Published in 2005, Freakonomics introduced a ground-breaking way of looking at the world through the eyes of an economist. The book inspired a series of books and a podcast, which continues to offer alternative solutions to everyday issues through the use of data.
One of the most notable episodes of the podcast was called The Upside of Quitting, which made the assertion that sometimes knowing when to stop is better than persevering regardless.
The principle behind this theory is the idea of opportunity cost. As economist Stephen J. Dubner explains in the episode, “it means that for every hour or dollar you spend on one thing, you’re giving up the opportunity to spend that hour or dollar on something else — something that might make your life better.”
This got me thinking about the way in which brokers work in our market. No broker is, or can be, an expert in every part of the market and so the likelihood is that you will have some cases that are slightly different to your usual cases, require more effort to research and more time to place.
This is worth it if it results in a good customer outcome, but if you are not an expert in that part of the market, how can you be 100% sure that the outcome they have received is the best possible outcome they could achieve?
Then there is the opportunity cost to consider. For every hour you have spent finding the right solution for that client, could you have worked more efficiently and effectively working with clients in your core markets?
Income is income of course and if you are able to earn a fee from a case, you are still benefitting. But what if you could earn a fee from cases that are outside of your core market and have more time to work on the type of business that you are able to convert more effectively?
By choosing to refer some cases, you are benefitting from improved opportunity cost by focusing on what you do best and you are earning additional income in the form of a referral fee, and this could put you in a better position than simply choosing to place the case yourself.
Nowadays, specialist distributors often provide the flexibility to work with them in the way that you choose. You can decide to work in partnership with a specialist distributor on a case, but you also have the ability to refer the business in return for a percentage of the fee. This option is particularly popular for times when your options are restricted by your network, during busy periods and holidays, or even just as a way of allowing you to focus on other areas of your business. At Brightstar, for example, all we need is a name and telephone number. We can keep you up to date with how the case is proceeding and we have a no cross-selling guarantee.
And there are additional benefits. By referring to a specialist you can be sure that your client is receiving advice from an expert in that market and may even have access to more options with whole of market access and exclusive products. There are also other considerations. At Brightstar, for example, we process seconds referrals under our PI cover, so we take on the risk, and we pay the valuation upfront so if the case doesn’t proceed for whatever reason, we are the ones who take on the loss.
So, if you have never considered referring some of your business, maybe it’s time to think again and look at your opportunities from another angle. You might just see that you can benefit from the upside of referring business.
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