As we progress through the current cycle, the New Zealand general insurance market is operating in a definitively soft phase. Fuelled by global reinsurance capital, insurers are demonstrating a strong appetite for growth. Consequently, premium rates across many commercial lines are softening, coverage terms are broadening, and the market is highly competitive.

For insurance brokerages, particularly agile, mid-size firms, this environment presents a phenomenal opportunity. It is an ideal time to aggressively expand market share, remarket risks, and win new clients who are actively looking for premium relief. To execute these growth targets, many businesses are smartly incentivising their brokers with lucrative new business bonuses.

From a corporate perspective, this is a highly effective and positive strategy to drive revenue and scale in a favourable climate. However, as a specialist insurance recruiter in the New Zealand market, I frequently speak with candidates who consider their long-term career decisions on these immediate windfalls.

While taking advantage of a buoyant market is excellent for your current take-home pay, relying on a singular new business bonus as the anchor for your career strategy can be a false economy. To protect your long-term earnings, it is crucial to step back and assess the whole picture.

The Business Strategy vs. The Candidate’s Perspective

It is important to recognise that corporate growth strategies and individual career strategies, while aligned, serve different ultimate goals.

Many mid-size brokerages are currently leaning into new business acquisition, weighting bonus structures towards winning new clients alongside retaining existing ones at renewal. This makes perfect commercial sense for a firm looking to scale rapidly in a soft market where clients are highly receptive to competitive quotes.

However, as a candidate, you must evaluate your total remuneration and long-term financial security. If a sizeable portion of your income is tied to variable, new-business-only bonuses, your earnings are highly exposed to macroeconomic cycles. A strategy that works brilliantly for a brokerage’s top-line growth today may not translate to a stable, reliable income for you tomorrow when market conditions inevitably shift.

The Cyclical Reality: Looking Ahead to the Turn

The insurance sector is inherently cyclical. While the current soft market provides excellent leverage for brokers to secure quick wins and support their firm’s expansion, underwriting agencies and market veterans know that these conditions are not permanent.

Several fundamental factors suggest that the current pricing environment is a window of opportunity, and candidates should prepare for an eventual hardening of the market:

• The Profitability Tipping Point: As premiums decrease and claims volumes normalise over time, insurer profitability margins will eventually tighten. Once that crossover occurs, insurers will naturally pull back on capacity, triggering a flattening or hardening of the market.
• Underwriting Scrutiny: Even in a soft market, a reliance on speed over technical discipline carries risks. As the market eventually tightens, technical broking and comprehensive risk presentation will once again become mandatory to secure placement.
• Systemic Pressures: New Zealand’s geographic exposure to severe weather events, combined with the persistent costs associated with construction and rebuilds, means that insurers cannot price below technical risk indefinitely without eroding capital.

When the cycle eventually turns, insurer appetite will shrink. Winning new business will transition from a pricing exercise to a highly complex, technical challenge, naturally impacting new business bonus pools.

Taking the ‘Whole Picture’ Approach to Your Career

For brokers currently enjoying the fruits of a soft market and supporting their firm’s growth, the message is not to ignore new business bonuses, but to ensure they are part of a balanced, sustainable remuneration package.

If you are considering your career options, or weighing up whether to stay in your current role versus moving to a new brokerage, consider the following holistic factors:

1. A Strong Base Salary: Your base salary forms the bedrock of your financial security, mortgage serviceability, and retirement planning. The best time to negotiate a premium, guaranteed base salary is during a soft market when brokerages are well-capitalised and actively hiring to support growth.
2. Balanced Remuneration Structures: Look for roles that offer a balanced scorecard. Firms that financially reward client retention alongside new business acquisition will protect your income when the market hardens and growth becomes more challenging.
3. Technical Upskilling: Ensure you are in an environment that values and resources technical broking and claims advocacy. When the market hardens, the brokers who thrive will be those with superior technical skills and strong, established underwriter relationships.

The current soft market is a largely positive environment, driving healthy competition and business growth across New Zealand. However, as an insurance professional, your career spans multiple market cycles. By taking a comprehensive view of your remuneration today, you can ensure you remain financially secure and highly sought-after, regardless of where the market turns tomorrow.

Frequently Asked Questions

1. What is a soft insurance market? A soft insurance market is a cyclical phase categorised by increased competition among insurers, abundant capital, and decreasing premium rates. During this phase, insurers prioritise gaining market share, making it an advantageous time for brokers to negotiate broader coverage and better pricing for their clients.
2. Why are mid-size brokerages heavily incentivising new business right now? The current soft market presents a strategic window for mid-size brokerages to aggressively expand their market share. By offering strong new business bonuses, they successfully incentivise brokers to capitalise on lower premium rates to win clients and scale the business efficiently.
3. Why is relying solely on new business bonuses considered a risk for brokers? While new business bonuses are lucrative in a soft market, relying on them as a primary source of income leaves a broker’s earnings vulnerable to market cycles. When the market inevitably hardens and winning new business becomes more difficult, brokers heavily reliant on variable, acquisition-only bonuses may see a drop in their take-home pay.
4. Why will the New Zealand insurance market eventually harden again? Decreasing premiums will eventually intersect with normalising claims costs and systemic risks, such as local climate events and inflationary rebuild costs. This tipping point will eventually prompt insurers to tighten capacity, increase scrutiny, and adjust rates, signalling a return to a harder market.
5. What should an insurance broker look for in a remuneration package? A sustainable remuneration package should focus on the “whole picture.” This includes a highly competitive, guaranteed base salary, alongside a balanced bonus structure that rewards both the acquisition of new business and the long-term retention of existing clients.

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