Why do insurance agents fail

The difficulty of selling a brokerage portfolio

It is estimated that the average age of insurance brokers is now over 50, and at least half will reach retirement age in the next 10 to 15 years. Increasing regulation and ongoing discussions about cuts in commissions and brokerage fees make the profession less attractive, and there are no young people.

"A little more than a decade ago, a business registration was enough to set up a business," says Andreas Vollmer, Vice President of the Federal Association of German Insurance Brokers (BVK). Today, up-and-coming brokers would have to deal with complex regulations, considerable additional work when advising on life and health insurance, and continued attacks due to alleged commission tailoring. That scares off young talent.

Success factors in a narrowed market

This in turn makes it more difficult for older insurance brokers to find successors for their business or to sell them. The aim of a study by Versicherungsforen Leipzig GmbH, Maklerforen Leipzig GmbH and Professors Matthias Beenken and Michael Radtke from the Dortmund University of Applied Sciences was to find out how many broker portfolio sales take place in the market and what experience those involved gain.

"From this, success factors can be derived, such as how a purchase or sale of an entire brokerage company or at least its essential values, the customer base, has a chance of success in a narrowed market," says Beenken.

Not a representative overview

The online survey carried out in August and September 2018 with the support of BVK generated considerable interest. A total of 183 complete questionnaires from participants from Germany and Austria could be evaluated. Of these, 92 participants were buyers and 13 were sellers of brokerage firms or brokerage portfolios. A purchase failed for a further 52 participants and a sale for 26 participants.

"The study shows that there is definitely a significant number of buying and selling activities in the brokerage market. However, we were unable to provide a representative overview. There are no reliable figures on the part of the supervisory authorities because they are not even collected," explains Radtke.


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There is a problem with the purchase price

By far the most common reason a brokerage book business fails is the purchase price. Unrealistic ideas on both sides are likely to be responsible for this. At just under a third, however, a lack of personal chemistry and the unsuitable inventory composition are also important reasons for failure. In the successfully completed sales, buyers who want to expand their existing brokerage business dominate the market.

Professional associations, insurance companies, and specialist inventory brokers do not play an important role in bringing together prospective buyers and sellers. Rather, the parties find each other through their own search activities and recommendations from professional colleagues.

On average, buyers pay around 350,000 euros for the purchased inventory or operation. The most common factor used to determine a purchase price is the multiplier of the annual brokerage fee. The buyers surveyed paid an average of 1.8 annual courtesy days for property / casualty insurance excluding motor insurance and 1.2 annual courtesy days for motor insurance. "Many brokers still believe that their property insurance portfolio is worth at least three annual court days. But nobody pays them anymore," says J├╝rgen Schulz, Managing Director of the Leipzig Broker Forum.

Politics should turn the wheel around

The BVK draws the conclusion from the study that there is a risk of value destruction if the policy continues to worsen the framework conditions for insurance brokers. "Insurance brokers are allies of consumers who, in line with consumer protection policy, ensure transparency in the insurance market and offer qualified advice. That is why politicians should stop negligently questioning brokers' remuneration and thus devaluing entire life's works and destroying pensions", demands Vollmer.

What is needed again is attractive framework conditions for start-ups, appreciation of the work of insurance brokers and investment security for the enormous sums that a broker has to raise when buying a customer base.

The complete "study of broker inventory sales" provides information about the general conditions and success factors of inventory sales and can be purchased from the Leipzig Insurance Forum for a nominal fee.

Versicherungsforen Leipzig GmbH, Diana Ehrenberg, phone: +49 (0) 341 989 88-233, email: [email protected]

Author (s): Versicherungsmagazin.de