Beazley broker cutback: no gain without pain

Beazley’s revelation today that it is cutting about 200 broker relationships in the USA is further proof that underwriters need to see that they are getting value, and more importantly good-quality business, from their broker relationships.

The Lloyd’s insurer is far from the only company to be trimming its broker panel. RSA made the headlines for doing much the same in February.

Times are hard for brokers the world over, so knowledge that insurers are scrutinising their lists of broker relationships to find the weakest links is unsettling to say the least.

However, it is understandable that insurers are making these cuts. They cannot justify spending time maintaining relationships with brokers that are not able to provide them with the type, volume or quality of business that they need.

Reflect and refocus

Rather than getting bitter about this, brokers could view it as an opportunity to assess what they are best at, and only focus their efforts in these areas. Maintaining relationships that are not working for whatever reason is as much a drain on brokers’ resources as it is for insurers.

Also, these moves by insurers should not be seen as an attack on smaller brokers. While they can rely on the big boys for volume, more specialised brokers can give underwriters access to markets and products that they might not get from the larger players. What matters to the underwriters here is that the broker relationships are delivering something they need, not the size of the broker.

Beazley is a case in point. Yes, it gets 43% of its business from Aon, Marsh and Willis, and has no intention of reducing the amount of business it does with these key players. But it also does 41% of its business with small brokers and consolidators, 11% with London-based independents, and 5% with US independents. And it is keen to grow these areas, despite cutting back the relationships that aren’t delivering.

The cutbacks may be painful, but brokers or underwriters that are not providing what their business partners need should not expect to stay on panels.