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Changes: Consolidators and The New Breed of Insurance Brokerage

13 November 2020
By Howard Pepper
Managing Director, Momentum Broker Solutions

The recent acquisition by consolidators of two of the bigger names in Leicester, my local marketplace, Brokerbility and Erskine Murray took me back to when I first started in the broking sector in Leicester. Virtually all the brokerages around at that time have disappeared, many have been purchased by consolidators.

Consolidation is part of the natural growth cycle in our industry – 40% of M&A deals in 2019 involved a market consolidator. Eventually faced with the many choices available, some brokers will realise the capital value of their hard work, with a sale being the most obvious exit.

Of course, there are consolidators and there are consolidators. Some will strive to maintain the same service standards for clients and job satisfaction for employees, others are more focused on getting a greater return on the asset and greater leverage with suppliers. In any event, this provides an opportunity for new brokers to step into that space, provide local personal service and build a great business and an asset.

While there are economies of scale in insurance broking, corporate structures can often deliver inferior outcomes for clients.

Analysis of the Insurance Times Top 50 Brokers 2020 by IMAS suggests that the amount of premium handled is not concentrating, even though the market is consolidating.

Smaller firms with an entrepreneurial spirit can be more flexible, more agile and more client-centric. A lot of them do not strive to be corporate and see it their unique selling proposition that they are not.

Supporting the start-up and growth of the new breed of insurance brokerages is our business model.

It has never been more important that we are able to provide the environment for brokers to compete effectively with larger players and enable them to provide to their clients the best of both worlds.

This ensures that we have a vibrant industry and maintains the growth cycle so that the landscape in Leicester and elsewhere will not be bereft of great independent broking businesses.