Insurance Broking Post Covid – minority investments and broker acquisitions

We hope you enjoyed our recent article “Insurance Broking Post Covid – is it now safe to raise your head above the parapet?” and thank you for the comments we received.

Thankfully for all of those involved in the insurance industry, the market held up reasonably well compared to some. Insurance is a product that people still need, and of course certain elements are indeed a legal requirement (e.g., motor vehicle, employers’ liability), so whilst revenue and profit of insurance brokers likely dipped for most, the brokers we have spoken too are by and large alive and well post COVID-19.

Now we are hopefully through the worst of it (🤞🏾), Ataraxia would now like to pen our thoughts on how insurance brokers might move forward with their growth plan to rebuild any lost income and perhaps take advantage of market conditions to accelerate growth faster than their competitors.

We genuinely think that post Covid-19 is a great opportunity for insurance brokers to grow their business faster than ever before if the appetite exists.

This is all dependent on factors such as market opportunity, attitude to risk and what reserves of cash you have available. With a minority investment, Ataraxia might be able to assist you in all three of these aspects, more of that later in the article.

There are 3 reasons why we believe insurance brokers can grow quicker than pre COVID-19 industry averages – whether this is organically, or via acquisitions, or indeed both.

1. Risk averse brokers

Many insurance brokers will be risk averse, perhaps enhanced by the surprise of COVID-19 (who saw a Worldwide pandemic coming?!) so they will be unwilling to invest the time and money required to fuel growth. They may have depleted cash reserves and are unable or unwilling to risk those reserves.

They will be happy to keep their existing customers and take any new customers via work of mouth recommendations without taking what they perceive as unnecessary risks.

For the record, Ataraxia believes there is nothing wrong with this approach whatsoever! Every business is different, every shareholder has different aspirations and people are at different stages of their work career.

For those that have growth aspirations, however, now is a great time to accelerate growth as more of your competitors than ever before will be taking a “watching brief” for a year or two while they assess the insurance market post COVID-19.

2. Recovering and Booming Markets

There can be no doubt that the pandemic affected some markets more than others.

Some are still in recovery stage – the travel hospitality industry as one example – as it waits for full consumer confidence to return and infection rates to fall further.

However, there are plenty of markets that have really thrived during the pandemic and continue to do so.

The Manufacturing, warehousing and logistics markets are all booming as people ordered online during lockdown and continue to use that behaviour.

The internet shopping market was already proliferating for several years pre pandemic, and COVID-19 has only fuelled growth to record levels. More and more people now trust ordering online, know it arrives quickly and safely, and continue to use this method of purchasing. There is a current shortage of over 100,000 lorry drivers in the UK to distribute the food and goods around the UK, with Government incentives to try and reduce this number.

For an insurance broker, if you have existing customers or win new customers in booming or recovering markets, you have a lovely opportunity to grow as businesses and the economy recovers.

Of course, this doesn’t happen by magic and requires strategy, marketing, sales and cash-flow. Ataraxia can help with all of these facets.

3. Acquisition of other Insurance Brokers

Ataraxia believe that now is a fantastic to acquire other insurance brokers, for a number of reasons.

Some potential sellers may have held fire during the pandemic, worried about business valuation, but are now ready to consider selling again. Or indeed those that hadn’t yet considered a sale are now doing so to ensure that they capitalise on their hard earned work in this “you never know” era!

Potential buyers of insurance brokers may now not want to proceed with their strategy. They may have become more risk adverse, spare cash may have dwindled supporting the business during the pandemic or potential lenders have now disappeared.

Simply put, the competition for buying insurance brokers will have reduced and more brokers may now be considering a sale post COVID-19.

Of course, the same rules of engagement apply, and the deal still must stack up for both parties. You should only buy businesses that fit into your business philosophy and ethos, you are buying goodwill and people after all. Due diligence is always key.

Acquiring other insurance brokers is a sure-fire way to grow your business quickly. You are buying customers essentially but have the economies of scale within your business to make this book of business even more profitable to manage.

Summary

To summarise, Ataraxia believe that there is a big opportunity for ambitious brokers to grow quickly with the right strategy post COVID-19.

Marketing, organic growth and acquisitions should all help insurance brokers wanting to grow their business, and future value, do just that.

If you think our industry expertise, or a minority investment to provide much needed capital, would help you on your growth journey, please so get in contact with Ataraxia here.