Lea Cheesbrough is the Head of Broker Development for New Start Ups at Broker Network. She gives us the lowdown on why brokers go it alone, and what makes the successful start ups thrive.
Starting a new company can be tough, and insurance brokers are no exception. I’d know: it’s not just that I work with multiple new start ups while they find their feet, but I’ve done it myself when I built my own brokerage. I know how firsthand not only how challenging it can all be, but also how rewarding it is when your hard work pays off.
What drives people to set up new brokerages?
You get a real variety of people starting up, but more often than not, they fall into one of two categories:
Firstly, you get the guys who work at a large corporation. We get a lot of executives or team leaders with a strong entrepreneurial streak and a firm belief that they can do things better under their own steam, for instance improving customer care or streamlining processes.
Secondly, you’ve got the brokers who have gone down the appointed representative (AR) route. The lack of independence and not being able to choose where you broke often becomes an increasing frustration over time. When you factor in that becoming directly authorised can save 40% of your income, you find there are some strong pulls to starting afresh.
What challenges come up time and time again?
No two independent brokers are the same, but whilst the personal challenges will vary from person to person, there is a common thread that ties them together: areas of inexperience. Take our exec leaving a larger corporation for instance. They will know insurance and broking inside out, but have they ever had to organise a company’s finances? Have they ever had to set up their own back office software? Have they ever had to create HR policies?
With AR conversions you tend to face a slightly different set of challenges. Compliance will largely be new and daunting, and the lack of agencies can present a big challenge.
In both cases, there are going to be tasks that have not arisen before, and new skills that will need to be learned or outsourced to accommodate.
Can start ups compete against the larger corporations and thrive in a crowded marketplace?
There are a lot of big players in the insurance industry, and it can seem crowded. However, the start up scene is absolutely booming at the moment, and there are some real success stories from new brokers. There are two things that will really help independent brokers compete from the day they launch:
- Join a network. This was covered in a recent Insurance Age article – larger organisations have more muscle to throw around when negotiating products than smaller ones. However, by being part of a network you can benefit from the collective buying power and get access to much more competitive products than you would have access to flying solo. This is a great way to punch above your weight and level the playing field.
- Fly below the radar. You will be able to offer a level of customer care which larger companies will struggle to match, so take full advantage of this. Premiums under £10k can be highly profitable, yet larger organisations will often overlook these and overlook the fine details in the hunt for bigger wins. This is an area where the traditional broker values and focus on customer will help independent insurance brokers truly excel.
What common traits do successful start ups tend to share?
As a rule, it’s the guys that have their house in order who tend to shine, particularly when starting up. There’s a lot of upfront work involved in creating a new insurance brokerage, and the more time this takes up, the less time you have to spend on your clients and building your pipeline.
You are thoroughly dependent on getting your compliance and TOBA in order of course, which can be very labour intensive if you don’t have support. Another big one is marketing. Your customers will increasingly expect a brand presence through your website, social media and printed collateral. This has a huge impact on drawing in new leads, but you also need to consider the more administrative side of your brand like logos, business cards, letterheads, the list goes on…
How do you prepare for the unknown?
Gaining the support for back office services like these and access to competitive products are two of the big reasons brokers join networks. The other thing that is invaluable to start ups but often overlooked is having someone on hand who has already been through it and knows the pitfalls to avoid.
There are key trigger points where issues come up again and again. If you hit them head on it can cause chaos, but if you are experienced, you can spot a lot of them a mile off and take evasive action. For instance, did you know that six weeks into the FCA application the FCA will contact your employer as part of the process? This can cause huge issues if your employer wasn’t already aware. Similarly, if you are under a restricted covenant in your contract, this can hamstring your initial growth forecasts if you aren’t prepared.
We deal with issues like these time and time again. When you’ve been through it as many times as we have at Broker Network, it means you can see many of the hidden traps long before they spring and react accordingly. Even if you don’t think a network is for you, find someone who has been through the same process – it will be pay dividends in the long run.
Thinking about starting up an insurance brokerage? We’re always on hand to bounce ideas around – you can reach Lea on firstname.lastname@example.org or 07834 755317