Insurance broking is not an entirely stable place to be – headcount across the industry is tipped to remain flat over the next five years, despite an uptick in revenues. However, while some roles will thrive, others will step into the firing line. Where should you be if you want to survive?
Traditional insurance brokers have been competing with a proliferation of online brokerages as well as banks, underwriters, and financial advisers which can sell insurance directly. Currently, 155,000 people work in the industry – an increase of nearly 10,000 since 2009, despite overall revenues falling from £37.4bn to £31.6bn during the period, according to a new report from London based industry research firm IBISWorld.
Staff costs have been increasing – spend on wages now amounts to around 30% of total revenue (admittedly a small figure compared to other areas of financial services), but this has now “hit its point of exhaustion”, according to Tim Stephen, author of the report. Changes are coming.
“The change will not come from reducing the number of highly qualified staff but the under-qualified,” he says. “As online systems and computer software continues to replace the traditional brokerage function, the number of staff required will be lower.”
So, what are the ‘under-qualified’ people? Sadly, means sales – now sales are either executed over the internet or through telesales, meaning traditional broker services are no longer as relevant.
What do you need to do to stay out of the firing line?
1) Go niche: IBISWorld’s research suggests that smaller, niche players can survive through their specialist knowledge and services – “brand awareness and niche labour skills are key to product differentiation”, it says. It pays to be a specialist in broking, both in terms of earning potential and job security.
2) Work in London: This may seem obvious, but currently 45.5% of all business is based out of London, followed by 15.7% in the rest of the south east. It’s best to be in a hot zone.
3) Work in market intelligence: Brokers have been increasingly producing market intelligence for their clients in order to provide some value-add to clients and those that can produce reliable, timely and useful market data are increasingly valuable.
4) Move into consulting: Broking is also no longer just about acting as an intermediary to the insurance transaction process. Instead, the brokers and agents are offering risk management and insurance consulting services – particularly for large multi-national firms - and this is driving their recruitment needs.
5) Work for a larger firm: This might seem at odds with the first point, but it’s the large firms investing in consulting expertise, suggests Stephen: “By incurring higher wage expenses as a result of superior talent, some players are able to write higher margins compared with smaller players, which usually do not possess such expertise.