In an increasingly competitive marketplace, brokers can gain an edge by specialising in niche areas and strengthening their regional focus
The broking market is a tough space for many players in 2013. For the past 10 years, the market has been fairly flat – but aggregators have edged into consumers’ line of sight, offering cheaper, direct insurance rates that bypass the high-street broker.
Competition is fierce, and brokers need to differentiate themselves in order to secure market share. In the face of these challenges, some players are realising that having a regional presence or focusing on niche areas can be of key importance to the future success of their businesses.
For many, emphasising the best parts of a broker’s service – such as offering the consumer or SME a more personal insurance-buying experience – has made a real difference to their business propositions.
For example, Peter Smits, managing director of Ashbourne Insurance Services – which has been around for 34 years and has two branches in Hertfordshire – says the idea of focusing on one aspect of their service has played a key role in the company’s success. “Becoming more specialist over the past five to 10 years has been paramount in keeping our business healthy and buoyant,” he says.
At Ashbourne, this has come in the form of knowing the local community inside out. “70% of our business comes from within a 50-mile radius, so we say ‘we know your area and we understand it, the types of businesses that are functioning and the types of residential areas there are’,” Smits says. “We have come away from advertising nationally in the last five to 10 years and gone back to the ethos of 34 years ago: providing insurance to our local community.”
This idea makes sense to Alec Finch MD Mike Latham, who says his firm decided to open an office in Sheffield this July in recognition that having more regional presence is an underrated choice, particularly when most companies are cutting back and offering services from larger head offices.
“Our differentiator in Sheffield is that we’re a corporate broker investing in a local community, when a lot of people have pulled out and tend to deal with clients from offices in Leeds or Leicester,” Latham explains. “We know investing in Sheffield isn’t going to generate immediate profits, but we have a five-year plan to more than double our business. We understand we have to invest a lot of time and capital now to help us grow in the future.”
By combining local presence with niche capabilities, brokers can cover much-needed bases and hammer home the importance of regional networks. Rhys Thomas, MD of Wales-based Thomas Carroll, says these two pieces of the puzzle have fitted together to create a healthy business, which flourished even during tougher times in the mid-2000s when Thomas Carroll was concerned consolidators would win out in the region.
He says: “We have specialised in the property sector and become a leading UK player in some areas. This specialism, built up over 15 years, has been profitable and has also allowed us to reinvest in our business and our people. We are also very committed to and focused on our region and community – I would say more than 90% of our income is from our region, we just happened to specialise in our region in property.”
According to Stuart Winter, a partner at JLT, much of the work his firm has done over the past three years has been around growing specialist capabilities in its regional business, which has grown this year to include offices in Reading and Nottingham. “That’s not to say our regional businesses were entirely general, but they were probably 50/50 general versus specialist beforehand,” he explains. “Our move has been to increase to a far greater proportion of specialist capability.”
Specialising in certain areas is also a way for smaller brokers to compete on a national scale – a factor Perkins Slade business development executive Matt Turner started to notice a few years ago. He says: “While we don’t have the same resources as the nationals and consolidators, we realised that driving down into segments and micro sub-segments allows us to push our resources in a way that can get us on a par [with national brokers] when competing for business.”
For Perkins Slade, that meant specialising not only in areas such as manufacturing, technology, real estate and prestige motor dealerships, but also in sub‑segments such as precision engineering, aerospace, telecommunications, digital media and commercial property.
These new business segments came about after the company performed a detailed analysis of its book around three years ago, soon after the recession hit. It had what Turner calls a “watershed moment”, when the team realised changes had to be made in order for the firm to stand out in the new environment. “We thought about [areas] where our retention was very good, and from there it was about developing a plan into those parts we were really strong in. It was also about analysing whether those markets were going to continue to be strong,” he explains.
A similar path was taken at JLT when the company decided to develop its specialisms. As Winter explains: “We asked ourselves ‘what areas are we really good at?’ Construction was logical for us, and then we looked at manufacturing. We honed it down to [areas] where we thought we had a viable service option and could really make a difference, so while we might have thought of 20 specialisms, we might only proceed with seven or eight.”
But it’s not just about making the initial decision to specialise. Simon Pearce, chief operating officer of Giles, which has 38 branches in the UK, says securing new business within one’s specialisms is also about targeting the right potential clients and going one step further.
He explains: “Rather than just putting an ad on the side of a bus about what we do, it’s about saying ‘okay, we’re an expert in passenger transportation’, so we’ll go to the Confederation of Passenger Transport, ask if we can work with it, then understand its database of members in order to present something targeted and relevant. It’s about hitting the sweet spot rather than throwing a bucket of manure at the wall and seeing what sticks.”
However, while having specialisms is important for standing out in a competitive marketplace, there is a risk that firms could forget about providing good generalist insurance. In this vein, Steve Foulsham, head of technical services at the British Insurance Brokers’ Association, says it is still important for regional brokers to retain the core part of their business – that of providing general insurance to their local communities.
“Rather like the local solicitor, [brokers] become professionals within their own communities,” he says. “Any SME would look to its local professional to look after its insurance, so therefore there is a need for any regional broker to maintain that generalist approach – even if separately it starts to diversify into a specialist area.”
For small brokers like Ashbourne, this idea of providing a range of products, from general to specialist has been key to continued growth. “There’s no longevity in us writing one policy for one customer; we need to become that customer’s preferred choice across all their products,” says Smits. “I don’t want them to think ‘I’m Aviva for this and Direct Line for that’. I want them to wake up and think ‘Ashbourne, it’s a one-stop shop’. And my staff are incentivised as much on generating second or third activity as they are on gaining new business.”
Additionally, combining a specialism that gets people through the door with good-quality generalist insurance can have a helpful bonus effect, says Pearce: “If that customer thinks ‘I might be able to save £5 on my office insurance and I know these guys have looked after my specialist indemnity and they’re brilliant’, then they’ll be happy to stay with you. You may lead with the specialism, but the halo effect of the generalist insurance from the specialism is massive.”
Training and development
Outside of providing the best possible service to customers in local communities and focusing on niches, another way brokers can stay ahead of the curve is to invest in training. But attracting and training the right staff is one of regional brokers’ biggest challenges, according to Latham. “It’s almost a full-time job in itself,” he says, adding that Alec Finch uses an academy approach to take new recruits through training.
However, Latham says while many brokers understand the need to do this in practice, training isn’t always implemented where it should be. “A lot of brokers understand the importance of recruiting talented people, but [the challenge is] trying to do that while growing the business at the same time,” he explains.
According to Foulsham, the importance of training and development will form a key part of Biba’s campaign work over the next year. “We’re also keen on young people joining the broking industry,” he adds. “Many regional brokers would perhaps rather take someone with good A-levels and train them up than import someone with many years of experience who could be more costly.”
This is the approach taken at Thomas Carroll, and Thomas says it has been a huge success: “We introduced a graduate programme around eight years ago that has paid dividends. It has meant we have grown our own talent from scratch.”
While this training can, naturally, be difficult for smaller companies from a cost perspective, Pearce suggests the investment pays off in the end, especially if the training goes towards specialisation. “If you put the same amount of hours into learning and development for someone in a specialism as someone in a generalism, then the person focusing on the specialism is going to be better at what they do – you get more out of it when you put the training into a specialism,” he says.
Despite Ashbourne being a smaller player, Smits recognises that training has been a crucial part of the firm’s development. “We spend more money on training and development than on advertising – it’s absolutely critical, because my staff are my single biggest asset,” he says.
For companies with a larger presence, it is also important to recognise that the knowledge doesn’t only come from the bigger geographical centres. Winter says he noted this when JLT was increasing its regional focus around four years ago.
“We’ve looked at how we could develop our expertise out of our London offices into the regional ones – but in a reverse-flow manner we also have some specialisation within those regional businesses and we look at how we grow that back to London and to other regional offices. It’s about how we grow across the whole piece,” he says.
As uncertainty continues to surround the broking climate, commentators agree firms have to stand out from the crowd by either offering something different in a niche area or doing good old-fashioned broking very well in order to survive.
Above anything else, it’s about keeping the customer happy. “You’ve got to be able to deliver what the customer wants – everyone forgets about that,” says Pearce.
“The customer will want to engage differently depending on the product they’re after and who they are. You have to be nimble on your feet, be multidimensional and be ready for everything.”
- Top 100 Insurtech: Quarter four update
- Charles Taylor bolsters liability team by hiring senior sextet from Vericlaim
- Roundtable: Is a single customer view taking off in insurance?
- I work in insurance: Stephanie Horton, River Canal Rescue
- Insurtech diary: Getting stuck into insurance
- Analysis: The mystery of the missing Insurance Fraud Taskforce report
- Gallagher Bassett acquires claims management firm