Independent Brokers: Networking Technology a Powerful Tool

During the 1980s, approximately 230, or 46%, of the Fortune 500 companies fell for lack of vision. A similar challenge is facing financial service providers, and independent brokers in particular, as society and the world of commerce shifts to the technology age — an event which has already resulted in financial analysts viewing and rating companies as either being “new economy” or “old economy”. Needless to say, adapting your business to the new economy forces will become critical for survival.

Think of Eaton’s and others who scoffed at the threat of a changing market. We certainly do not waste much time crying over the fallen but we must spend the time to study their fate lest it be ours tomorrow. Insurers are too busy with their own problems to worry about ours. This is our enigma and we must solve it or succumb. We must become “the solution” to our insurers’ distribution problem before they choose another. The choice is ours to “thrive”, “survive” or “dive”. Together we stand but divided we will fall.

Survival of the fittest

It is rapidly becoming a market where “survival of the fittest” rules. The good news is that our competition is really not all that fit. They have a tremendous Achilles Heel and it is exposed. Sure, they might be able to take ten points off distribution expenses but the small broker can easily take twenty points off the claims side where it really matters, provided we live to see the day.

The solution for the small independent broker lies in working “collectively”. The small broker has the best relationships with their clients and is historically more profitable. So what is the problem? Size, profitability, technology, perpetuation, image, service and market are the problems, and collectively they spell an investment in time and money that the small broker can ill afford. To survive, a brokerage must be sales and service orientated and customer focused. It is physically impossible for today’s small broker to address all of his client’s and insurer’s needs and run a profitable business in harmony on their own.

Technology networking

Modern technology delivery evolved from Internet-driven solutions have really opened the door for independent brokers to maximize on their collective strength. The industry’s technology debate has thus far been almost solely focused on finding a “technology package” with basic interface capabilities. What has been neglected in this drive is the greater potential technology offers in a complete package of “size, profitability, perpetuation, image, service and market”.

The surprising fact is that both packages cost about the same. The second package is “networking technologies”. By understanding and using existing networking technologies the small broker can retain its individual uniqueness and serve clients better, ultimately resulting in a more stable and profitable business.

Networking technologies can link multiple users together providing a more stable, cost-effective environment or conduit through which large volumes of multi-faceted and geographically diverse business can be moved in an untouched service. This effectively reduces the costly “friction” resulting every time someone “touches” the business.

As complex as it may sound, it is really quite a simple and manageable solution to an otherwise paradoxical problem. Essentially, the proven profitability of the smaller rural and urban broker can be married to the economies of scale of a much larger “virtual broker”.

The broker remains responsible for “quality” but the network provides “quantity”. In the end, the small broker has access to more markets with no volume commitment, reduces operating costs and is therefore more profitable and stable, the insurer obtains a better distribution platform and the consumer is happy. The potential for growth and new business that “networking” can provide is staggering.

Brokers all want to be “thrivers” –no one plans to “dive”. However, if you are looking for an easy way out, I have bad news for you. If, on the other hand, you see the future as a lot of hard work, constant evolution and exciting, you are well on your way.