Should brokers turn away micro-SME customers?

Brokers starting in the industry may ask an important question: should I accept every client that comes through my doors?  

Some say no, you shouldn’t, while others say any business is good business when you’re building your books.  

PNO’s Director Peter Conquest sparked the debate in a recent webinar hosted by BizCover for Brokers, saying that “it’s a real trap” for inexperienced brokers just to say yes to every single referral.  

“In my view, and I think in most brokerages in Australia, it is barely profitable to service some of the micro-SME clients, and I think brokers have got to be disciplined to say no, you’re not suited to us,” Conquest said to the panel. 

Austbrokers’ Managing Director Rebecca Wilson disagreed.  

 “There is not a single client that we would ever turn away ever unless the behaviour were wrong because we’ve set up the team to make sure that they can service the client in the correct way,” says Wilson. 

One thing everyone agrees on is that it is most important to put the client first.

McLardy McShane’s Co-Founder Mike McShane said that he is a big believer that it’s difficult for small businesses.  

“A corner milk bar which pays a thousand bucks, that’s a big deal to them,” McShane said. “If you’re going to do it, you’ve got to do it properly, do it respectfully and advocate. Otherwise, what do we do different from the direct market?” 

McShane also said that it’s dependent on where you are in your broking lifecycle.  

“When you’re a mature business, at times, it makes commercial sense to turn business away but if you are just starting off, any business is good business”. 

McShane’s advice for young brokers starting off is to approach every client as a potential advocate. 

“The number of clients you have hopefully telling other people how good you are can become a great advertising medium for your brokerage,” he said. “And whilst small clients don’t usually become big clients, they can become a great advocate for you.”  

Peter Conquest had some interesting insights suggesting that smaller businesses are likely to refer like-minded clients.  

“You’re going to end up with a book of what are called C or D clients. You’ve got to remember that and that is why I’m still going to challenge it. You’ve got to be really careful.”  

The theory of the A-B-C-D Classification Model mentioned by Peter above generally means that servicing a smaller number of A-grade businesses is financially more efficient than servicing C- and D-grade clients due to the size of premiums.  

On the surface, this makes sense. 

Rebecca Wilson provided some useful insights into the potential cultural effect of classifying business in this way, suggesting that is can be “dangerous” to culture as “no employee wants to be part of the D team”.  

Whilst an advocate herself for not turning away smaller client’s, Wilson believes it’ ‘s important to structure the teams appropriately. 

“There is not a single client that we would ever turn away ever unless the behaviour was wrong because we’ve set up the team to make sure that they can service the client in the correct way,” says Wilson. 

It seems that key to servicing all clients is to have the appropriate structure or processes to do so. Having more efficient processes to service C and D clients could just be the answer.  

BizCover for Brokers’ Founder and CEO Michael Gottlieb said if what you do can’t add value because the process of broking is so time-consuming and paper-based, you need to fix the process.  

“Let’s be honest; there are very few industries that have the margin that brokers have. It is an amazing industry that has been incredibly lucrative to thousands of businesses,” he said.  

“We have good margins, and we should be able to service most businesses. It’s just about the process that we go through to service it.”  

Rebecca Wilson echoed this sentiment, saying that having efficient processes removes the mentality of A-B-C-D teams and that corporate brokers are better than SME brokers.  

Wilson said in Austbrokers’ SME space that includes micro-SMEs, they have a process where, no matter what, will make money.  

“If we structure our business where in SMEs we’ve got ExpressCover or BizCover for Brokers and we say right, we understand that we are going to use that platform, it’s going to take ten minutes, the client will take it or leave it and get the advice that they require and we might earn $300 from 10 minutes’ worth of work,” she said.  

“And that customer, which as brokers regardless of what we earn, we give advice. Anyone that is buying insurance within the community is entitled to advice. Because we are brokers and that’s what we do best.”  

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