Schemes: Consolidating smaller books of business into a profit making scheme.

A chat over lunch turned into a profitible opportunity for one broker.

CLIENT:          Broker

CATEGORY:   Schemes and Consoldiations

TOPIC:            Consolidating business and new scheme negotiations.

Overview

Chatting with a broker over lunch, we were talking about how he found inconsistency in the service he was getting from his property markets, and that cover and rate differed wildly across different carriers. He also felt some of the markets he was supporting more regularly were not keen on taking on some of the non standard risks.

Problem

Placing business open market with different markets can certain lead to some headaches, especially when comparing cover and rate, and acceptibility. In a very competitive space rebroking these risks at renewal can also be complex when recommending alternative insurers.

SWOT

When adding these various books together, the account ran well into six figures but what initially seemed like a relatively small book of £250,000 of property business the broker never felt it would be 'schemeworthy' many carriers wanting in excess of £1,000,000 to make this a viable account.

Solution

After obtaining claims experience from the relevant carriers, the total book showed a healthy COR of 60%. After helping collate the MI required from his system, we prepare a business case to some niche insurers, and MGAs. A full risk analysis of the book showed a healthy mix of profitable risks, with some fringe cases that could be written as accomodation over the consolidated book.

Conclusion

A delegated authority (DA) was negotiated with the carrier, and a best of breed wording agreed, alleviating the risks of gaps in cover, and differences in wording from placing open marketing with a range of insurers. A commission enhancement was negotiated, increasing the profit for the broker which enabled them to invest in additionsl software to ease the administration of the DA.

The book of business has continued to grow and remain profitable, with a second insurer added to the panel to balance appetite.