Why brokers should “love” the UK market’s broker management systems

Whether you know them as broker management systems, software houses or technology providers, the message from insurance thought leader Andy Fairchild (pictured) is plain – it’s time to embrace the role these institutions play in the success and viability of the UK broking model.

“Whether you want to start a broker, grow a broker, consolidate brokers, distribute a product as an MGA, or help insurers or MGAs or brokers make better risk selection or pricing decisions – all roads lead to broker management systems,” he said. “Because what they do is provide brokers with a seamless way of not only managing your business internally, from sales pipeline through to invoicing through to managing information, but they also connect you externally to insurers and MGAs and third-party data providers.

“And in my humble opinion, the UK leads the way, particularly if you compare the UK with North America which holds our closest markets. We lead the way with that connectivity which I think is fundamental to the vibrancy of UK broking, of UK MGAs and the entrepreneurial nature of the whole market.”

How the UK market compares with North America

While the US operates under the effective duopoly of Vertafore and Applied, and the Canadian market is currently seeing a live and unresolved anti-trust case, the UK market is home to no less than five major players, he said, and it should be thankful for the competition. That each of these players has its own clear market positioning underscores the “vibrancy” of the UK insurance sector and its competitive nature.

“It might be a once-in-a-decade decision for a broker, but in the UK you can actually change your broker management system if you need to,” he said. “You need to be big, you need to be ready and you need to be brave but you can change systems, and many brokers have done just that.”

Why brokers should “love” these systems

There are so many reasons to “love our broker management systems”, Fairchild said but underpinning them all is the independence of these organisations. The fact they are mostly independently owned by private equity or private management is critical because it means they don’t have a trading agenda, so they’re not working on behalf of any one broker, insurer or MGA.

“You can’t tell me the likes of the Aviva & Ardonagh board rooms haven’t actively considered what it would be like to have ownership here,” he said. “But thankfully no one like this has made a move. I would hope mainly held at bay by market dynamics, wary of how we would all react… [Our] broker management systems are playing a role of effectively promoting competition by encouraging brokers to think about how they can use them to outsmart the broker next door.

“And how can insurers make better use of the broker management system to outsmart the insurer next door? And the same goes for MGAs. It’s that independence, that entrepreneurial spirit that you find within the broker management systems, along with the fact that they’ve got no trading agenda and they promote competition that makes them such a rich foundation for the success of our market. And I think most end customers would acknowledge that this works for the benefit of them – which in the end, is critical.”

The ”eye-wateringly” strong P&Ls of these organisations are what enables them to invest in strong capital research and development, Fairchild said, and the fact that a large slice of their income in the UK comes from insurers and MGAs – driven by e-trading volumes – in turns keeps the licencing fees down. This R&D investment has a knock-on effect on the efficiency gains of brokers.

“At the end of the day, it is down to us as brokers to drive these efficiency gains,” he said. “But again, most roads lead to the broker management systems and whether we’re making the most from them. Is there functionality there that we’re just not using? And often the answer to that is yes, even the most sophisticated users feel that they can make better use of their broker management system.”

Looking across the market, he said he thinks most brokers and insurers would recognise that these systems have been integral to their efficiency gains, which in turn can be passed on to the end consumer – and at the end of the day, insurance has to be about the end customer.

What’s next for the UK broking market?

As for what the future has to hold for the UK broking market, Fairchild expressed his confidence that its vibrancy can remain untarnished. Broker management systems are as entrepreneurial as the brokers they support, he said, and they’re open to evolution and change because they’ve been at the heart of a lot of the efficiency and effectiveness gains being seen in recent years throughout the market.

It can be hard for these organisations to always remain at the cutting edge of innovation, he said, because they are increasingly large software development companies which require great governance structures and a sound approach to delivering improvements. So, the fact that so many brokers and insurers can point to new initiatives that they’ve been able to pioneer and bring to market with the support of their broker management systems is even more impressive.

“We know that all roads lead to these broker management systems,” he said. “But the fact that they support these kinds of entrepreneurial initiatives and those changes that the market wants to make is vital for the continued vibrancy of this market.”