Wesfarmers Insurance will continue to drive growth through its brokerages – a strategy that will pay longer-term dividends despite possible short-term margin compression, says MD Rob Scott.

The insurance division owns OAMPS in Australia and the UK as well as Crombie Lockwood in New Zealand.

“This year we will make a much bigger investment in systems and this may impact our margins in the short term but will help our brokers service their clients and set us up for future growth,” Mr Scott told insuranceNEWS.com.au.

“We are rolling out some new programs in Australia to reward our high-performing brokers and give them an added sense of ownership over the portfolios they grow.

“We are really focused on building stronger propositions for our clients, our team and our insurance partners.”

While growth through acquisition is on the agenda for the broking business, Mr Scott is wary about the state of the market.

“I feel that value expectations for some smaller and mid-sized brokers are a bit overheated at present,” he said. “There is a big gap between what some vendors think their business is worth versus what buyers are prepared to pay.

“What we are seeing is that the domestic and small business books of many small brokers are under pressure from direct insurers and you have to question what multiple you pay for revenue that is unlikely to be there in a few years.”

However, Wesfarmers is still prepared to pay for “quality brokers with good portfolios”, he said.