Primary objectives: Insurance brokers branching out
The fallout from the recent broker investigations has prompted reinsurance broker Benfield to branch out into primary business and create Benfield Corporate Risk. John Lapsley, the new division's chief executive, tells Ben Dyson about his plans and why he thinks there is room for another broker.
This article appears courtesy of Reactions.
Before last Autumn, big was beautiful in the world of insurance broking. A wave of mergers in the late 1990s created three big powerhouses – Marsh, Aon and Willis. Their aim was to provide everything an insurance buyer could possibly want under one roof, which earned them the nickname of supermarket brokers.
But, on October 14 2004, New York Attorney General Eliot Spitzer sued Marsh, the biggest of the three, accusing it of rigging bids to obtain the highest possible contingent commissions.
This brought an abrupt end to the bigger-is-better credo. Many felt bid-rigging was the preserve of the largest brokers, simply because they were the only ones with enough market share, and therefore enough bargaining power, to persuade insurers to submit false bids.
Although this was bad news for the big boys – Marsh in particular – it was music to the ears of smaller brokers and those wanting to establish new primary broking operations. Talk about angry insurance buyers seeking comfort from smaller, more specialised brokers gave them the confidence to set out their stalls.
One of these was UK broker Benfield.