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Honan isn’t an international broker with massive global operations, but there’s more than a hint of that top-end confidence in the way it has accrued an impressive collection of ASX 100 and 200 clients.
Chief Executive Andrew Fluitsma admits the Melbourne-based brokerage “hasn’t beaten our chest” about its successful push into the tightly held corporate market. But now is a good time to talk about the achievements built on a rebranding and overhaul that have seen Honan flourish on a wave of youthful energy and innovation.
The rebranding exercise has seen Honan adopt a more modern image, that allows it to capitalise on what Mr Fluitsma describes as “a whole new set of rules and a whole new set of values”. “We didn't want to become just a small version of an international brokerage,” he tells Insurance News. “We wanted to become a unique, very special challenger brand that represented something different.”
Honan’s 260 employees are very much key to its more outgoing and confident identity. “We hired with a view to people that had that growth mindset,” Mr Fluitsma says. “Our average age is 29, and we’re 55% female. That's reflected in our executive leadership as well. I’m 40, and I’m the old guy.” One of the values adopted by Honan is challenging the normal ways to approach insurance problems, and then to celebrate those challenges and speak up – “to talk and make noise. That’s what we want to do. “[Innovative ideas] don’t come up in a business like ours unless you have that diversity of thought, the challenging age group from a demographic that likes to challenge and likes to speak. “It’s not one individual sitting in a corner office who’s going to be the hero coming up with the ideas. We don't incentivise single sales people. We do it as a team.”
“Our average age is 29, and we’re 55% female. That's reflected in our executive leadership as well. I’m 40, and I’m the old guy.”
While Honan intends to retain that challenger mentality as a core part of its culture, it’s got genuine scale too. Formed in Melbourne in 1964 by Geoff Honan, the father of current Executive Chairman Damien Honan, the business now has a presence across Australia as well as offices in Auckland, Singapore and Kuala Lumpur. It is also part of the Worldwide Broker Network.
“Honan has gone past $400 million across their General Insurance business heading towards $500 million, with Employee Benefits the fastest growing part of our business”. “If you think of $400 million, that is easily the largest independently held insurance brokerage in Asia Pacific,” Mr Fluitsma says.
Significant size and profile is necessary to broke at the corporate end of insurance, and he sees the company’s success working with large institutional listed and private businesses as a matter of some pride. “We’re really proud of that, but I think our trajectory is probably not as well known as it could be in the marketplace,” he says.
“We’ve invested significantly in the back end – legal compliance, technology and people and culture. Now we’re at a point where we’re highly scalable. “But we don't want to be the traditional risk management-style broker that brings out all this literature that is targeted at risk managers and insurance people. We want to focus on CFOs and sophisticated buyers. We want to make it clear. We want to make it simple. We want to make it sophisticated and we want to make it Honan.”
That seems to be a successful combination, with a client retention rate of 98.4% in a market that Mr Fluitsma describes as “incredibly challenging”.
And through its Singapore licence, Honan is providing wholesale insurance to other brokers including Steadfast and Austbrokers, and facultative reinsurance.
Honan has powerful backing – a fact underscored by the decision last year to partner with US private equity firm TA Associates. It’s a $US30 billion fund, and gives Honan access to more than just finance.
“We tap into something that they’ve got called the Strategic Resource Group, which is 30 people based out of London who are data scientists, data analytics people, and finance people,” Mr Fluitsma says. “What that’s done is take our aspirations around data analytics from ‘this is what we think we want to do conceptually’, to executing it.”
The business is aided during the hard market by a service timetable model called RISE – Risk Insurance Service Excellence – which gets rolled out to all clients. “It’s all about transparency,” he says. “Our retention rate is so high because we've been able to say, ‘look, this is where it’s going’.”
“There’s no reason why we can’t be challenging to be the best insurance firm, not only in Australia but Asia Pacific. And that’s absolutely where we want to be."
Strong thought leadership channels keep clients and the broader business community informed, he says.
“The one thing that I can't stand is the opportunistic nature of some brokers out there to say, ‘well, there’s a 400% increase, I'll drop this on the client at the death, and then they've got no choice – I'll take the money.’ “It’s very short-sighted, but we’ve seen a lot of that. We’ve won a lot of new business because we see it as our job to educate. “If we can’t bring those best-in-the-market terms, we’re not doing our job. But if we haven’t given the transparency and the runway to understand why, then again, we haven’t done our job.”
On directors’ and officers’ insurance, which has seen huge premium increases over recent years, Mr Fluitsma says tough decisions are having to be made, particularly for listed businesses with Side C cover for securities class actions.
"They are challenging conversations. Once upon a time, in a soft market, we just said, ‘Buy as much insurance as possible [because] it’s the cheapest form of risk management’. “Now, it’s a conversation six months out, where you say, ‘well, we need to look at what we should retain and what we should buy. Should you even be buying Side C?’
“Now, are we looking at a balance sheet protection instrument or we have to actually increase those retentions to say, ‘You guys need to take some responsibility here.’ “It’s no longer the cheapest form of risk management. It’s a catastrophe instrument.”
Cyber is also rising to the top of client boardroom priorities, and there’s the traditional problem sectors such as food and beverage businesses using expanded polystyrene panels.
But the hard market will also be a learning experience, Mr Fluitsma says.
“They’re hard conversations, but we’re going to come out of the other end with every single broker in here having worked through a really hard market, and that’s just going to make us all a lot better. “I think it'll make everyone in the industry a lot better because we haven't seen a really hard market for 20 years.”
“I believe that there needs to be a fair price for work done, but I totally agree that there needs to be a complete overhaul of transparency,” he says. “We have looked at a lot of [brokerages] from the acquisition point of view and walked away from them because their average commission rates are unsustainable.
“So, there is an issue with the lower end, and it has to be addressed. We’re all for that. But we’re also very much for being paid for the work that we’re doing. And that’s where the practical and commonsense position will land.
“The intermediary is not going to die. It’s just going to correct and be transparent to a point of sustainability.”
Brokers need to believe in themselves and understand the work they are doing has genuine value, Mr Fluitsma says. “I think a lot of the time brokers don’t actually think that. That to me is part of the problem.
“A lot of brokers are out there thinking, ‘I’m sneakily taking 20 points, and I got away with it."
“Let’s be transparent. Let’s be confident enough to say, ‘I deserve X amount of money for the work that I’ve done and here’s the reasons why.’ “We put a scope of fees to every single client. So, we actually break down what we’re doing and what we’re getting paid for. I think that’s quite unique.”
Competition for acquisitions is fierce, but he says Honan is looking for a specific type of partner and plenty of opportunities remain. “We’re positioning ourselves so differently [and] there’s a bunch of firms that just align with us. “Granted that market is not going to be as big, but there are a bunch of them there that will join us.”
He says spending time in the US has made it clear to him just how significant independent brokerages can become.
“We want to continue with the same DNA, the same brand, the same challenging philosophy, the same challenge of thought, and we absolutely want to grow. “There’s no reason why we cannot be a top five in Australia, if we’re not already.
“There’s no reason why we can’t be challenging to be the best insurance firm, not only in Australia but Asia Pacific. And that’s absolutely where we want to be."
“So we set the challenge to our people, and they’re running pretty hard with it.”
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