Leader: Networks must work harder to survive

Westinsure is one of the first victims of the new antipathy towards networks. As we report this week (see page 7), Zurich has pulled out of the network’s panel and other major insurers are reviewing their arrangements with all networks.

This has been on the cards for a long time. It’s no secret that insurers are scouring their distribution chains for weak links as they look to cut costs. The pressure on consolidators’ commissions is old news. A shake-up of capacity providers to MGAs has been making the headlines in the first quarter of this year; now it’s the turn of the networks.

Norwich Union fired the first shot last year with a warning that it would not pay higher commissions when it received no value in return. No doubt the UK’s largest insurer would prefer that brokers join its own quasi-network, the Broker Independence Group.

As with the consolidators, NU and other big insurers have been negotiating down terms behind the scenes. Grant Ellis, boss of Towergate’s The Broker Network, recently conceded that there would be no increased commissions this year, and that in some cases, there would be cuts. Given the level that the commissions are coming down from, that’s all very well – as long as the networks still have something to offer to their broker members and insurer partners.

For brokers, this value could take a number of forms. The bigger networks at least are likely to offer some kind of enhanced commission, though the numbers may look small compared to recent years. Perhaps as importantly, they can offer compliance support; access to insurers and schemes that may otherwise be out of reach; and a viable exit strategy for entrepreneurs. And, as with Marsh’s recently launched ProBroker network for SME business, they may offer the prestige of association with a national or international brand.

And for the insurers to play? If the big boys are going to bother, they need some guarantee that the networks have got the clout to deliver on their promises. A loosely associated group of brokers that refuses to act on central guidance will be of little value to them. Of the many network propositions that have sprung up in the past couple of years, not all will be able to offer insurers what they need.