As 2014 drew to a close, a team of almost 50 authorised representatives and associates from around Australia boarded a cruise ship in Singapore for the Westcourt General inaugural annual conference. The events and sessions on board had little to do with insurance, though.

Instead, they focused on entrepreneurship and SME management. They were about managing and growing a business, for instance, and about how to attract, retain and incentivise staff, and how to ensure absolute customer satisfaction, and other business-related subjects.

“We are very close to our authorised representatives,” says Jeff Hollands, Westcourt General’s managing director. “But they are all running their own businesses and to help them be successful we need to help make their businesses as good as they can be. As they improve it is better for them, for us and for their clients.”

ARs may live and breathe insurance but unlike many brokers, they must also delve deep into the world of business. That is not dissuading thousands from joining their ranks each year though; in the past two years, the number of ARs employed in Australia has swelled two-thirds, with an estimated 5000 ARs now spread across the country.

Ups and downs

At its most basic level, the AR formula is simple: a broker with an Australian Financial Services Licence authorises an external agent to use their licence to sell insurance, in exchange for a share of the profits.

Life as an authorised rep

In the competitive marketplace, the reality can be more complicated. AR networks vary widely in the level of support they give their ARs, and the way they go about attracting the most promising brokers to come under their umbrella. The chief attraction for brokers is a paycheck directly linked to their performance. The model also offers flexibility unheard of in corporate jobs and allows ARs to explore and exploit their entrepreneurial talents.

It is probably one of the easiest types of sales force to manage. Everyone involved has skin in the game.

“Our ARs are left to run their own business and they can use their own business name,” Hollands says. “But at the same time we also provide them with support. We meet several times a year, both face-to-face and on the phone, with a national committee chosen by our ARs so they can share ideas and bring up issues. We also provide people to look after their business when they go on holiday – a locum service, if you like.”

Model world

A relatively recent entrant to the AR space, Marsh Advantage Insurance currently works with about 50 ARs spread across the country. Executive Director Travis Kemp says there is no single type of person that is most likely to succeed as an AR, with his ARs comprising a diverse mix. The NSW team, for instance, is mostly populated by well-experienced people that took the opportunity to become an AR later in their careers. The Victorian team, however, reflects a younger group of ARs who are emerging and hungry to achieve.

From the frontlines

“Also, the females and mums have been outstanding performers for us,” Kemp says. “There is great diversity amongst our people. The flexibility and opportunity attracts many types. But they must all be driven and they must all be experienced. The key attribute of an AR is the ability to create relationships based around providing an insurance broking advisory service. So they must be reasonably experienced and have the ability to create those relationships.”

Kemp says the attraction for licence-holders is obvious, with the model allowing them to attract individuals of a higher ilk than they would otherwise be likely to find on a straight salary basis.

“It is probably one of the easiest types of sales forces to manage,” he says. “Everyone involved has skin in the game.”

To help it attract the most sought-after brokers, Marsh Advantage is rolling out a new business model. Traditionally, new ARs have taken over a seed portfolio owned by Marsh Advantage and aimed to expand this book and develop their own relationships.

In the mix

With the blossoming of various AR networks around Australia, each is keen to differentiate itself within the market. How do they do this? Experts interviewed for this story say it varies from how much revenue the network owners are prepared to share with their ARs, what types and levels of back-end support systems the network owners offer, what compliance and licensing requirements the networks look after on behalf of their ARs, how ownership of portfolios is set up, what training is provided and what level of buying power the network boasts on behalf of its people.

From the frontlines

Tony Walker, managing director of PSC Connect which operates 65 ARs in Australia and 20 in New Zealand, says differentiation usually comes about via a mix of benefits.

“We set up in March 2010 so our AR business is rapidly growing,” he says. “We’re looking to achieve 100 authorised representatives by 2015. We don’t want to be the biggest but we do want to be the best and the most professional.

“There are two ways to do this and we utilise both. Our model mixes a bigger share of commission and fees with a lot more value-add services, such as IT platforms, professional insurance programs, placement services support, marketing and finance assistance, technology advice et cetera.

“Rather than the ARs having to go out and incur the cost of getting their own license, we can do these things for them. We take away a lot of the distractions and offer them access to market and to networks, allowing them to enjoy the lifestyle and career control involved with running their own business.

“Many more brokers are taking the AR option because it not only offers them great flexibility, but it is also more rewarding. The harder they work, the more they earn and the greater the equity they build in their
own business.”

Changing landscape

Reliance Partners Managing Partner David Wyner says success that many brokers have found as ARs has lead to some trying their hand at it before they are ready.

Why NIBA matters for ARs

“There are some ARs out there who are a little bit inexperienced and little bit naive. Just because one person goes out there and has huge success doesn’t mean that it happens for everybody,” he says. “You’ve got to be a certain type of person with a certain type of attitude.”

Wyner says the influx on new talent into the industry in recent years has also upped the levels of competition. “The days are numbered for lifestyle ARs, who are the sort who have maybe $100,000 worth of business and if you suggested a good lead for a new client to them, they’d hem and haw and then tell you they really don’t want any more clients because that means they can’t play golf on both Thursday and Friday,” he says.

“The competition is closing in on these businesses from all angles. All that needs to happen is they have two or three clients picked off and their income is going to dwindle away. They’re going to disappear.

“The best ones, the ones who will thrive, are always pushing to learn new things and grow their business.”