The broker network rationale
In recent years the number of Insurance Brokers has been in fairly dramatic decline. From circa 11,000 in 1992 down to roughly 3,000+ by 2016.
Historically, UK Brokers have been privately owned, founded generally before 1975 and, consequently, the Principals of these firms have mainly reached retirement age before 2005. Unsurprisingly, when they are approached by larger firms with a view to acquisition, they are often open to the suggestion and – in the 1st round of mergers – their offices and the local staff may well have remained in place.
However, we are now past the 2nd and 3rd round of ‘consolidations’. The original acquirers are themselves being purchased by brokers who are, in turn, snapped-up by an even larger organisation! Local presence and client servicing can often be sacrificed in favour of regional centres and in the interests of rationalisation and short-term profit.
The outcome of this kind of re-structuring frequently means that nobody quite ends with what they signed-up for originally.
An appointed representative network
In the parlance of the Financial Conduct Authority, TEn is deemed to be an Appointed Representative Network and the independent brokers who have joined us are known as Appointed Representatives or ARs.
This simply means that TEn is the entity that is “authorised and regulated by the FCA” and the Appointed Representatives, a.k.a. our network member brokers, are in turn regulated by TEn, having been approved and appointed by us.
TEn also provides a range of back-office services to its members, as any Account Executive within a larger broker would expect to have. Along with these services comes a similar (or better) level of supervision than would be provided by a a large broking operation. Therefore, any client can choose to deal with a smaller independent broker; without compromise.
The upside of network co-operation
Insurance in the UK – beyond private car and simple home/travel/pet insurance – is still predominantly arranged through brokers, because brokers represent the interests of the client in the best light to the multi-national corporations that are the insurers.
Theoretically, the larger the broker, the better the deal they can achieve for their clients and the better the level of service they and their clients receive from insurers. This is simple bargaining power and economies of scale etc.
TEn was established to level the playing field for small local brokers and broker start-ups; and for those clients who prefer to deal with them. Consequently, we have the facilities with insurers, as would a larger broker, which our membership has access to.
Whilst a larger intermediary may tend to lose touch with their clients, independent community brokers, gathered together within a network, achieve collective strength but retain local focus.
An equitable sharing
It is incumbent upon the broker – and required by the FCA – that the benefit of any muscle they may have is shared with the client. TEn firmly believes that one of the things the client most needs and desires is proximity of service and the ability to deal with the professional advisor of their choice. Preferably the same person, year after year.
In respect of this re-introduction of choice – and in other aspects – the TEn approach runs counter to the prevailing trends within the market.
Other Appointed Representative models
Whilst TEn has a handful of emulators operating a broadly similar AR network model for full-time professional brokers, there are additionally hundreds of other AR networks overseeing approximately 20,000 ‘secondary market’ ARs, with mixed results from an FCA compliance point of view. These would include Vets selling Pet Insurance, Mobile Phone stores selling Gadget Insurance, Motor Traders selling Gap Insurance etc.
Unfortunately, these other AR networks are subject to period criticism by the FCA which should not have any bearing upon the reputation of TEn or its AR member brokers. However, a few directly authorised brokers sometimes have a mischievous habit of suggesting otherwise.