The im­pact on provider choice

RISKSA Magazine - - News -

Bro­kers “Whereas a bro­ker could write a cer­tain amount of poli­cies within a week, say 20 years ago, the abil­ity to do so nowa­days as a re­sult of com­pli­ance has dropped sig­nif­i­cantly. To­day, the bro­ker has to com­ply with nu­mer­ous pieces of leg­is­la­tion; hence the turn-around time for a bro­ker to write up a new pol­icy takes much longer. This in turn means new rev­enue comes in slower, whilst ad­min­is­tra­tion costs, op­er­a­tional ex­penses and com­pli­ance costs still need to be ad­dressed on a monthly ba­sis. This lag on cash flow can neg­a­tively im­pact the on­go­ing vi­a­bil­ity of bro­ker­ages,” says Kuun. “The small bro­ker could view the ad­min­is­tra­tive part of his busi­ness as an un­nec­es­sary bur­den, and would search for larger or na­tional bro­kers to merge with, or sell the book of busi­ness, to have the ad­min­is­tra­tion ab­sorbed.” Petersen adds that two other op­tions that ex­ist for floun­der­ing bro­kers in­clude form­ing part­ner­ships with ex­ist­ing busi­ness or (more de­spair­ingly) sim­ply dis­solv­ing and mov­ing into another more lu­cra­tive in­dus­try. “As far as the in­ter­me­di­ary mar­ket is con­cerned, the dom­i­nant res­i­dent in­ter­na­tional bro­kers have largely driven the con­sol­i­da­tion of the ma­jor broking houses in South Africa. How­ever, this con­sol­i­da­tion has also cre­ated the op­por­tu­nity for other in­ter­na­tional bro­kers such as JLT, Price Forbes and Part­ners to en­ter the South African mar­ket and so com­pe­ti­tion, par­tic­u­larly in the cor­po­rate sec­tor, has ac­tu­ally in­ten­si­fied over the past five years de­spite the con­sol­i­da­tion,” adds Kuun.

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