The players

See also: Can networks take on the giants?

Networks are big business. In the past year alone, Our Network, Willis N2 and Purple Partnership have been launched, while Towergate has taken over the industry’s best-known player, Broker Network.

Competition has never been fiercer, leading to some wars of words. Broker Network accused OurNetwork of plagiarism – which the latter denied – and threatened to sue. The Broker Network boss Grant Ellis (interviewed on page 20) also warned brokers of the dangers of “knock-off networks”.

When businesses begin biting chunks out of each other, it is often a sign of trouble in the market. However, even with new players launching networks and alliances on a regular basis, a huge tranche of the broking industry remains independent – and up for grabs. Despite the bickering and the competition, industry experts believe there is room for at least a handful of major players. After all, there are about 2,500 insurance brokers in the UK and only about 500 of those belong to networks or alliances so far.

So what’s the difference between a network and an alliance? We asked many people in the industry, but only Denis Morgan, managing director of the Westinsure, which describes itself as an alliance, came close to a detailed explanation.

“There is no precise definition of a network or an alliance, says Morgan. “These terms have evolved over time, and today the definitions are very blurred. To me, an alliance is a group of brokers who joined together to create size with a view to competing against larger organisations, whereas networks tend to be propositions designed by larger organisations which distribute via their members to create leverage.”

Whether an alliance or a network, funded by fees or not, these organisations must create value for members and suppliers.

“For members, Westinsure essentially provides access to markets and products, together with operational support,” says Morgan. “But the real differentiator is about people, communication and the way we do things. Regarding fees, clearly there is no such thing as a free lunch. So anything, which purports to be free, will be funded indirectly.”

While companies are loath to reveal their revenue models, brokers that join a network are clearly signing up to some kind of commission-sharing deal.

The bulk-buying power of a network will push down premiums and the increased commission levels obtained from the insurers will be split between the broker and the network.

Willis does charge a membership fee, which depends on the size and range of services required by the broker. So what’s the deal when it comes to splitting commission with the brokers?

Mark Radburn, managing director of Willis Networks, which includes Willis N2, says: “We operate to deliver such good value to insurers that we can increase the commission for the broker. Of course, we keep part of the commission but I can’t say how much. That has to remain confidential.”

“The newer networks are at a disadvantage. If you join with some networks you will be unsure about who is going to own them in a few years, even months.

Mark Radburn, Willis

Despite Radburn’s reticence, it is clear that a combination of squeezing the insurer on premiums and increasing commissions has begun to rile the big policy providers.

As competition increases and the general business environment suffers in a slowing economy, the talk is of consolidation among the brokers and alliances themselves. Broker Network has already gone to uber-consolidator Towergate and now the focus appears to be on Westinsure after recent speculation that it is set to be snapped up by Broker Network.

Westinsure’s Morgan would not discuss the rumours, which he has previously denied. However, he has already issued a warning, as have others in the industry, that the smaller groups will become unsustainable by 2010.

Radburn believes the accusation that some new networks are less than original could be the reason for their eventual downfall or takeover.

“The newer networks are at a disadvantage for a couple of reasons,” says Radburn. “If you join with some networks you’ll just be unsure about who is going to own them in a few years, even months. And it’s crucial brokers know who is running a network when they join.

“Look at Broker Network, they’ve already been acquired. Cobra is on the Alternative Investment Market and could be snapped up at any time and there are always rumours that Westinsure is for sale.

“If you join a network you should do so with a strong degree of certainty about who it is affiliated to. At Willis, you know we’re not up for sale and the people you join up with will be there to support you for years ahead. In that way we’re unique, no one else can say that right now.”

David Hopwood, managing director at Layton Blackham Business Solutions, believes Westinsure may well be taken over in the near future.

“Lots of people are talking about Westinsure,” says Hopwood. “The rumours continue about its sale. I’m not sure if the rumours are true, but I suspect they are.”

It’s not just Westinsure, he adds. “You also have to look at Cobra. It tried to raise some funds recently and I don’t think that went too well. So you have to wonder what its future holds too.”

One thing is for sure, there is no shortage of network bosses willing to stick the knife into their competitors. And such aggressive talk is sure to lead to consolidation and takeovers soon. Until that happens, here’s a rundown of some of the major players in the networks and alliances arena ...