In these cash-strapped times brokers need to eek out every penny possible to ensure their business does not become another unwelcome credit crunch statistic. Taking the introducer route can prove to be a viable option for many intermediaries. As a specialist in one area of financial services, such as mortgages, brokers often have too many eggs in one basket and when that sector suffers a setback there is nothing else to pick up the slack.
Naturally a mortgage broker will wish to continue as a specialist because that is where his or her expertise lies. However, the current financial climate demands that they offer clients access to other product categories in order to shore up the bottom line of the business by receiving a welcome fee in the form of introductory commission. For example, a mortgage adviser that wants to offer general insurance (GI) products can introduce clients to a specialist GI broker or product provider and receive a fee for his trouble.
The testing economic climate means that productive provider firms also need to shore up their bottom line as much as advisers. Increasingly they have come to realise that they need to put in place a series of incentives in order to secure the quality leads that can boost their business. They urgently need to re-engage providers’ existing population of introducers, attract new introducers and provide a solution to networks where penetration of GI business, in particular, is low.
This is good news for the adviser because they provide the access to a wide customer base that insurers can tap into. At the same time, provider firms benefit from a closer relationship that broadens, deepens and strengthens existing relationships with introducing appointed representatives and networks. The new challenge therefore is to launch something that will create interest in generating income in what is now a very challenging market.
Specialist MPPI insurer Paymentshield is one firm that recognises the importance of doing business with introducer partners and is currently in the process of overhauling its offering.
Chief Executive Office Stuart Pender says: "For a number of years we have been highlighting the positive effect that non-investment insurance renewal commission can have on a business and many intermediaries have established a real appreciation for the reliable stream of cashflow income it provides - after all, a general insurance sale can significantly increase the commission earnings of a mortgage intermediary - and even more so now that the volumes of mortgage sales has fallen so dramatically.
”However we recognise that in an extremely challenging market in need to provide to new and existing relationships a headline offer, a choice of commission structure and greater support levels.”
Commission rates have been reset at a one off 30% of annual premium or 15% on an annual indemnity basis.
Ted York, managing director of Lewes-based general insurance wholesaler Berkeley Alexander, believes it has never been easier for brokers to benefit from introducing new business. He says: “Advances in technology means brokers can benefit from introducing general insurance at the push of a button and secure good rates of commission for doing very little.
“The sophistication of today’s quotation systems allows us to tailor the products to the broker’s requirements. For instance, the broker makes the choice between whole-of-market quote facilities or a single insurer product.
“Brokers can also introduce a client to us for any type of general insurance product – not just the obvious mortgage-related products.”
But just how much money is there to be made from introducing business? This can vary from anything from 15 per cent to as much as 33 per cent or more. But the beauty of introducing a general insurance product is that, in many cases, the broker will continue to receive commission on new business and on renewals for the lifetime of each policy, even should they decide to retire.
But York argues that advisers need to do more to help themselves.
“As a general insurer wholesaler we can make it as easy as possible for brokers to introduce business to us at no cost. But brokers themselves must become more professional by re-examining their entire book of business and building a databank of prospective clients that you can cross-sell to with particular attention paid to mid and night net worth clients,” he adds.
York believes that even while the broker may have been used to seeing commission rolling on from past business written, if they are not proactive in retaining this business (for example, by contacting the client early in the renewal process) they stand to see a reduction in the ongoing commission they receive.
The key to a profitable relationship is to find the right business partner and put in place an introducer agreement with your selected partner.
