A wholesale fight is the way to go

It's interesting to see that most brokers see consolidation by the so-called 'super-brokers' as their biggest threat but that few can define them. That's because these 'super-brokers' aren't some new breed of super-firm, they're a jumbled collection of consolidators (both national and regional) and networks; and they don't have much in common except the ability to leverage scale economies to extract better terms from their suppliers. But there's nothing new with that, wholesalers have been doing it for years.

And just as corner shops discovered in the 1970s and 1980s, these insurance aggregators are focusing not on what the customer really wants but rather on wringing the best deal from their suppliers (the complete opposite to most brokers' business models, which tend to focus exclusively on customer service). Put simply, over time the aggregators will be able to supply insurance to their clients cheaper than independents can. But that doesn't mean the end of the independent - far from it. Take a look at the average high street today - the corner shop may have gone and been replaced by a mini-supermarket owned by one of the major brands but so too have emerged a number of boutique retailers offering niche quality products to a tightly defined market. And many of the most profitable independent retailers don't have a high-street presence at all, being exclusively web-based. So, while the broking model is changing, it's not all doom and gloom. And provided independents can identify and operate in niche markets, there is a healthy future for them.

In the meantime, how can the small independent compete with the huge buying power of the consolidators that are able to arm-twist insurers to give them favourable rates? One way is to use a wholesaler who will bring the benefits of the aggregators' business model to small independent brokers, while allowing the independent to maintain complete autonomy and control.

So, while brokers are right to be concerned about the emerging super-brokers there is an alternative to meekly accepting their dominance. Seek out niche markets, while in the meantime enjoying the scale economies that wholesalers can bring. Then sit back and watch the consolidators start fighting among themselves when they have bought up all the firms that want to sell out.

- Agree/disagree: e-mail jonathan.swift@incisivemedia.com.