Bluefin's Reid: Network model has to change

Broker networks need to change to ensure they are benefiting both the members and their panels of insurers, according to Bluefin Insurance Group chief executive Stuart Reid.

His comments come as at the AXA-owned broker’s Business Partner Services (BBPS) division’s divisional contribution to group EBITDA dropped 46.6% to £0.8m. Revenue dropped 12.8% to £3.6m and expenses increased 6.5% to £2.8m.

Reid said the decline was down to restructuring of BBPS, which included overhauling the underwriting portion of the network offering.

He said: “It had to change. Networks have to do more than simply offer higher commission [to members]. There has to be added value for the members and the insurers for whom they are selling products.”

Reid said the changes were in keeping with what has happening at other broker networks, but he added: “We realised it a year before most other people.”

This move has borne fruit so far in 2012, according to Reid.

“The amount of backwards movement in 2011 has been more than compensated by forward movements this year so far,” he said, while pointing out that 2012 was not yet over.

He also pointed out that BPPS was a relatively small part of Bluefin. It accounted for 2.4% of the total £33.3m contributions made by all Bluefin’s operating units. He said the unit has promising prospects for growth, however.

The slump at BPPS mirrors performance slowdowns in other broker networks. For example, Towergate’s network division’s operating profit dropped 17% to £5.4m in the first half of 2012 (H1 2011: £6.5m).

The BPPS decline came in an otherwise solid year for Bluefin. Total group EBITDA in 2011 was £17.8m, up 17.3% on the £15.2m. BPPS was the only division to shrink in 2011 (see table below).