Appointed representatives are the engine of insurance growth for the future

appointed representatives

The broker market is constantly changing, but perhaps not in the way most people think. We often hear worrying reports of the diminishing number of brokers, but with more and more people picking the Appointed Representative model, I believe we are in for some exciting shifts in the market soon. And it will be interesting to see if a return to the high street is on the horizon as more brokers are set up to serve their local communities and diversify into cross-selling financial services products. 

A topic that has constantly been on people’s minds over the last few years is broker consolidation. At the moment, there are a lot of high debt levels across broker consolidators, and that puts a lot of pressure on people to produce income, which might be okay while rates remain high. But I wonder whether, when rates drop while interest rates are high, the pressure will become unbearable, and we’ll see a big swirl of individual brokers leaving and setting up their businesses. 

Attracting new talent 

The Appointed Representative (AR) model is also an opportunity to attract new faces to the distribution market. When the costs for setting up are lower, we can help people who otherwise wouldn’t consider insurance broking as a career in the industry. But to do this, we need to show them that insurance broking is more than just policy admin and claims – it’s having the conversation with the business owner, understanding what their business does, and really getting under their skin. That’s why insurance is fascinating; it’s an amazing route to understanding how the world works.  

We must focus on getting new blood into the industry, and we can do this by making the model simpler and focusing on financial services rather than purely insurance. Brokers are in a privileged position because they ask for so much information from a business to find the right cover.  

Broking is also great for a part-time demographic because it doesn’t need to be done face-to-face in an office. I’m always amazed that there aren’t more brokers who are post-maternity leave. There’s a massive opportunity there because brokers have knowledge and can earn good money, and they can also have a work-life balance while still talking to interesting clients who do interesting things.  

Shifting models 

Everyone always talks about the diminishing number of brokers, but I don’t believe the number has reduced much. We see more people than ever going down the Appointed Representative route, but no one is paying attention to this shift in business models. People are focusing on the tip of the iceberg rather than the massive iceberg underneath, which will be the engine of insurance growth for the future. 

At the moment, there are currently around 40,000 ARs operating under c. 3,600 principal firms in the UK (HM Treasury, 2021). The barriers to entering the insurance broking market are challenging, which is why so many people choose to become ARs. To do this, they must find a partner who can provide them with technology, regulatory licensing, products, and business support. But crucially, they also need funding, which is incredibly difficult to find as a start-up broker. In the old days, brokers could set up syndicates with backing from Lloyd’s names. But that somewhat egalitarian model no longer exists. At the same time, private equity companies are reluctant to invest in start-ups because they prefer to buy and build.  

Providing capital 

The lack of funding options available to start-up brokers is one of the reasons why we are setting up Stubben Edge Capital. We want to invest in the brokers of the future and help individuals start businesses. We’ve seen so many people with good ideas that need support, and as a start-up ourselves, we’ve also seen not everything is linear. Life is a random walk, and it’s not as easy for younger people to build up capital in the way that it was for older generations. 

We’ll launch our fund towards the end of the year, where we can provide start-up capital, alongside the services we already offer, to people who want to grow their businesses.  

When you ask a broker why they work in insurance, the most common answer is that they fell into it. Our goal is to get the brokers of the future to fall in love with insurance rather than fall into insurance. 

Chris Kenning is CEO at Stubben Edge, where we’re on a missing to supercharge insurance distribution. 

Stubben Edge is the new destination for anyone looking to become an appointed representative or to grow their current business. Find out more here.

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