British Brokers say the economy and a hardening market are the biggest issues facing their business, according to the latest Broker Barometer survey by Aviva.
After the UK spent over two-thirds of 2020 under varying levels of COVID-19 restrictions, broker expectations for the economy have continued to decline over the course of 2020, with stark contrasts between broker attitudes in February compared to October 2020. Those brokers expecting moderate (economic) decline
more than doubled from 21% to 51% (Feb vs Oct 2020) with those expecting ‘deep decline’ increasing from 6% to 19%, for the same time period. Uncertainty around Brexit drove 61% of brokers to expect zero growth or decline in February, but this had increased to over three-quarters (77%) by October.
Expectations for their own businesses, while more optimistic, may have been influenced by their outlook on the economy. While most were buoyant about their own performance, broker expectations had still declined from their view at the start of the year, when 64% expected their business to grow, to 40% in October.
While there was already an expectation of a hardening market in February, this increased by three percentage points in October (from 12% to 15%), putting it on a par with the economy as the factor brokers believe most likely to impact growth rates going forward. The concerns about the market hardening were also prevalent when focusing on the future for the broker market. The hardening market was the top concern for brokers, again listed by 15% of respondents, with
one-in-five national brokers saying it is their biggest concern. The impacts are also highlighted in the advice that brokers expect their customers to want from them.
Aviva’s Broker Barometer data showed that almost a third (30%) of brokers expect customers to want advice on competitive pricing – up 24% points from the February measure of 6%. Additionally 10% of brokers expect to see queries on ‘adequacy of cover’ up 7 percentage points from February (3%). Unsurprisingly pandemic advice was the second most common answer, which was cited by a quarter of all respondents (25%).
Phil Bayles, Aviva’s Chief Distribution Officer, said: “It is clear that the remainder of 2020 and much of 2021 is likely to present a challenge to brokers as the market continues to harden and we continue to face the uncertainty that Covid-19 presents. For many brokers, this will be their first experience of a hard market. These circumstances, along with the new trading situations that come when we leave the EU at the end of the year will mean that brokers will need to remain flexible but also diligent in how they plan and respond to their trading environment. The resilience that we have seen from brokers throughout 2020 will continue to be tested but I am confident that their adaptable nature will help them navigate the challenges ahead and continue to provide exceptional service to their clients.”
The silver linings
While the impact of lockdown on everyone has been undeniable, the resilience and tenacity of the broker community is also demonstrated in the Broker Barometer . When asked for their view on the way that the current economic environment has affected business, one third (36%) said it had resulted in a negative
impact on their business. However, almost two thirds (64%) did not feel that the year had had a negative impact with 55% responding that they felt there had been no impact and 9% finding that there had been a positive impact on their business. This sentiment was slightly more prevalent in local brokers who scored 3% lower on negative impact (33%). The opposite was very much the case for National brokerages only 5% of whom felt positive.
When asked about any unforeseen opportunities that had come their way this year the top response cited by one in eight brokers was that they were able to develop better relationships with their clients. This was particularly the case for the regional brokers 16% of whom cited it as a benefit. The other benefit that the
data suggested appeared to be driven by the move businesses made during lockdown to delivery of their products and services, with brokers outlining an increase in courier based start-ups.
Bayles continued, “It is no surprise that we have seen brokers improve their relationships with customers during this time, their advice will have been invaluable and we know that they have been using platforms like Teams or Zoom to continue to connect with their customer base. Of course this will never replace being able to meet face to face but it highlights that brokers continue to be nimble, finding a way to help their customers adapt to new
challenges or move to alternative business models.”
Business Plans on hold, for now
Undoubtedly the expectations for the economy and their businesses have had an influence on the plans that brokers had for their businesses. The drop in those brokers expecting to see business growth has seen local and regional brokers in particular shift focus to strengthen their current position, presumably to weather the storm. For example although 21% of brokerages are still looking to recruit externally, this is very much driven by the national brokerages (34%) while only 19% of local brokers and 10% of regional brokers are looking to do the same. The same tightening of belts could be seen when looking at the intention to promote internal talent. While this was planned for 7% of brokerages it had fallen by over half from 17% at the start of the year with the drop again driven by local and regional brokerages (6% and 3% in October respectively) vs. 12% of national brokerages.
Bayles continued, “All businesses have had to reassess the way they operate during 2020 so it does not surprise me to see brokers adapting too. Brokers are acutely aware of the challenges ahead as they continue to help their clients adjust to the current version of ‘normal’. But they have shown time and again that they are incredibly resilient and adaptable. By ensuring they are in the best position to continue trading they are well placed to help their clients as they prepare to tackle the same challenges.”