Consolidation: A threat, or a benefit to the client relationship?

This article explores the impact on and consequences for clients of consolidation within the broking market, and key factors which can influence whether consolidators serve to benefit clients, or risk compromising their client relationships, value, and offering.

Ideally, only culturally aligned entities should be brought together, and any efficiencies gained should be used to target improvements tailored to the existing client base or reinvested into client services and experience. Cultural assimilation should also be prioritised to ensure the entities’ relationships with clients are strong, consistent, and premised on delivering value. 

Over the past decade, there has been a growing number of mergers and acquisitions among key insurance brokers, such as Gallagher, Marsh McLennan, Aon, Brown & Brown and Willis Towers Watson. Recently, a new phase of consolidation appears to have begun, where large consolidators are now acquiring or combining with other large, significant players.

Given the growth in consolidation and the wider implications for market dynamics and competition, what are the consequences for clients, whom the broking profession centres upon?  How can consolidators ameliorate any negative impacts of a consolidation?

Consolidation – The Benefits

There are several benefits associated with bringing together a wider group of brokerages. A brokerage that is part of a larger group will be better equipped to deploy greater resources and expertise than a small brokerage can on its own.  It will be able to react swiftly to develop new products and collaborate with insurers to tailor propositions to benefit the customer, whether this is via investment in risk management, claims capability, or data. Leveraging combined resources can often result in greater choice and better value for clients.

Consolidation also facilitates wider expertise among intermediaries, bringing together those with diverse specialisms and knowledge of a range of subjects or lines of insurance to improve advice for clients and more tailored insurance solutions. Client experience may also be enhanced as larger intermediaries will be able to invest in more sophisticated technologies.

Consolidation – The Challenges

It is also important to be attuned to ways in which consolidation may adversely affect clients, and their relationship with their insurance broker. Care must be taken post any acquisition/merger and throughout integration as, regardless of the benefits consolidation can offer both the intermediaries and clients, strong relationships are the vital to the success of any broker, regardless of size or profit margin.

For instance, clients who previously had an intimate, long-standing relationship with a smaller broker may be particularly sensitive to the impacts of consolidation, which may produce intermediaries with complex organisational structures and or processes which may make it difficult for clients to comprehend products and services. Levels of communication and personalisation offered may also be altered, threatening trust and engagement.

Adverse changes to pricing, along with altered structures initiated by a combined entity, may also have a negative impact on clients, whilst fewer intermediaries will reduce competition and, ultimately, client choice.

What to Consider?

It is crucial that intermediaries who face consolidation consider that growth and success is dependent on their ability to maintain strong, client-centric relationships pre and post deal; this is more valuable than any wider capability, technology or enhanced offerings, which, without strong relationships as a foundation, will appear as meaningless buzz words to any client.

In considering a potential buyer of your business, or buying another business, perhaps seek a cultural alignment or compatibility.  Use the efficiencies gained to target improvements tailored to the existing, and the new combined client base and utilise new resources to reinvest into client services and experience, whilst ensuring cultural assimilation.

Crucially, clients must feel valued and heard- despite the size of the brokerage. Whilst it is hard to flag or measure in a spreadsheet or CRM, this client relationship should form a key focus for growing brokers and be central to the post-acquisition/merger process.