Frequently Asked Questions from Start-Up Insurance Brokers

Rationale, Commitment & Relationships

In so far as the FCA designate us as an AR Network, then the answer has to be “YES” we are a network. However, insofar as we are an independent Employee Owned company with no ties to any larger broker or insurer - with no direct client of our own (saving friends and family) - we are certainly NOT typical.

No certainly not.

Franchises tend to impose their own branding on local outlets and restrict the products and/or services sold to a limited array. That practice is really quite the antithesis of what we are about, which is a supplier of outsourced broking services to Insurance Professionals who are building their own corporate identity.

Because that’s the FCA rule for AR Networks and, in many ways, it is what positively distinguishes AR networks from the rest.

As a non AR small broker, your support for a sufficient range of markets is spread very thin, resulting in lower service standards, quoted rates and commission levels than would be the case with a larger entity such as TEn.

Consequently, aggregation of buying power is very desirable, both for the network and its members. Also, as members reach retirement and potentially sell books of business to other ARs, then there are no agency transfers required; all are covered by the TEn TOBAs.

The simple answer was… potential; or, at least, the insurers perception of it.

The TEn model promised a combined possibility of credible account growth and cost savings to insurers, unlike any other individual, team, established small broker or ‘consolidation’ model could realistically manage. Since then, we have delivered on that promise and insurers remain friendly to our proposition.

At the time of writing (2016), our GWP is hovering around the £50m mark, with our largest single market being about £5m or 10%.

In a sense YES, but better. Consolidation generally means that the management of the client relationship is moved away from the client’s locality to a regional/national centre; but we most certainly do not propose such a shift… in fact, the TEn model promotes exactly the opposite.

Also, consolidation typically results in the Account Executive or Broker Principal becoming an employee, rather than enjoying the status of a valued customer, as in TEn’s case. Arguably, elsewhere, the individual Insurance Professional can be coerced into shifting customers’ insurances away from markets where that ‘Professional’ feels they are best placed already. We don’t do that either.

For a minimum of 18 months; this being 15 months of initial commitment followed by a 90 day notice period at any time thereafter. This is the norm.

We believe that TEn is going to work very well for a lot of people, in which case they will continue to support it without onerous contractual commitments of longevity being imposed. If for some reason it doesn’t suit a particular Broker, then it’s completely pointless to have everybody locked into it for years.

If any money is borrowed from TEn to fund growth or an acquisition, then there will generally be a separate contract put in place that will cover an extended period of commitment.

We regard the client relationship as belonging to the Broker; not us, not ever.

On the way in, the client must appoint TEn as its intermediary from the point of view of the insurer and, of course, TEn will have certain responsibilities to the client in extremis. Nevertheless, TEn will be contractually bound to the Broker to place no impediment in the way of the client’s departure in the event of TEn and the Broker ceasing to have a relationship; nor will TEn ever initiate a direct approach to a client or via another Broker.

Very much so; 90 days notice after the 15 months initial period. Brokers have been successful in the past and moved on with GWP figures in excess of £5m and staff at 10 or more.

In many ways we regard this scenario as excellent marketing for our services. This has happened perhaps 10 times since we started and we do whatever we can to help during the transition and, indeed, sometimes retain a business relationship with the departed in respect of some of their clients and risks.

That said, we don’t believe that it makes economic sense for any AR to think in these terms until they have reached a GWP level of about £5m or more.

YES absolutely, after the initial 15 months plus 90 days notice period. It makes no sense to impose any other conditions, people have to make a living and working alone does not suit everybody. That said, a lot of people have second thoughts after 6-8 months and then win through in the end.

We believe that the more open we are as the natural habitat of only ‘the willing and able’; then the stronger we will all become.

Division of Labour

Simple… TEn looks after the back-office and each Practice services the client; we feel that this is a fairly clear demarcation that some national brokers successfully adopt between Account Executives and the infrastructure behind them.

Yes and No; it depends upon how much insurer contact you want. Yes, in the sense that it spells the end of hours of listening to Vivaldi and Scott Joplin, whilst hanging-on for the next recorded message, reassuring you about the importance this relatively trivial amendment or a simple renewal. That said, there can be instances in relation to larger ticket business and complex cases when things can get lost in the translation via an Account Handler and direct insurer contact is required.

Yes… in all but very unusual circumstances. Nevertheless, there will be the odd query coming from the TEn staff performing that function, which Members will be required to respond to.

Credit control remains very much in the province of each Practice, simply because they are the ones closest to the client and nobody would want anybody else threatening their clients with cancellation if they don’t pay up.

Most of our members are (or have been) Start-Ups anyway, so this has seldom applied; at least up until the launch of Renaissance.

The economic position of the small established broker making the transition for Direct Regulation (DR) towards AR status is entirely different. They will tend already to have the staff and the office space to accommodate them etc. Consequently, because the answer to the original question would generally be NO, we believe that most brokers making the transition will be looking to do so when they are short-handed in the first instance, either because somebody has departed, or growth is constrained by lack of resource.

Very much so, although that change of role is absolutely their decision.

It may work better for some people to remain doing what they are used to doing, whilst others may rise better to a new challenge. Every situation can potentially have a different solution.

This is going to be a question worth asking for a Practice which is near a major conurbation such a Manchester, Glasgow, Princes Risborough or others.

TEn will expand in Princes Risborough and in Manchester and by opening more regional offices where there are the largest clusters of Practices. Therefore we shall be seeking constantly to employ more qualified staff in these new locations. Glasgow and the West of England are very much on the cards.

It would be disingenuous for us to suggest that you will definitely regain the other 50% of your time; because you will still have premises and possibly some (but fewer) staff to manage. So, it really comes down to how much time you currently spend messing around with insurers, software houses, cleaners and regulation etc. Shall we say that re-capturing something around 25% of your time is about right?

That is none of our business… play more Golf if you like… or go sailing. Alternatively, you could spend 75% of your time servicing and/or winning clients, rather than 50%; in which case we would all make a lot more money as a result. Nevertheless, it is a matter for each Practice to decide the division of labour/leisure time.

TEn is not a franchise operation with targets and objectives. Like any independent business you will have to make enough money to live and to remain solvent, but only your solvency is TEn’s legitimate concern as its regulated AR under FCA rules, not how many hours you choose to work.

Well, none really; unless you need a PA or a Marketing/Claims Assistant. Obviously, Account Execs are a matter for each Practice.

Whether you are a partnership or a company, you will be responsible for the proper accounting of your own Practice; but TEn will have taken on the client/insurer part of it.

Therefore, responsibilities are somewhat diminished and, typically, a lot of what is left will handled or advised by your Accountant. Credit Control remains with each Practice however.

Service Levels & Markets

Via TEn, the service levels will be much the same as any medium/large broker, which if you are an Account Executive coming from a similar organisation, will be just about what you are used to. If you are an established small broker, then there could be a marked improvement.

Note: we shy away from using words such as “superb” or “fabulous”. As with anybody else, there are insurers involved and so the best laid plans etc..

Somewhat beyond the normal range for a medium/large broker.

As of now (2016), the number of TEn Agencies/TOBAs stands at about 200. That said, approx. 75% of our business is with 25 and 75% of the balance is with another 25, which leaves the balance of +5% with about 150!

We used to think that large numbers of TOBAs were a bad thing, but we have come to accept that this is the proper norm for a ‘broking’ organisation such as ourselves. We have members with some obscure specialties and they tend to have specialist market. Other MGAs and wholesalers have their place and we need to be able to cope with agency transfers when they occur; which they frequently do.

Yes and No; we can cope with whatever comes but most clients pay annual premiums between £2,500 and £10,000. Historically we have handled winds farms in India and diving contractors in Iraq and all sort of unusual stuff.

At the time of writing (2016), our Members collectively can count very many clients paying in excess of £50,000 p.a. and dozens in excess of £100,000. There is one client who exceeds £0.5m and another above £0.75m.

FCA Compliance

No to both; TEn does that.

No, TEn does that. However, if they find your knowledge/procedures measurably lacking, then there may be some remedial training costs thereafter.

No, TEn does that. The amount we pay annually to the FSCS depends upon the mis-deeds of others and can range between almost nothing to nearly £40,000.

Nevertheless, it is not a major concern for our Members, although when the amounts do become rather excessive, we have been known to impose and £2.50 policy fee (per policy) to help us meet the demands of the regulator.

No, TEn does that. The AR simply needs to remain solvent as would any other business.

No, absolutely not; the same criteria will be applied to Practice Principals (who must be identified by TEn to the FCA) and they will in turn be held responsible for those in their Practice. We are just as concerned as anybody else should be about TCF, Contract Certainty and everything else.

We do a full range of Experian checks before anybody is appointed and, arguably, our ears are closer to the ground in some respects than the FCA and we believe that are much more likely to spot a ‘bad apple’ early.

Systems

Yes… categorically. For the start-up this may be easier to accept than for an established broker; having got nothing already makes it more likely to welcome something that is that is provided as part of the deal.

A small established broker who is not tied into a broker software house will find it just as easy and beneficial to take the step onto Strata/ Acturis. Larger established brokers with technology investments would find it much harder and, consequently, the TEn proposition does not appeal much to them, nor them to us.

The system is a significant part of our ability to fulfil our FCA mandated role of oversight and, on a practical level, it is absolutely essential for the operation day to day.

A broadband connection… i.e. an ADSL line, preferably something fibre, such as Infinity. The size/speed of the connection will vary depending upon the number of people in a Practice, but in any event, we are talking about a monthly line cost of between £15 and £45 plus VAT.

A start-up Practice can, like many new brokers did in the 1970s, quite literally establish their businesses from a back-bedroom, using a pre-installed home broadband connection. Business broadband connections are more reliable and less contended than are Home ones, reflecting the higher prices charged; but, theoretically, just about anything should do.

In most cases, no servers are required and any decent business/home PCs (or laptop) of less than a couple of years longevity will do very nicely. Printers and scanners can be a little bit more tricky to get right. Laser printers are definitely preferable to Inkjet and scanners MUST be capable of converting a multi-page document into one single PDF.

Some multi-function machines are pretty much idea, although a FAX element to the multi-functionality is generally unnecessary these days.

Yes, only by members of that Practice and no others; although, given the nature of TEn’s business model, TEn staff who deal with Practices, do get similar access. The same is true of both CDL Strata and Acturis.