A creature of the 2001 Financial Services Reform, many AR networks started out as a rag-tag bunch of “square pegs who couldn’t fit into round holes”, says David Wyner, Managing Director of AR group PSC Reliance Franchise Partners.

“Some brokers couldn’t get a job. But they had some contacts and realised the only thing they could do to make money was to become an AR,” the former NIBA president recalls.

“So unfortunately you got a bit of a mix and I think that coloured the insurers’ view of ARs for quite a while.”

The AR segment is one of the most rapidly growing segments in the broader broker market so it makes sense to look for ways to grow and enhance our existing offering.

Over time, however, more and more high-quality insurance brokers realised they could start their own business by becoming an AR, which allowed AR licensees to become more picky.

“It’s completely changed now. Insurers are all over AR networks,” says Wyner.


“The really successful networks have been able to harness the strength of all of their ARs working together, do deals in the market, and offer underwriters blocks of business.”

Senior traditional insurance brokers haven’t been so easily swayed. Many believe some ARs cut corners and are more interested in selling products than providing a professional and competent service to their clients.

Another beef more traditional players have with ARs is that they’re able to offload some compliance procedures and responsibilities to their licensee, whereas brokers always had to meet all the requirements by themselves. They also have question marks around ARs’ education, training, background and experience.

Regardless, not only are insurers increasingly embracing the AR business model – they’re wanting their own slice of the pie. While the AR model is fairly unique to Australia, large international insurers such as Aon and Marsh see the advantages and have ARs operating in their local arms.

There’s a misconception that an AR is different to an insurance broker. They are all insurance brokers, all qualified in the same way, and they all have to comply and be ultimately regulated the same way.

Then you have the big movements from the Australian players, such as IAG. In July, the Aussie insurance giant acquired leading national AR network Westcourt General Insurance Brokers (WGIB).

Over time, WGIB will be integrated into IAG’s other AR business – National Adviser Services (NAS) – to make the combined business the biggest player in the market.

“The AR segment is one of the most rapidly growing segments in the broader broker market so it makes sense to look for ways to grow and enhance our existing offering,” says IAG Chief Executive Australian Business Division, Ben Bessell.

AR models

There are two common AR network models, both of which more or less comply with the same classic licensing criteria. The first model exists within an SME-type broking firm, with one or two ARs working closely together in an office mix that also includes salaried brokers.

The second, in a nutshell, is where a licensee is responsible at all times for all their ARs’ conduct, with well-known examples including NAS (300+ ARs), Insurance Advisernet Australia (140+ ARs) and WGIB (130+ ARs).

“It’s where the AR actually owns their book and we supply their non-income producing activities, such as a broking system, trust account management, education, learning and development, technical support and marketing support,” says Shaun Standfield, Managing Director of Insurance Advisernet.

“We are a business partner that assists our ARs to build an asset so they spend their time providing advice and service to their clients.


“It’s like a franchise model. We also supply a lot of branding they can use in addition to their own personal and/or business brand.”

When it comes to compliance and regulations, ASIC treats ARs exactly as they would traditional insurance brokers under the Corporations Act.

“There’s a misconception that an AR is different to an insurance broker. They are all insurance brokers, all qualified in the same way, and they all have to comply and be ultimately regulated the same way,” says Wyner.

“The difference is whether you are an employee of a licensed insurance broker and you take home a salary each week, or whether you’re effectively renting the licence of a licensee and running your own business.”

Pull factors

That said, Standfield believes one element that attracts many brokers to AR networks is that they can spend less time focusing on back office administrative and compliance tasks.

“The cost and time of resources to adequately manage your own licence is quiet considerable, so we virtually remove that from the table and allow them to stick to what they are good at: selling and managing risk,” Standfield says.

Another attractive feature of the AR model is that it offers brokers the opportunity to be their own boss.

“There are such people as lifestyle ARs out there. They are happy with what they earn from their businesses – the status quo is fine for them. They play golf or tennis two days a week and have a great work life balance. And there’s nothing wrong with that,” says Wyner.

Then there’s the more ambitious ARs, explains Wyner (see breakout).

“They decide they’ve got enough fire in their belly and enough confidence in their own ability to go out from a relatively young age and start their own business as an AR,” he says.

Look before you leap

It’s not hard to see the appeal. Yet as touched upon earlier, AR networks are becoming increasingly selective of who they welcome to the fold.

“We don’t accept everybody that approaches us. In fact, we probably accept far less people who approach us because culture is quite important,” says Standfield.

And it’s not just the AR networks that need to choose wisely. Aspiring ARs also need to exercise caution when selecting a financial services licensee.

In May, ASIC cancelled the Australian financial services licence of national AR network Winley Insurance Group for failing to comply with a number of its key obligations, including failing to lodge financial statements, auditor reports and auditor opinions over consecutive years.

It’s about complementing what the large brokers do.

“Ultimately you’ve got to think about your personal brand. Is your personal brand likely to have any adverse impact from an association or perhaps joining the wrong AR network brand?” asks Standfield.

And while the Winley incident wasn’t the greatest of PR moments for the burgeoning AR market, the industry isn’t concerned about any lasting impact.

“I really believe that was an isolated incident. And at the end of the day no consumers were impacted, it’s ultimately up to insurers to extend security to licensees and insurers also need to do their due diligence on who they are and aren’t going to support,” says Standfield.

Adds Wyner: “I don’t think it has destroyed consumer confidence in AR networks. It definitely hurt a lot of underwriters and I think that is wrong – that impacts all of us, as they have to recoup their losses.”

The road ahead

So with the AR networks continuing to charge full steam ahead, do they threaten to shake up some of the larger broker networks?

Well, there’s optimism that there’s enough room for everyone to play nicely.

“AR networks are in no way a threat to the insurance broking industry. The larger brokers still dominate just by virtue of expertise,” says Wyner.

“That’s because of the connections that they have and their ability to do certain types of complex business that just the average run of the mill broker can’t. And they only play a little bit in the SME space, whereas most ARs in my experience are really good SME brokers.”

Standfield agrees: “It’s about complementing what the large brokers do.

“And more and more brokers now have ARs working within their licenses – that’s becoming quite popular. So the two models can complement each other.”