The Broker Network has announced that following a recent wave of new enquiries, it has added commercial lines broker Spedding Goldthorpe to its network; and acquired RLS Insurance Brokers for its retail division. As brokers gravitate towards such ways of increasing their collective power and ability to maintain high commission rates, insurer margins will continue to be squeezed.

The Broker Network has continued to pursue its stated intentions of growth through recruitment and acquisition by announcing not only the addition of independent insurance broker Spedding Goldthorpe to its burgeoning ranks of brokers, but also the purchase of RLS Insurance Brokers to sit within its Broker Network Insurance Brokers retail division.

The Broker Network aims to continue expansion through the purchase of both member and non-member firms and its aggressive growth strategy does not appear to be progressing at the expense of the satisfaction levels within its existing membership. The recently released results of independent research commissioned by the Broker Network showed that 96% of respondents agreed that their membership presented good value for money. Unsurprisingly, all members stated that membership was important; with almost 80% stating that it was very important or indispensable.

According to a new report, more than one-third of brokers are currently members of a network, making the broker network a well-established phenomenon in the market. The report also found that 83% of all commercial business was carried out through such intermediaries in 2006. As a result, the Broker Network’s strategy of broker recruitment and acquisitions as its main catalyst for future growth appears to be based on sound principles. The group dynamic of a network allows brokers to negotiate higher rates as any insurer refusing their demands will have fewer outlets to distribute their product. As broker power grows, insurers are likely to find their premium rate increases constrained by broker demands for high commission rates as well as strong competition in the market continuing to postpone the inevitable hardening of rates.

The acquisition of the Broker Network by consolidator Towergate and the continuing purchases of brokers by insurers such as AXA, mean that the battle for control of distribution is warming up. The denouement will likely see the considerable power of the broker channel continue to consolidate into the hands of just a few major players.

Related Research: UK Commercial Insurance Distribution 2007