10 Sep 2020

Benefits of an Independent Brokerage Firm

When it comes to deciding between a large, multinational brokerage firm or using a smaller, independent brokerage firm, it can seem obvious. Most people would likely go with the larger firm if they have multinational exposures at risk. But, do you know what the differences are and why there is a real benefit in using an independent firm? In the following article, we will compare the two so you can make the decision for yourself.

a bird stands alone instead of with a large group, symbolizes an independent insurance brokerage firm vs. a big, multinational insurance brokerage firm

Large vs. Small Brokerage Firms

Large, multinational brokerage firms often point to their international presence because most have many offices scattered across the globe. It is as if their footprint alone makes them uniquely qualified to manage international risks and global insurance programs. Is it possible for independent brokerage firms to match or exceed services in this area?

International Risks & Global Insurance Programs

In short, yes it is. Large, multinational brokerage firms are known for engaging brokers from across the globe. Just like them, independent brokerage firms engage brokers across the globe to collaborate on global insurance programs and local insurance solutions for their clients.  However, larger, multinational brokerage firms can be financially incentivized or otherwise constrained to utilize their own network brokers or affiliates. On the other hand, independent brokers enjoy the freedom to choose the best global broker networks and independent agencies that make sense for the client.  Diversified is an active member firm within the TechAssure network. This means Diversified can deliver several key benefits to our clients through this model.

Benefits of an Independent Brokerage Firm

A couple of benefits of using an independent brokerage firm are as follows:

Being Nimble & Flexible

  • Independent brokers are nimble and flexible.  They can access local brokers through a variety of networks including Assurex, TechAssure or direct relationships with other broker agencies. This allows local country clients to enjoy a decentralized experience while the parent company/master program insured enjoys the benefits of a centrally-managed program.  They can work with ANY independent local broker that is appointed by a master program insurer’s local affiliate.
  • This approach is especially valuable to a company expanding its footprint organically or through M & A strategies. This is because the parent insured can offer some discretion to the local country management team in the selection of their local broker. Local management typically appreciates autonomy in their local business relationships. These relationships can be critical when reverse-flow* terms are perceived as restrictive, ill-fitting, or inequitably priced. It is almost inevitable that some such perceptions will arise at some point in any global insurance program.

*“Reverse flow” refers to a multi-policy pricing strategy which starts with an aggregate, “global” premium for the entire worldwide exposure, and then allocates premiums to individual local policies (rather than pricing each policy individually from the start).  The primary benefit of this strategy is uniformity of coverage under a master global program, as well as some economies of scale at the master program level.  However, due to minimum premium thresholds for individual policies, premium allocations are not necessarily proportionate to the risks insured under each respective policy.

Don’t Require a Minimum Fee

  • Of course, independent brokers may prefer an affiliate network. We at Diversified often rely on the ever-growing TechAssure network because it is a very collaborative network of like-minded agents. However, unlike Big Broker’s network, which typically imposes minimum fees (sometimes exceeding the local premiums) in each country, most of the brokers in our network will accept standard commissions without requiring a minimum fee.  In instances where a TechAssure broker might apply a minimum fee, if the client objects, independent brokers do (as noted above) have the ability to work with a different broker of their client’s choice.
personal relationships symbolized by people shaking hands

Personal Relationships

  • Independent brokers have real relationships within our TechAssure network.  For each local country placement we facilitate with brokers in our network we have either exchanged a personal handshake with someone who works in the local broker’s office, or someone in our office has exchanged a personal handshake with someone who works there.  Even beyond our network of current members, thanks to the trusted connections within our membership, we are never more than one or two degrees of separation from the most talented independent brokers in any country.  That counts for something: better communication, trust, and accountability. 

Insurance Business Mag also notes that “Due to their small size, such agency producers are able to spend greater time with small businesses”. In most cases, clients notice a big difference in how their accounts are handled. At a small, independent agency, they are more likely to get more attention and time from their broker and the firm as a whole.

Greater Perspective

  • Many members of an independent brokerage work on both sides of a reverse-flow program. On the other hand, Big Broker teams are more likely to work strictly on one side or the other.  Understanding both sides lends us the context to see and sell the “big picture” benefits of these programs, whereas the individual pieces can often appear ill-fitting or inequitably priced. 

Diversified is an independent brokerage firm

In conclusion, hopefully, you are now able to see the many benefits of utilizing an independent brokerage firm. Diversified Insurance Group is proud to be an independent brokerage firm. At Diversified Insurance Group, we are committed to a cutting-edge, personalized approach to safeguarding the assets that matter most: your business, your employees, your bottom line. The Diversified model coupled with our ability to outperform the market on price, coverage, and service has resulted in our becoming one of the fastest-growing independent brokers in the country. If you would like more information go here.