BrokerFest 2023: AR attraction on the rise as insurers look to engage

BrokerFest 2023: Regulatory change and a switch in the approach from insurers is creating a new and “far more attractive” environment for appointed representatives (ARs).

This is according to an expert panel speaking at Insurance Times’ BrokerFest 2023 event on 23 February 2023, during a session entitled The role of appointed representative networks within the broker market, which formed part of the client SOS conference stream.

For example, Lea Cheesbrough, managing director of broker network Movo Partnership, said the benefits of moving to direct authorisation were fast diminishing.

“The AR sector has become far more attractive given greater recognition by the FCA,” she explained.

“We are an increasingly viable route for startups. We are seeing increasing numbers of market professionals who know their customers and want to make the most of the opportunity they have identified.”

Therefore, the traditional process whereby ARs move to direct authorisation once established is now under threat.

“Questions are being asked as to why you would want to take on the burden of regulation and compliance by moving to [direct authorisation] when you have the support of an AR network,” Cheesbrough added.

“We have people in our business who enjoy compliance and we allow brokers to concentrate on servicing the customer.”

For Cheesbrough, the consolidation that the industry has seen in recent years has created a broking sector dominated by large consolidators, subsequently creating a lack of choice in the market.

This has led to increasing pressure on insurers and a recognition that AR networks are an evermore attractive option.

“Lots of insurers are having their tails pulled by the big brokers,” she explained. “They are suddenly in a position where they are having to pay what they’re told. As such, we are starting to see insurers support startups.”

‘Perfect time’ for startups

Roger Gaunt, managing director of Gauntlet Group, added that the current AR market was being driven by two key factors.

“New startup businesses are traditionally the core of the AR sector,” he explained.

“It is those who are looking for the opportunity to start their own business, but there [are] the regulatory costs, the IT costs and the administrative burden [to contend with].

“However, we are also seeing established brokers getting into their twilight years [who] do not want to get acquired by a consolidator, but are struggling with their relationships with insurers [that] are demanding more premium income and are faced with a heavier regulatory burden.”

Gaunt added that these types of brokers were now looking to move into an AR network, to remove these issues while continuing to serve clients.

Cheesebrough said her network had seen cases where brokers that had sold their business five years ago and were now at the end of their non-compete contracts were using the AR route as a quick return to the market.

Others, meanwhile, were using the funds they had gained from the sale of their business to support former members of their old teams who were now looking to set up their own operation under the AR system.

“What ARs do is provide real innovation to the market in the long term,” added Gaunt. “Clients are begging for good quality, local service they can trust. Now is the perfect time for new startups to give it a go.”

The Covid-19 pandemic has also aided the AR sector due to the move to hybrid working and the use of video calls bringing clients and brokers closer without the need for lengthy and time consuming travel.

“Covid took away the 9am to 5pm working ethos, but throughout the pandemic, the local broker was the critical friend to the client,” said Cheesbrough.

This panel discussion also included John Dunn, managing director of Brokerbility, and was chaired by Tim Potter, managing director of Newsquest Media Group.