How can managing general agents build broker relationships during a hardening market when insurers have much less incentive to provide capacity? After more than 25 years as a broker, Peter Blanc, CEO of the Goldman Sachs-owned consolidator broking group, Aston Lark, has developed insights “into how brokers think about placement and why they choose the markets that they choose.”

At the top of his MGA check-list to guarantee successful trading with insurance brokers is that MGAs must carve out a niche, be different, and have “a unique proposition,” said Blanc who spoke at meeting in London last month of the Managing General Agents’ Association (MGAA).

Those niches, he explained, don’t necessarily have to be an industry class. A niche could be a particular size of customer, a customer that has a corporate buying committee, a family-owned business, or an owner-managed business, Blanc said.

Other MGAs might specialize in writing businesses that have had a big claim or businesses that have had loads of little claims, he added. “Whatever your niche is, just own your niche — really focus on what your niche is.”

(This week, it was announced that Aston Lark is being purchased by Howden Broking for a reported £1.1 billion, subject to regulatory approval. Upon completion, Blanc will become executive chairman of Howden’s UK retail broking operations. See Blanc’s biography below).

Other suggestions from Blanc’s check list for successful MGAs relate to: capacity, claims, innovation, the quote journey, go-to-market strategies and marketing.

Blanc took each of those points in turn.

Capacity. “[M]ake sure your capacity is financially secure and rated or you just won’t get quality brokers using your services,” Blanc said.

“As our [professional indemnity] insurers tell us, it’s an absolute must for brokers to use rated capacities, so I think it should be a must for MGAs looking to develop broker relationships to have rated capacity. If you don’t, the only brokers that will use you will be the ones that, frankly, don’t care about things like PI insurance and chartered status and all that stuff, and they’re not really the brokers you want to partner with, in my view.”

Claims service. “Make sure your claim service is superb, don’t skimp. Use claims as an opportunity to secure clients for the long term,” Blanc emphasized.

Brokers love it when an underwriter settles a claim to the client’s complete satisfaction, Blanc said. “From a broker’s perspective, that is just the best thing that could ever happen. The client becomes a client for life; the client’s attitude to insurance purchasing changes overnight and all of a sudden, all of the shopping around and all of the transactional pain that we go through every day, just disappears.”

If an MGA behaves with such professionalism, “its reputation will spread and you’ll have a super successful business,” Blanc went on to say. If an MGA pays its claims quickly, efficiently and fairly, “then you will get customers for life.”

Innovate. “Brokers have to bring new ideas to their clients. It makes us look good.” Blanc said brokers look good to their clients if they are able to tell them about an MGA with a “really super” product that would be perfect for them.

“It makes us appear that we are doing nothing all day, other than worrying about our clients, which of course is broadly true.”

Consider the quote journey. “Help brokers make [the quote journey] as swift and easy as can be. Lengthy proposal forms and two-week turnarounds are a huge turnoff,” Blanc said.

“Over the years, I’ve developed very close relationships with a couple of cracking MGAs, and one of the main ways that those MGAs differentiate themselves is simply through speed of response.” He said when an opportunity comes his way, he knows he can call the underwriter at the MGA and get a quick quote. “We know each other well enough and trust each other well enough, that actually why would I want to go through the rigmarole of sending out presentations to 15 different carriers when I know I can get the solution I need there and then.”

But it’s only possible to provide that rapid service, “when you’re operating in a niche, where you really know your space,” and don’t have to “reinvent the wheel for every customer.”

Go-to-market strategy. Blanc said an MGA should consider its go-to-market strategy. “Should you be friends with every broker or will you be more successful by focusing on an exclusive panel?” He said there are risks and rewards with both approaches. “It does rather depend on the nature of your product and whether you’re selling a low volume, high value, or high value, low volume; there are different approaches.”

Unfortunately, he said, some brokers will contact an MGA to get an indicative quote and then use it to place the risk “with their mates.” If brokers do that three or four times, Blanc suggested that the MGA should contact the broker and say: “The game’s up, guys. Either place the business with us, or we’re pulling your agency. It’s amazing how behavior changes.”

Blanc suggested that MGAs “should be a bit bolder sometimes and select your partners, select your friends; decide who you’re going to work with. You will get a better outcome.”

He acknowledged that it is tempting to be friends with everyone and get regular enquiries coming in, “but you can be busy fools.”

“If you’re converting one in six of the enquiries you get through the door, then consider your go-to-market strategy and think about whether actually there’s a better way of doing it.”

Market the business. Blanc suggested that the MGA needs to build name recognition – not just in the insurance press but also in the sectors in which it operates. He recommended that if MGA specializes in construction, it should be spending all its time “in the construction press, not the insurance press.”

“Go directly to the source of where you’re focusing your efforts. If you do a good enough job in that regard, then brokers won’t be able not to use you…” He explained that clients will say that they have heard about an MGA that turned up at one of their conferences. “From an MGA’s perspective, that is a great way of winning business.”

Broker Placement Strategies

Blanc then commented on typical broker placement strategies he sees in the market. “By far and away, the most common picture is that brokers tend to have at least 60% of their book placed with the traditional composite carriers — very uninventive, basically.”

Every UK composite company that begins with an “A” – Allianz, AXA and Aviva – account for 60% of a broker’s book, while 20% of the book is placed with second tier, smaller carriers, he explained. “And then the remaining 20% tends to be with the MGA wholesalers, specialists, and specialist classes of business.”

He said that spread hasn’t really changed much over the years.

Blanc recalled getting some advice as a young broker from an older industry practitioner about how to build his first brokerage business. This practitioner described the insurance market as falling into two camps: the old money markets, such as the big composite carriers, and the hot money markets, such as MGAs, wholesalers and smaller insurers.

The practitioner’s advice to Blanc was “to use the hot money markets to grow the business and then educate clients and convince them that in long term they’d be better off with a composite carrier – at which point you switch them across to the old money markets.”

Blanc called this dynamic “the lifecycle of the broker-client relationship.”

Many brokers follow this strategy “without necessarily even realizing that that’s what they’re doing,” he affirmed.

When a broker is trying to win a new commercial account in the market, it needs a differentiated quote “in order to persuade the client to appoint you, instead of their incumbent broker,” he said. “Virtually every broker in the land deals with Allianz, Aviva and AXA etc., so getting a differentiated quote from the big composite carriers is kind of impossible.”

As a result, “MGAs perform a super valuable role for brokers in these situations, often providing brokers with differentiated quotations and enhanced cover – suitable for a particular niche that the client fits into…,” Blanc explained.

This enables the broker to win the business by providing the client with a better overall price and product, he said.

And in future years, once the broker and client relationship is bedded down, the broker still has to turn up at renewal with a different story, or eventually the client will go out to tender, “if the broker keeps rocking up at renewal and saying, “Yep, yep, the thing I recommended to you back in 2000, it’s still good; we’re just going to carry on and renew with that one.”

The main reason many clients use a broker is because “brokers are able to obtain comparative quotations from a wide range of insurers, which a client simply could not access on their own,” he said.

The main job of the broker “is to obtain alternative quotes, prove to the client that they’re doing their job, covering the market on their behalf,” Blanc said.

Unless they’ve got a particularly strong relationship with the MGA, or there is another reason to stick with the MGA, the broker often will just see the MGA as being a means to an end, he said. “They’ve secured the business by placing it with an MGA, but it seems sometimes at the earliest opportunity, when they’re not in competition [with other brokers], business then tends to drift into the hands of the composites.”

He said there are two big reasons for that: composites tend to pay higher commission rates and composites have brand awareness that goes down well with clients.

In the lifecycle of the broker and client relationship, the broker develops a relationship with the client after winning the business by using the MGA, “and then a few years later, they turn up and say, ‘Great news — I’ve been able to persuade Allianz or AXA or Aviva to take on your business.’ In a way the broker is trading off the brand strength of the big composite carrier.”

That reality is a real challenge for MGAs, Blanc said.

“Why do MGAs struggle to turn into old money markets? Why do brokers not reward MGAs’ innovation by sticking with them for the long term? That, I think is the big challenge,” he added. “Winning new business always requires a differentiated product and a differentiated price, but retaining business for the long term requires fantastic levels of service, or a brand reputation, or the provision of a product that is truly differentiated on an ongoing basis.”

Blanc then noted: “The great news for MGAs is that composite insurer competitors can never be as nimble or as flexible as you. I’m a massive fan of niche MGAs who’ve chosen a sector, completely immerse themselves in it, such that the products and services being provided are truly differentiated.”

He said “brokers crave underwriters” that help them do a good job in the eyes of their clients.

“No client has ever thanked a broker for getting 20 ‘no’ quotes, but every client expects a broker to come up with two or three interesting alternatives at least every two or three years, if only to justify their fees and to prove to the client that they’re looking after them,” Blanc emphasized. “This means that, for MGAs, if you’ve got differentiated products and can provide a great service, you just have to find your way into enough brokers to grow your business.”

While the big composite carriers have brand strength, he said, MGAs can develop their own brand strength. “The best way of doing that is to be super rapid and responsive at the underwriting stage [and] to be truly superb at the claims stage.”