at NIG.
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