Insurance brokers endangered species

By PAULA OLIVER

Insurance brokers unhappy about having only a handful of insurers to deal with have just got some bad news - expect more consolidation.

The prediction came straight from the horse's mouth as the bosses of New Zealand's major insurance companies took to the stage at a brokers' conference in Fiji.

The event brought together two distinct industry bodies - the Independent Insurance Brokers Association and the Corporation of Insurance Brokers.

Under the umbrella title of Insurance Brokers Association of New Zealand (Ibanz), the two hope to present a more united front for the industry for purposes such as lobbying the Government over regulation.

Results from a questionnaire for brokers showed they expect that dealing with a small number of underwriters will be one of the industry's major challenges over the next three years.

But the conference also heard that the stream of mergers and takeovers in insurance was far from finished.

Ross Chapman, general manager of cashed-up Australian firm QBE, said it was well known that his company was looking for acquisitions in Australasia and the Pacific.

Vero chief executive Roger Bell said Promina, which had a highly successful stockmarket listing this year, was also actively shopping.

"We have no debt on our balance sheet, and the markets would like to see us leverage that," he said.

"We could either return money to shareholders, which would be odd given that we've only just taken it off them, or we could make an acquisition. We're looking aggressively."

Brokers let out an audible groan at the feisty talk of more takeovers.

As many as 77 per cent of respondents to the questionnaire said their businesses had already been affected by underwriter consolidation.

Having fewer companies to deal with made it harder to extract good deals and brokers felt the bigger operators were treating them badly.

David Smith, chief executive of IAG, which has the State brand and bought the NZI business this year, said he was aware of broker concerns.

IAG is the country's biggest fire and general insurer, and Smith said it was not looking to make any purchases.

"The size we are brings responsibilities that we recognise," Smith said. "We're focused now on growing organically. We want to get our recent investments humming well."

One local arm that has been rumoured in Australia to be a takeover target is that of German company Allianz, but its chief executive, David Randle, said yesterday that it was not for sale.

"I think it's sensible to suggest that there will be further consolidation in New Zealand, but I can't see how it will happen," Randle said.

Brokers have also become aware that there are very few young people following them into the industry.

A tongue-in-cheek video screened at the conference yesterday predicted that the species of insurance broker would be extinct by 2015.

Smaller brokers are getting squeezed out, and the average age of operators is getting high.

Allianz yesterday revealed it would work on a recruitment programme over the next three years with Ibanz.

* Paula Oliver travelled to Fiji courtesy of Ibanz.