19th August 2021
Insurance Broking Post-Covid
Before we start, we’d like to point out the obvious that COVID-19 still exists!
What we mean is, it is now a few months on from “Freedom Day” on July 19th and it – thankfully 🤞🏾 – seems that the pandemic is under control, so Ataraxia think now is a good time to pen our thoughts on general insurance broking for the remainder of 2021, and beyond into 2022.
We’ll also cover minority investments and broker acquisitions in our follow up article next week!
Ataraxia currently have 27 minority investments in insurance brokers throughout the UK; this number is growing, and we are constantly meeting with owners considering selling a minority investment in the not-too-distant future.
In short, we speak with owners of insurance brokers each and every day, sometimes assisting in their accounting and P&L, and are therefore well placed to give a good insight into the current market.
The Insurance Broking market during Covid-19.
I think it is safe to say that when Covid-19 started rearing its head back in early 2020, resulting in the first UK lockdown in March 2020, every insurance broker would have been affected in some shape or form.
Firstly, it has been an operational nightmare for all brokers, reliant on systems and intranets for quotations.
Secondly, revenue streams have been impacted, depending on what sectors a broker operates in, especially if niche products make up a large part of your book of business.
All insurance brokers have been affected; it just depends on by how much!
That said, insurance is a product that the public and businesses still by-and-large need, and therefore demand has not waivered. So, in summary, the insurance broking market has held up well and we should be thankful for that.
The entertainment and food/beverage market have been hit far harder than the insurance market, and we commend all these businesses that have survived this awful pandemic.
On the insurance renewals side of things, brokers have had little to complain about. In fact, in the commercial/business insurance market the pandemic often meant that company directors were so focused on their core business, furloughing staff, supply chain issues and the like, that shopping around at insurance renewal date was often not a priority at all.
That of course had a knock-on effect on the New Business generated by insurance brokers during the pandemic: fewer quotes from customers seeking a comparison at renewal, fewer start-up businesses, business fleets parked up and generally a deflated commercial insurance market. This all coupled with no networking to meet new businesses, reduced (or completely cut) marketing spend and furloughed insurance advisors.
The internet has meant that the simpler transactional business insurance policies – such as public liability or courier insurance – have had new business quotations, but more complex, relationship-based new business opportunities have been harder to come by.
What does the future hold post Freedom Day?
Ataraxia are cautiously optimistic about the UK insurance broking market moving forward. This does of course vary from sector to sector.
The B2C insurance broking market – private cars, homes, pets etc – should return to normal. Perhaps with a little more shopping around to save those pennies if income has been affected during Covid.
The industrial, manufacturing, warehousing and logistics market is booming. Businesses in this sector literally cannot fill their vacant roles quickly enough. We spoke to The Absolute Solutions Group, a recruitment company that covers all sectors but specialises in the above sectors, and they literally have hundreds of vacancies they need to fill for their clients such as Boughey Distribution and Rymans stationary due to the continued rapid growth of internet shopping and the warehousing and distribution required to satisfy “next day” demand.
Employees getting “pinged” and having to self-isolate for the required duration had made this shortage of staff even worse.
If you are an insurance broker with existing clients in this sector, we believe this will continue to grow. Good news if your existing clients become bigger with more employees and premises, with premiums increasing. Great new business opportunities too.
The commercial (corporate) sector will take, in our opinion, a little longer to recover. That said, the furlough scheme and other Government initiatives have meant that this sector has not been hit as hard as it could have done. Businesses have had to think smart and tighten their expenditure, but the vast majority have come through without severe revenue or profit downsizing.
With the end of the Government backed furlough scheme in September, it will be interesting to see if we will see redundancies or a full return for the workforce. Will we see downsizing of office space now businesses know and trust their employees to work from home much more often?
To summarise, Ataraxia forecast that for insurance brokers who might have thought the worst, that we are certainly through the worst of it and the market can be cautiously optimistic for the future.
In fact, for insurance brokers now ready to embark on a growth strategy via marketing, organic growth and acquisitions, the next two years presents great opportunities for those that get their strategy and execution right.
More on that in our next article…. watch out for that next week!