DO YOU WANT IN­SUR­ANCE WITH THAT?

ADDING COM­PLE­MEN­TARY SER­VICES TO YOUR EX­IST­ING BUSI­NESS, known as ‘ad­ja­cen­cies', is the real es­tate growth strat­egy du jour. En­ter­ing into an ad­ja­cency with an in­surer can of­fer clients a value-add and the agent a valu­able in­come stream, so it's im­por­tant

Elite Property Manager - - Contents -

Sharon Fox-Slater

Up­selling, value-adding and al­ter­na­tive in­come streams are all part and par­cel of mod­ern-day busi­ness. The busi­ness growth strat­egy du jour is ‘ad­ja­cen­cies’.

Ad­ja­cency is a strat­egy where a com­pany looks out­side its bound­aries for new sources of in­come, mov­ing into re­lated ar­eas that use and re­in­force its core busi­ness. In real es­tate, the most com­mon part­ner­ships are with re­lated ser­vices such as mort­gage broking, con­veyanc­ing, sur­vey­ing and in­sur­ance. Other value-adds could in­clude ar­rang­ing util­ity con­nec­tions for clients, or re­movals and stor­age.

AD­JA­CENCY IN AC­TION

Do­main is a good ex­am­ple. Tra­di­tion­ally, the com­pany’s core in­come is de­rived from ad­ver­tis­ing rev­enue from res­i­den­tial sales list­ings. Later it in­tro­duced con­tent mar­ket­ing as an ad­ja­cency to cover the cost of in­vest­ing in jour­nal­ism. Then last year the com­pany en­tered into a joint ven­ture with Lendi to of­fer a mort­gage-broking ser­vice.

At the time, Do­main’s CEO said the broking busi­ness was the most lu­cra­tive of the “ad­ja­cency busi­nesses” to on­line real es­tate list­ings and that earn­ings from ser­vices could eclipse earn­ings from list­ings.

UK real­tor Coun­try­wide’s ad­ja­cen­cies strat­egy was to achieve 50 pence in ad­ja­cent ser­vice rev­enue for ev­ery pound in prop­erty sales. Mort­gage broking, gen­eral in­sur­ance and life in­sur­ance com­mis­sions, as well as con­veyanc­ing and sur­vey­ing fees, com­ple­mented its rev­enue from prop­erty sales and en­abled the busi­ness to weather the post-GFC prop­erty mar­ket de­cline. To­day, prop­erty sales ac­count for only 20 per cent of Coun­try­wide’s prof­its.

PART­NER­ING WITH IN­SUR­ERS

En­ter­ing into an ad­ja­cency can pro­vide ad­van­tages for both agents and their clients – of­fer­ing clients a value-added ser­vice and the agent an in­come stream. Part­ner­ing with an in­surer to of­fer land­lord and tenant con­tents cov­ers is an op­tion many real es­tate busi­ness own­ers are ex­plor­ing. And it can be a great strat­egy, so long as the right in­sur­ance part­ner is cho­sen.

In­sur­ance is a heav­ily reg­u­lated in­dus­try, sub­ject to strict leg­isla­tive re­quire­ments and ac­count­abil­ity. In­sur­ers have many obli­ga­tions un­der Com­mon­wealth, state and ter­ri­tory laws

BY CHOOS­ING TO PART­NER WITH A TRUSTED IN­SURER, THE AGENCY WILL BE ABLE TO REAP THE RE­WARDS.

that deal with the fi­nan­cial in­tegrity and con­duct of the gen­eral in­sur­ance in­dus­try, and un­der the in­dus­try Gen­eral In­sur­ance Code of Prac­tice.

The gen­eral in­sur­ance in­dus­try is gov­erned by a num­ber of laws, most im­por­tantly the In­sur­ance Act 1973, the In­sur­ance Con­tracts Act 1984 and the Cor­po­ra­tions Act 2001. It is reg­u­lated by the Aus­tralian Pru­den­tial Reg­u­la­tion Au­thor­ity (APRA, which sets pru­den­tial stan­dards) and the Aus­tralian Se­cu­ri­ties and In­vest­ments Com­mis­sion (ASIC, which is re­spon­si­ble for li­cens­ing fi­nan­cial ser­vices providers and reg­u­lat­ing con­sumer pro­tec­tion in the fi­nan­cial ser­vices in­dus­try). In ad­di­tion, in­sur­ance com­pa­nies must abide by var­i­ous other laws and reg­u­la­tions, such as pri­vacy laws to pro­tect the con­fi­den­tial­ity of in­for­ma­tion they gather.

In light of this en­vi­ron­ment of reg­u­la­tion, it is im­per­a­tive that any real es­tate busi­ness owner look­ing to en­ter into an ad­ja­cency with an in­surer does their due dili­gence and chooses the right part­ner – one that has the right struc­ture to sup­port the agency and pro­tect agents when deal­ing with in­sur­ance.

MORE TO CON­SIDER THAN JUST COM­MIS­SION

All com­pa­nies or in­di­vid­u­als who pro­vide fi­nan­cial ad­vice or de­liver a fi­nan­cial ser­vice to con­sumers must be li­censed un­der the Cor­po­ra­tions Act 2001 (‘the Act’). This means that any­one who sells an in­sur­ance pol­icy needs to do so un­der an Aus­tralian Fi­nan­cial Ser­vices Li­cence (AFSL).

If an agent ar­ranges an in­sur­ance pol­icy for a client, they need to ei­ther hold an AFSL or be ap­pointed in writ­ing as a rep­re­sen­ta­tive of an AFS li­censee – this may be as a dis­trib­u­tor, au­tho­rised rep­re­sen­ta­tive or cor­po­rate au­tho­rised rep­re­sen­ta­tive. Agents can also act as a ‘re­fer­rer’ and sim­ply pro­vide in­sur­ance mar­ket­ing ma­te­ri­als to clients with­out be­ing au­tho­rised to act as a rep­re­sen­ta­tive.

At EBM Ren­tCover, our part­ner agents can be au­tho­rised as Dis­trib­u­tors, Cor­po­rate Au­tho­rised Rep­re­sen­ta­tives (CARs) or Re­fer­rers to of­fer our land­lord and tenant cover prod­ucts. As an AFSL holder we have obli­ga­tions, de­fined by the Act, to en­sure that our rep­re­sen­ta­tives are ad­e­quately trained and com­pe­tent to pro­vide fi­nan­cial ser­vices.

Dis­trib­u­tors and CARs are au­tho­rised to pro­vide a fi­nan­cial ser­vice un­der EBM Ren­tCover’s AFSL. Dis­trib­u­tors and CARs are au­tho­rised to:

sup­ply brochures, fly­ers and other mar­ket­ing ma­te­rial from EBM Ren­tCover to clients ar­range in­sur­ance for a land­lord pay the pre­mi­ums To meet our AFSL obli­ga­tions, we pro­vide train­ing with on­go­ing mon­i­tor­ing and su­per­vi­sion to our Dis­trib­u­tors and CARs on the ser­vices they are au­tho­rised to pro­vide to their clients. Im­por­tantly, we also ex­tend cover un­der our Pro­fes­sional In­dem­nity (PI) in­sur­ance pol­icy for fi­nan­cial ser­vices re­lated to EBM Ren­tCover and as­so­ci­ated prod­ucts.

Re­fer­rers are not au­tho­rised by EBM Ren­tCover to pro­vide a fi­nan­cial ser­vice or ar­range in­sur­ance cover; they can only pro­vide our mar­ket­ing ma­te­ri­als to clients. As such, they do not work within our AFSL and our PI cover is not ex­tended to Re­fer­rers.

By pro­vid­ing the sup­port­ing sys­tems and pro­cesses that en­sure our agent part­ners op­er­ate within the bound­aries of their autho­ri­sa­tion and are pro­tected, we make it pos­si­ble for agents to of­fer our in­sur­ance prod­ucts to their clients – pro­vid­ing land­lords and ten­ants with value-added ser­vice and the agent with an ad­di­tional in­come stream.

Ad­ja­cen­cies with in­sur­ers can be a great way for real es­tate pro­fes­sion­als to grow their busi­ness and in­crease their in­come – so long as the busi­ness owner makes sure that they part­ner with an in­surer who can pro­vide the right type of agree­ment and en­sure the agent is pro­tected. By choos­ing to part­ner with a trusted in­surer, the real es­tate busi­ness will be able to reap the re­wards of­fered by the ad­ja­cency.

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