The impact on provider choice
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.