Marsh has recently announced a new strategy for the small to medium-sized enterprise marketplace. Julie Page, who is running the initiative, speaks to Mairi MacDonald about why she is confident it will succeed
If nothing else, the decision by one of the world's largest brokers to target the UK small to medium-sized enterprise market has got the industry talking.
Marsh's critics - including new-found competitors in the SME space - have cynically suggested that the proposition offers nothing Marsh has not tried before.
For example, it was just two years ago that former RSA small business leader Chris Wallace was appointed as head of UK commercial client practices, heralding Marsh's ambitious push into the space.
Mr Wallace has since joined QBE and was replaced as head of UK commercial by Julie Page in September amid a shake-up of the UK business that has led to SME and middle markets being split into two divisions.
Ms Page, who now heads up SME, says her new division need no longer play second fiddle to the higher revenue generating middle market business, headed up by Marsh Ireland boss Joe Grogan (Post, 30 April 2009, p8).
She credits Marsh chief executive Martin South with developing a serious proposition that redresses the broker's under-representation in the SME market and insists Marsh is bringing something new to the market rather than playing catch-up with established players.
The proposition is two-fold: self-employed Marsh franchise consultants are being enlisted to target the higher end of the SME market, while a new network - Marsh Pro Broker - will give small brokers access to Marsh products and pricing for business with a gross written premium of about £10,000.
It is an interesting role for Ms Page who, by her own admission, has moved to the SME market - previously an unknown quantity for Marsh - from the largest corporate end of the scale. Her background is solidly insurance-based and she says that, of her peers, she is "one of very few people that actually chose to go into insurance". A school trip to the City as a teenager in the 1980s and a tour around institutions, including the futuristic-looking Lloyd's building, convinced her insurance was where she wanted to be.
All roads lead to Marsh
After her first job working in the self-drive hire department of Bain Hogg in Reading, she studied for her professional exams part-time at college. Once qualified, she was employed by her tutor at Alexander Stenhouse, which two acquisitions later became part of Aon.
She stayed for a decade until quitting her sales and project management role in the late 1990s for a similar role at Sedgwick about the same time as it was bought by Marsh. She moved into running Marsh's risk management client base in the south outside London until 2004, "when the event took place", as she describes it, and the company was restructured.
"Until then, SME business formed an integrated part of Marsh's middle market offering under the National banner. That turned out to be one of the reasons we were not getting traction," she says. "Obviously middle market was larger and, therefore, the dominant part of our thinking and strategy, so we were always asking 'what will we do with SME business?'"
Since the launch of Pro Broker was announced, smaller brokers have also queried why they should share clients with a company they view as a much larger competitor and have raised the question of who needs who more in the SME space.
But Ms Page confidently explains that the SME propositions have both been ring-fenced to assure independent brokers that, while Marsh has its own offering at the higher end of the SME market, at the lower end it will be acting as an "enabler" to market, rather than as a direct competitor.
She continues: "I would say we are coming at the market from a different direction. To set out to play catch-up would mean only ever being on the tail of much larger organisations in that space. We looked at our business operation and our ability to deliver value and define that in a different space and way, and worked out Marsh has a significant infrastructure, leverage and content.
"It also has quite an expensive cost base, which in the high volume space at the bottom end of the SME market is an inhibitor. We did our sums and looked at the size of the market and where our values could be played out strongest and decided the community brokers provide excellent service.
"What they lack is the ability to supply excellent product and leverage price, so our decision was rather than to compete with them we would create a proposition enabling them to compete stronger in that space."
Of the other national firms, Marsh may be ahead of Aon in SME but it is some way behind Willis, which already has a well-established network. Compared to older networks, which Ms Page suggests entered the market on the back of the advent of compliance and regulation, Marsh is entering at a different starting point.
"We're coming in at a time where the market is less flexible and making noises about being a little less flexible in the future, particularly around networks. The message coming loud and clear from the insurers is that networks need a strong value proposition if they are to maintain that enhanced position, be that product or pricing."
It is true that Pro Broker is launching amid persistent talk of insurers reviewing relationships with networks and, in some instances, withdrawing cover but whether Marsh can step into the fold and give insurers what they want while also providing a suitable package to the brokers it wants to sign up to its network remains to be seen.
She continues: "We need to work out what our stakeholders need. We're giving commercial brokers market-leading product, business-enabling tools for them to deal with contract certainty and enable them to undertake faster, more informed transactions.
"We are defining ourselves as enablers. We know that the independent brokers can deliver our product much more cost effectively than we could and we have tested the market enough to know SME customers value service. So we have managed to convey to those brokers that we are not competing with them in that space."
However, Ms Page clarifies that when GWP moves above £10,000 it is a different story. "We are competing with them when they move up the food chain. We have our own proposition above £10,000 GWP, which is the franchise. Again we have done the research and our customers' average premium spend is significantly below that - the degree of conflict is extremely low."
Ms Page adds that the company has "no problem" with its brand being used by members "in ways Marsh will define" - unsurprising given the opportunities for raising brand awareness in its target sector.
More unusually, broker members cannot be members of other networks. "Our proposition is strong and, in a way, it is an exclusive club," she explains.
"With multi-membership you are going to get a degree of selection, which isn't the way the market needs us to operate. We have to think about all our stakeholders and share with them what it is we need to do. We do require exclusivity but we don't require a 100% GWP commitment, as we know where our proposition is strong and part of our recruitment process is agreeing what percentage of their GWP is in our scope."
She adds that what is and is not "in scope" will be agreed by both parties, adding that where Marsh's core proposition clearly fits, there will be little "wriggle room". "All brokers will have clients in long-term agreements with existing carriers and existing clients that have expressed a commitment to a carrier but we will sit down and be realistic and pragmatic," Ms Page explains.
"The remuneration structure for brokers will reflect their commitment both in terms of volume and speed, using matrix earning capability."
She says she expects Pro Broker members to join from other networks as well as from the 50% of brokers that Marsh believes are not members of any network.
Of the latter set, she comments: "In our research it became apparent that brokers take the word independent very seriously. But in what is a shrinking marketplace, rates are going up and there is new competition. These guys are used to high 90s retention levels but there will be a lot more volatility in that space."
Confidently, she adds: "This is a time of economic turmoil for ultimate customers and for competitors but there's no inner turmoil at Marsh. We are stable, secure and we don't have debt issues. We are coming into this marketplace as a secure provider and going for long-term stability throughout this cycle and the next."
Of its targets, Ms Page explains that Marsh has a "top tier" of brokers, with which it is already at the negotiation stage and a list of 100 on its target list.
Asked how the proposition differs from, for example, Norwich Union's Broker Independence Group offering, Ms Page replies: "There is an inherent conflict in an insurer saying it wants to help you maintain your independence because an insurer offering a club acts as an incentive to use a particular insurer. But that doesn't mean it isn't right for those that sign up for it. NU is very strong in this space and knows how to deliver product and service."
She continues: "The decision depends on how you as a broker define your independence. If it means financially independent and not owned by anyone else - either proposition would fit. If you mean independent advice with multiple and competitive solutions, then it will be Marsh Pro Broker.
"If BIG or 110 is right for a broker then they are making a different decision to the decision they make to join Marsh Pro Broker. There are two facets to joining us - whether the range of products and the proposition is right; and the other is the cultural decisions based on the corporate culture."
She admits Marsh considered buying its own network but questions the value of such a purchase: "Buying a network is quite a volatile decision. You have members with no real commitment - you own them as a member but you don't own their customers."
In terms of its franchise proposition, out of 60 applicants, Ms Page has recruited seven self-employed consultants, two of whom have completed the 'on-boarding' process. Although consultants don't have to be ACII qualified, an insurance background is a must.
She adds: "We have mapped out the country and looked at what the right number of consultants is in each area. We are focusing on the South-east and Central - around Leicester and Birmingham."
The selection process has become easier as she and her team "are getting better at selecting candidates partly because we are clearer in own minds what it is we are looking for". She adds: "We have scoped out our sales trajectory and are offering a retainer. Within the sales trajectory, we have worked out when they switch from retainer to commission and they are monitored every month with degrees of tolerance either side. Some of them are out doing it already and fingers crossed that they meet that curve. Their first three months are based on activity and in the second three, it's time to work on turning that into revenues."
The consultants are operating at the upper end of the SME offering, with £10,000 as the "absolute bottom end" and £150,000 GWP at the top.
Ms Page expresses the view that Marsh is trying to address SME clients' concerns around the cost of risk management services by tailoring a package for their needs. "In tougher times, most SMEs don't have the financial means to pay for a highly professional team like Marsh Risk Consulting. In franchise and Pro Broker we are only weeks away from building and working with Marsh Risk Consulting and a third-party provider on an external proposition."
That Marsh would not be welcomed with open arms by all in the highly competitive SME broker market was to be expected - as were Marsh's protestations that it has exactly what that market needs. Ms Page is confident the Marsh brand will be a help not a hindrance in helping it crack the market and it is clear that it has not taken any decision lightly. But whether Marsh takes off in the SME space with a bang or a whimper remains to be seen.
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