Trade bodies urged to stick to same path

October 2009
broking.co.uk
Serving the broker community for 30 years
Trade bodies
urged to stick
to same path
By Liz McMahon
B
rokers have called for their
trade bodies to represent
them with a united front in the
wake of the Tory’s proposals
to scrap the Financial Services
Authority (FSA).
The Conservative White
Paper, From Crisis to Confidence: Plan for Sound Banking,
has raised concerns with brokers over plans to raise costs,
fragment regulation and pass
responsibility for regulation
over to the Bank of England.
The British Insurance Brokers’ Association (Biba) and
the Institute of Insurance
Brokers (IIB) have been vocal
in response to the Government on the subject of future
regulation. Biba has regularly
lobbied the HM Treasury and
the FSA and planned to meet
this month with the shadow
financial secretary for the
Treasury, Mark Hoban.
While the IIB said it shared
Biba’s anxiety, it has chosen
to respond separately to both
the HM Treasury and the
FSA. The IIB said it planned
to lobby the Conservatives
through its parliamentary
adviser, John Greenway MP,
who also chairs the All Party
Group on Insurance and
Financial Services.
However, this two-pronged
approach has caused concern
in the broking community.
Emma Knight, compliance
manager at MCE, said: “Two
bodies, from a regulatory and
representative point of view,
will definitely lead to fragmentation and communication
needs to be top notch or everything will fall apart. We will
not feel comforted or protected by either body as one
will say one thing while the
other is saying something else.
I think there could be quite a
lot of conflict there.”
Tim
Ryan,
managing
director of Ryan Insurance
Group, echoed those sen-
M
p20
The FSA’s future is contemplated
in light of the Conservative
party’s regulatory proposals
Power hour
Louise Meeson delves into the
murky side of legal expenses in
relation to TCF
Hold harmless
p38
for brokers. We all come from
the same side and we now
have an opportunity to make
regulation more relevant to
what brokers do on a day-today basis.”
Eric Galbraith, Biba CEO,
said that in recent years Biba
had strengthened its lobbying
position considerably, explaining: “Having one voice in the
sector would add extra strength
to this, but this is not the case
and therefore we maintain a
regular dialogue with various
organisations, including the
IIB, to inform them of our
activities and issues relevant
to them.”
In April this year, the broker
bodies joined forces with the
Association of British Insurers
and the London International
Insurance Brokers’ Association
on the subject of commission disclosure to convince
the FSA they could provide an
industry solution.
Travelers boss steps down
Tony Cornell asks if bigger still means
better following the half-year results
of five commercial insurers
Agenda
timents: “We must, as an
industry, make sure that we
offer a cohesive opinion on
regulation and are well represented at the highest level. We
must not appear as a disparate
group of businesses otherwise
we will lose control of our
own destiny.”
In response, Barbara Bradshaw, chief executive of the IIB
said: “I’d say, financially, we
need to work together to make
regulation more cost-effective
p22
artin Hudson, presidentEurope of Travelers,
is to leave the organisation.
Kevin Smith, who serves as
president of international for
Travelers, will assume Mr
Hudson’s responsibilities.
In a statement, Alan Schnitzer,
vice chairman of Travelers, said:
“After nearly 30 years with
Travelers, we’d like to thank
Martin for his loyal service to
the company, and we wish him
the best in the future.
“Martin’s knowledge and
experience in the European
property/casualty insurance
sector has been an asset to
the company.
“I am delighted that Kevin
is taking on an expanded
role within the international
team, applying his leadership
skills and extensive experience
more broadly to this important franchise.”
Mr Smith assumed his current role at Travelers in May
2009. He is responsible for
all of the company’s international businesses, including
operations in the UK and at
Lloyd’s, and in Ireland, Canada and emerging markets.
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broking.co.uk
IAG UK on lookout for SME
brokers at the right price
By Louise Meeson
I
nsurance Australia Group (IAG) UK
has spoken of its intention to buy a
‘hub’ of small to medium-sized enterprise (SME) brokers.
Neil Utley, chief executive of IAG,
said the insurer was actively looking for
“sensibly priced” acquisitions.
However, he remained tight-lipped
about reports it was on the verge of
snapping up HSBC Insurance (UK)
before the bank put its motor insurance
business into run-off.
Referring to IAG UK’s acquisition
of broker Barnett & Barnett in early
2008, Mr Utley said: “I’d like to see
that one as the first of a hub of acquisitions in the SME market. We would
like to make other acquisitions so we
can grow a network.”
He said that due to where the
country was positioned in the economic cycle, the value of all businesses
had dropped.
Mr Utley said: “If you look at insurance broking businesses, in their mind
the value hasn’t dropped. People are
still holding out for valuations that
were being achieved two years ago
– but that’s not realistic anymore.
Neil Utley: Would like to grow a network
“We are keen to buy businesses but
it has to be for values that are relevant
today. I think there’s going to be a
period where people will hold out but
then will gradually realise the prices are
not there.”
As reported in Insurance Age (September 2009, p1), IAG was tipped
to buy HSBC Insurance (UK), which
formerly traded as Corinthian Policies,
to complement IAG-owned Equity
Red Star by providing the insurer with
a non-Lloyd’s platform to underwrite
business. Both Equity Red Star and
HSBC Insurance (UK) are based in
Brentwood, Essex.
However, HSBC Insurance recently
ceased underwriting motor insurance
business through its two operations
HSBC Insurance (UK) and HSBC
Insurance Management Services.
Mr Utley refused to comment but
said the insurer remained committed to
investing in the UK.
Equity Red Star most recently
expanded its regional presence with the
opening of a new office in Manchester,
adding to its existing underwriting
operations in Glasgow, Leeds, Bristol
and Birmingham.
Mr Utley said that another two were
in the pipeline and envisaged that
it would end up with eight or nine
regional operations.
“We are opening underwriting centres. The sole purpose of that is to put
underwriters closer to brokers. It’s
entirely broker-driven,” he added.
See November’s issue for an in-depth
interview with Mr Utley.
Aviva tempts brokers back with commission boost
A
viva appears to be pulling out all the
stops to get brokers back on board
in a bid to claw back some of the volume
it lost following the rate increases it introduced earlier this year.
Insurance Age understands that at a
recent conference for brokers belonging to the insurer’s 110 Club, held in
Barcelona, a commission uplift for all
members of 2.5% was announced. The
increase will apply to all open market
products but excludes schemes.
Aviva would neither confirm nor
deny that the uplift had been applied
saying only that it would not comment on commercial agreements with
its brokers.
The decision is in stark contrast to
Aviva’s stance with consolidators. It has
made a very public and concerted effort
to claw back some of the commission
that brokers of this size had managed to
secure under the previous regime.
The increase in commission is the
latest in a range of tactics by the global
Rambla de la mar, Barcelona
player to win back a broking market
that some suggest it has neglected in
the past.
The 110 Club was set up to offer
preferential rates and products to the
insurer’s top broking partners and
was swiftly followed by the Broker
Independence Group, which tailors
products and services to the smaller
end of the market.
Aviva also decided to pull out of the
commercial direct market and channel
all its commercial business through the
broker channel. An upcoming television
advert will recommend that potential clients use a broker to place their
insurance and will utilise the British
Insurance Brokers’ Association’s ‘find a
broker’ service to back this up.
In addition, it has vowed to offer brokers the same rates in personal lines that
it offers direct.
October 2009
Insurance Age
3
News
NEWS IN BRIEF
The appeal brought by Barclays bank
against the decision of the Competition
Commission in regards to the sale of
payment protection insurance is drawing to its conclusion. All parties have
made their cases with the Commission
receiving the backing of the Financial
Services Authority. The Commission
said it was going ahead with a draft of
proposals outlining how measures to
introduce competition into the market
would be implemented as it awaited
the outcome of the appeal.
RSA has given consolidator Oval a
multi-million pound cash injection,
Insurance Age has learnt. However, the
insurer has not taken any equity in the
business in exchange for the funds
which are understood to be worth up
to £9m. When private equity backer
Caledonia originally invested £15m in
the broker in October 2003 – a move
that saw RP Hodson acquired by a new
holding company and Oval created –
RSA held a 12.5% stake in the business.
However, with subsequent investments
this has been diluted to 1-2%. An Oval
spokeswoman confirmed that it had
recently raised further funds through
an existing shareholder, but would not
comment on the identity or amount of
money concerned.
The British Insurance Brokers’
Association (Biba) has revealed the
theme for its 2010 conference and
exhibition to be held at ExCeL London
on 19th and 20th May 2010. Biba said
Professionalism in a Changing World
was chosen as the theme to reflect
the strength of the broking channel
at a time when the financial services
industry is under the spotlight as never
before. The event will take the new
format of a full two-day conference
and exhibition held over a Wednesday
and Thursday.
NIG review proposes greater
penetration of larger SMEs
By Louise Meeson
N
IG’s property underwriting manager has spoken of the insurer’s
plans to compete at the larger end of
the small to medium-sized enterprise
(SME) market.
Dave Sherman said that following an
in-depth review of its core non-package
commercial insurance product, Traders
Combined, the insurer had introduced
a new rating structure.
He added that the review had
resulted in the reduction of the majority of base rates and also aimed to
empower underwriters, allowing them
greater flexibility in targeting key sectors and risks.
“We are already very strong in the
‘small’ end of the SME sector, which
caters for up to £5m exposure – we
have a fair percentage of that business.
This will give us more flexibility to
compete at the larger end of the range,
NIG has identified
target SME sectors
such as builders and
plumbers merchants
with up to 250 employees or around
£25m turnover,” he added.
Mr Sherman said that NIG wanted to
grow its commercial SME book “substantially” in the next four to five years.
“It’s a perception issue,” he added.
“We can write larger risks and we want
brokers to think of us when placing this
type of business.”
As part of its review, NIG has iden-
tified a number of key SME trades
and sectors it is keen to target including wholesalers, office, retail, general
engineers, builders and plumbers merchants, printers, electrical services and
warehousing.
Mr Sherman continued: “The wider
use of underwriting features will
empower local underwriters to negotiate with brokers to secure business at
prices that better reflect the risk.”
NIG said the improvements were
designed to complement the insurer’s
new underwriting centres of excellence,
which were announced earlier this year
and involved the closure of NIG’s
Cardiff, Chelmsford, Exeter, Leicester, Liverpool, Newcastle, Reading and
Redhill offices.
Mr Sherman said: “This year is about
getting NIG into shape to compete in
our core markets. We are now working
on a series of product developments to
give our team the tools they need to
really support brokers.”
Experts welcome new MoJ claims procedure
I
ndustry experts have welcomed the
Ministry of Justice’s (MoJ) new
claims process for low-value road traffic
accident personal injury claims.
In a letter to stakeholders, Michael
Willis MP, deputy to the minister of the
MoJ, said the parties reached a broad
agreement on the detail of the new
scheme, which aims to streamline personal injury claims valued at between
£1,000 and £10,000.
He said: “This will reduce the time
taken to settle disputes by setting
fixed time limits and costs for settling
less complex claims. It will also be
a significant step forward in helping
victims of car accidents receive justice
through compensation, in a quick and
simple manner.”
The agreed fixed costs are: £400 for
Stage 1 – where the claimant solicitor completes the claim notification
form and sends it to the insurer, which
may admit/deny liability; £800 for
Stage 2 – where liability is admitted,
the claimant obtains a medical report
and the process continues with offers
and negotiation of a settlement to a
strict timetable; and £250 paper hearing/£500 oral hearing for Stage 3
– where the parties cannot agree a settlement and the case goes to court.
The aim is to implement the process
in April 2010.
Nick Starling, the Association of
British Insurers’ (ABI) director of general insurance, said: “The ABI has long
argued for a simpler, more streamlined
compensation system that works in the
interests of consumers, so we completely support the announcement.”
However, he added: “It is now vital
that employees injured at work have
the same opportunity as those injured
on our roads to benefit from this new
process, so we call on the Government
to extend it to cover employers’ liability insurance claims.”
Whether it’s mechanics...
4
Insurance Age
October 2009
broking.co.uk
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News
Ace unveils ambitious restructuring
NEWS IN BRIEF
The Financial Services Authority
(FSA) has issued a feedback statement
reaffirming its regulatory approach to
balancing the responsibilities of consumers and firms. The regulator said
the statement acknowledged that the
responses reflected a variety of views
and there was no consensus. In the
absence of wider agreement on where
the balance lies, the FSA said it would
maintain its current approach as set out
in the discussion paper.
Cunningham Lindsey is cutting up
to 59 jobs following a downturn in
subsidence claims. The company will
extend remote working to the dayto-day management of subsidence
work, reducing the need for regional
administrative support. Some 50
administration staff and nine technical
staff have been advised that they are
at risk of redundancy.
According to new research by
Ordnance Survey, insurance fraud is
soaring. Nearly three-quarters (74%) of
UK insurance fraud investigators interviewed said they had seen an increase
in fraudulent claims since the beginning of 2009. Four out of five believed
the situation would get worse. The
top issue highlighted was the credit
crunch, followed by fraud being committed when people first take out their
policies (43%).
Bluefin Insurance Services has
announced it will open a new branch
of its professions division in Greater
Manchester. Mark Westgarth, managing director of the professions division,
said: “We have a large number of
important clients in the North so it
has long been our desire to establish
a physical presence in the region to
complement our existing locations in
Bristol and London.”
By Louise Meeson
A
ce has revealed ambitious plans to
grow its regional corporate business after unveiling a new operational
structure in the UK and Ireland.
The company has created five areas to
support its 11 regional branches – Ireland, Scotland, the North, Midlands
and London and the South East – each
of which will be headed up by a senior
regional manager.
In addition, Ace has created two distinct business segments – major risks,
focusing on companies with a turnover
of more than £500m, and corporate, for
companies with turnovers of between
£5m to £500m – in a bid to align the
company more closely with the needs
of brokers and clients.
Each segment will have dedicated
underwriting and business development teams covering both property
and casualty, and accident and health.
Former national distribution and
development director, Pat Drinan, has
stepped into the newly-created role of
director of corporate risks.
Pat Drinan: Takes on new position
He said: “We are known for our
expertise in the major risks segment.
In the corporate segment, we have
always been there, but we have now
put sides to it and formulated a very
clear proposition and structure. We
are aligning all the departments as one
joined-up proposition and are formalising the structure, but we recognise
the offering needs to be tailored to
those different segments.”
Mr Drinan said Ace had ambitious
plans to grow its corporate business,
pointing out that while about 40% of
corporate activity was deemed to take
place in London and the South East,
this meant that 60% of activity was in
the regions.
Ace also plans to launch a suite of
cross-class products targeting a range
of business sectors. Mr Drinan said it
intended to launch six new offerings,
including a retail package product,
sometime next year.
So far, four regional managers have
been appointed – Jim Duncan heads
up the Ireland region; Colin McKellar, Scotland; Ian Fox, the North;
and Paul Jennings, the Midlands. The
London and South East position has
yet to be filled.
The major risks business also has
plans for growth. Phil Sharpe, director
of casualty and major risks, said Ace
was looking to double its gross written
premium in major risks from $500m to
$1bn in the next four to five years.
For the latest insurance industry
news and views, visit
Broker market intelligence from Insurance Age and Professional Broking
Bridge Insurance wins IA/Timebox competition
B
ridge Insurance Brokers has won
the Insurance Age/Timebox competition. Bridge, one of the Manchester
region’s leading independent corporate
insurance brokers, won a year’s free access to Timebox, an award-winning client profitability system developed specifically for brokers by Alphatec.
The web-based system helps brokers
to record all the time spent on client work, then analyse and monitor
areas such as client activity, profitability
and business productivity. The service
provides brokers with a practical and
powerful management tool to help
increase their earnings and profitability,
and offer a transparent and valuable
service to their clients.
Roger Potts, chairman of Bridge,
said: “We aim to do more than just
placing our clients’ risks – we focus
on offering commercial advice and
technical excellence to contribute to
the continuing success of our clients.
Having seen Timebox in action, it is
a lot more than just time recording. It
will give us the ability to very clearly
demonstrate the value we deliver to
our clients. It will also give us a clear
picture of the time and resources we
allocate across the business.”
David Grier, managing director of
Alphatec, said: “Many congratulations to Bridge on its success in the
competition. Timebox is a practical
and powerful management tool that
helps brokers increase their earnings
and profitability.
“We are sure Bridge will see some
real and tangible benefits from using
the system.”
The prize, worth more than £6,500,
will provide full access to Timebox for
up to 30 users, together with training
and technical support.
...or farmers...
6
Insurance Age
October 2009
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News
NEWS IN BRIEF
London Authorities Mutual (LAML) is
to go into provisional liquidation. In a
statement, the mutual said that despite
government and opposition promises to
change the legislation that disempowered LAML, provisional liquidators are to
be appointed to wind up the insurancerelated affairs of the organisation. Martin
Fone, chief executive of Charles Taylor
Consulting’s non-marine mutuals department, said: “Given all the uncertainties
surrounding LAML, we have agreed with
the Financial Services Authority that this
is the most appropriate way to ensure a
timely and orderly winding-up of LAML’s
insurance-related affairs.”
The board of directors at Willis
Group Holdings has approved a proposal to redomicile to Ireland from
Bermuda. Willis’ shareholders will be
asked to vote in favour of completing
the redomestication at a shareholders’
meeting to be held in approximately
three or four months. The move will
also be subject to approval of the
Supreme Court of Bermuda, as well
as receipt of customary consents,
approvals and waivers. If the change is
approved by all parties, it is expected
that a new Irish public limited company, Willis Group Holdings plc, will
replace Willis Group Holdings Limited
as the ultimate public holding company of the Willis Group.
Are you using an aggregator to help
you win business?
Yes
20%
No
77%
Working on it
3%
Off the agenda: AMII PMI meeting
vetoes transparency discussions
By Liz McMahon
T
he thorny subject of claims data
sharing was banned from discussion
at a meeting of private medical insurers
held by the Association of Medical Insurance Intermediaries (AMII).
The invitation received by PMI
insurers stated that certain providers
would not attend the meeting if claims
data transparency was mentioned.
Head of healthcare at Groupama,
Alistair Sclare, said: “Everybody knew
that claims transparency was at the top
of the list of what AMII and British
Insurance Brokers’ Association (Biba)
members wanted us to talk about and
I struggle with the principle of attending a meeting that has a blackout on
the topic, which the meeting was actually designed to discuss.”
However, Mike Izzard, chairman of
AMII, said: “The meeting went better
than I had dared hope; it developed
Alistair Sclare: Slams topic blackout
a footprint for moving the industry
forward. There were some areas of
commonality and a desire to work
together on the issues that there can be
some agreement on. We didn’t comment on claims sharing because that’s
off the agenda at the moment. We are
going to do the easy bit and in a couple
of years’ time, who knows what will
come forward.”
However, while transparency was left
off the agenda, other issues raised
included the development of an agreed
market service standard for the release
of medical or renewal schedules.
On the debate’s success, Mr Sclare
said: “There was an effort to actually
make some progress on this issue but in
reality it is still being stifled by the statement that unless all insurers agree to
this, many simply won’t get involved.”
Head of technical support at Biba,
Peter Staddon, who had questioned the
worth of the panel, now admitted he
thought it had “legs”.
On the subject of claims transparency, he added: “When the situation
changes, which it will, Alistair Sclare
can turn around and say – look, I was
an innovator.”
Mr Sclare is undecided over whether
he will attend the next PMI panel
meeting, which will be held before the
end of the first quarter in 2010, saying:
“There were a number of insurers in
the room that seemed to think if we
simply fail to discuss transparency, the
problem would go away.”
James Hallam develops Scottish presence
J
ames Hallam has expanded north of
the border with the opening of a new
office in Glasgow.
Heading up the Lonmay Road
operation, John Dougherty has been
appointed as regional business manager, reporting directly to David Allori,
James Hallam’s city corporate director.
He is joined by Scott Wright, who has
been hired as senior account handler.
The pair join James Hallam from
Towergate-owned TL Risk Solutions.
Paul Anscombe, managing director
of James Hallam, said: “The intention
is to build up our commercial business
in Scotland. We already have a presence
in Edinburgh. This office gives us more
coverage and the opportunity to grow
and expand in Scotland.”
Mr Anscombe said that there were
plenty of opportunities for independent brokers in the regions.
“The consolidators have bought up
some of the good quality brokers. We
see a gap in the market for independent
brokers to come back into the regions.
We believe there will be a massive
re-emergence of the independent community broker,” he added.
Mr Anscome said that the broker was
keen to look at specialist areas of business in the UK.
Earlier this year, Alan Turner, the
holding company of James Hallam
and Arnold Fisher Insurance Services,
acquired the specialist broker Landau
Manson, which owns the hotel insurance brand Gauntlet. The broker
also acquired Essex-based Peter W
Edwards, a corporate and personal
lines broker.
As well as the Glasgow office, James
Hallam also has branches in London,
Watford, South Woodford and Harrogate, through Landau Manson.
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8
Insurance Age
October 2009
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News
FSA issues guidance on
‘notorious’ PPI mis-selling
By Martin Friel
T
he Financial Services Authority
(FSA) has announced a package of
what it describes as “tough measures” to
protect consumers in the payment protection insurance (PPI) market and ensure they are better treated when buying
the product or complaining about it.
Firms representing more than 40% of
face-to-face sales in the single premium
unsecured personal loan PPI market
have agreed to review these sales and
redress those consumers identified as
mis-sold.
The FSA has issued new guidance
to ensure PPI complaints are handled
properly, and redressed fairly where
appropriate and a new rule that will
require firms to reopen some 185,000
previously rejected PPI complaints and
reassess them against the guidance.
In addition, the FSA is launching
targeted assessment of sales practices
for PPI on secured loans and credit
cards. If the potential for mis-selling is
identified, the regulator said pro-active
reviews by firms may be extended to
these areas too.
Jon Pain, FSA managing director of
FSA still needs to tackle
PPI sold with credit cards
retail markets, said: “Consumers should
not be pressured or deceived into buying PPI and they are entitled to have a
policy properly explained to them. It
is unacceptable that despite previous
warnings about poor sales practices,
backed by 22 enforcement cases and
significant fines, the PPI sector still
needs the FSA to intervene on this.”
The move received a cautious welcome from Adam Phillips, chairman of
the Financial Services Consumer Panel.
“The selling of PPI has a notorious
history. We welcome the FSA’s proposal
to force firms to revisit all rejected complaints about sales of PPI and re-examine
them against new FSA guidance.
“However, this action has taken a
long time, and the FSA still needs
to tackle PPI sold with credit cards,
secured loans and mortgages where
people may not have complained. We
also still await FSA enforcement action
against individuals in some of the bigger players that were responsible for the
mis-selling of PPI,” he said.
For the latest insurance industry
news and views, visit
Broker market intelligence from Insurance Age and Professional Broking
NEWS IN BRIEF
THB Group has acquired the balance
of minority shareholdings in FiSure
Holdings, giving it 100% ownership of
the professional risks and directors’ and
officers’ insurance broker. As originally
reported in August 2006, THB will pay
consideration based on the performance of the acquired business over the
three years ending 30 April 2011, to be
settled as two-thirds in THB ordinary
shares and one-third in loan notes.
Clear Insurance Management has
acquired Southern Insurance Consultants in its 11th acquisition. Clear has
increased its gross written premium to
£25m, with over 50 dedicated general
insurance staff working at the New
Malden site.
Lord Turner, chairman of the
Financial Services Authority (FSA),
has insisted that the momentum for
regulatory reform must be maintained.
During his Mansion House speech, he
said “regulators must design radically
changed regulations and supervisory
approaches”. He added that while
many financial services “are not bust
and don’t need fixing”, failing to
implement a more robust capital and
liquidity regime for banks globally
could allow a similar crisis to develop
in years to come.
SMALL BROKER FOCUS
People, performance and profit
Sponsored by:
Unemployment may be heading for the 3,000,000 mark, but the challenge of finding the right skills has not gone away in UK plc. The
big debate about bonuses in banking shows just how important having the right people for the job has become in financial services.
In September, the Chartered Insurance Institute announced that 40% of its members felt the UK had slipped behind other countries
in skill levels and launched the Broker Academy to address the need.
A skilled, motivated and productive team drives competitive advantage in a
tighter market and when other resources are limited, maximising performance
is the most efficient route to growth. Best practice for managing your human
resources is built around five aspects of people management.
Be clear what the job is
Many small businesses fail to define clearly what is expected of each role and how
they relate to other roles across the business. The result is that the span of responsibility gets confused and workers are not sure what competencies they need to
succeed. So define each job precisely, as part of the underlying process. Also keep
in mind that the Financial Services Authority expects to see responsibilities for key
activities clearly allocated and managed, with supporting evidence on record.
Pay the going rate, reward exceptional performance
It is surprising how many small business pay too much (often to long-serving
staff ) or too little (to control costs) in relation to competitors. Benchmarking
salaries (easily done online or by calling an agency) helps to keep costs in line
and set reasonable expectations. Many salary profiles have altered in the economic downturn, so it is a good idea to check again each year.
broking.co.uk
Give feedback – and accept it, too
One of the secrets of success for GE, the world’s largest enterprise, was a highly
organised performance management system. Every business should put in place
a regular process to give feedback to staff on how well they have performed and
contributed to business goals. Managers also benefit from feedback from workers.
Build the skills that drive growth
Investing in your team is more cost-effective in the long term than recruiting. However, it is a long-term investment that must be made each year. Identify the competencies that will be most valuable to the business and build them consistently.
Recruitment and redundancy – follow the process
When the time comes to manage changes in the team, follow a process that has
been agreed and meets legal requirements. Before recruiting, decide how candidates will be treated, the criteria for choosing them, how they will be tested and
the timescales for decision making. If staff must be let go, the process is much the
same: set criteria, keep staff informed and stick to the agreed timescales.
Michael Brewer is a consultant to Primary General
October 2009
Insurance Age
9
News
Fears over FOS complaints data
NEWS IN BRIEF
RSA has been appointed by West
Bromwich Building Society as the sole
provider of its buildings and contents
insurance policies. The product will be
sold via RSA’s Stargate home insurance
platform. Andy Elkington, partnerships
director at RSA, said: “Winning this business is a further endorsement of our
household offering and an important
progression in the growth of our affinity
division. This agreement demonstrates
our commitment to working flexibly and
providing first-class products to serve
the needs and wants of our customers.”
The insurance industry could incur
increased VAT liabilities and associated
costs under new rules, according to consultant Moore Stephens. The company
warned that under changes to the VAT
international services rules, which take
effect on 1 January 2010, the industry
could incur increased costs on certain
services bought in from countries outside the UK. It also warned that more
non-VAT-registered businesses could find
themselves caught in the VAT net.
Aon will work with XL Insurance to
bring new capacity to the solicitors’
professional indemnity (PI) market. Ryan
Senior, director for Aon’s specialist professional services group, said solicitors
wanted the confidence that they would
be able to access competitive rates and
market-leading cover: “Working with XL
reinforces Aon’s commitment to this.”
The British Insurance Brokers’
Association (Biba) has welcomed the
Department for Transport’s plans to
crack down on uninsured vehicles.
Graeme Trudgill, Biba technical and
corporate affairs executive, said it was
“fantastic news” which would lead to
safer roads. “We are all paying for the
£500m cost of uninsured drivers and
welcome this positive progress.”
By Louise Meeson
T
rade bodies have warned of the
danger of “misleading” clients, following the publication of detailed complaints data.
For the first time, the Financial
Ombudsman Service (FOS) has individually named and shamed banks,
insurance companies and investment
firms in its complaints data.
The move follows the Financial
Services Authority’s (FSA) release of
aggregate figures covering the period
2006-2008, which showed complaints
against general insurance intermediaries
had risen year on year.
Steve White, the British Insurance
Brokers’ Association head of compliance and training, said it was important
that complaints data was set in the
appropriate context. “Even then, there
is a real danger that information will be
misunderstood by consumers and misused by the media,” he added.
The FOS data, which covers con-
Steve White: Data needs context
sumer complaints handled by the
Ombudsman in the first half of the
year, showed that banks received the
most new complaints.
Barclays topped the list with 8,283 new
cases, with 2,085 of these being general
insurance-related, and Lloyds TSB came
second with 6,947, over half of which
were general insurance-related.
Complaints involving insurance companies were markedly lower. Aviva
Insurance UK had 669 general insur-
ance complaints, while Direct Line had
575 and Axa Insurance received 513.
While the FOS admitted the number
of new complaints against each business
was likely to be affected by its size, it
said experts consulted by the Ombudsman had “been unable to agree how
size (or market share) should be taken
into account”.
Maggie Craig, the Association
of British Insurers director of consumer strategy, said while the industry
acknowledged improvements were
needed in the way it handled customer
complaints, data had to be presented in
an appropriate manner. “Unfortunately,
the way the FOS has chosen to present
the data doesn’t achieve this aim, and
may in fact mislead consumers about
the performance of individual firms.”
The FSA aggregate data showed that
the number of complaints against general insurance intermediaries increased
to 218,901 in 2008, up from 156,309
in 2007. However, the data also showed
the number of complaints resolved by
intermediaries had increased.
BROKER FORUM – BROKING.CO.UK
Causing a stir
Liz McMahon rounds up the latest Forum posts: motor accident disclosure, cover for companies that have declared
bankruptcy and the validity of Swiftcover’s 60 second quote claim were high on the agenda
T
he broker forum has oscillated between the role of philanthropic patron and an entirely cruel mistress this month.
Members shared relevant advice on disclosing motor accidents. They explored the non-fault accident myth and posted
experiences that generally agreed there were problems in this area that were unfathomable to the man on the street.
There was also advice on underwriting for previously bankrupt or insolvent companies. Posters felt it was unfair for
insurers to refuse to quote on companies whose owners had experienced financial difficulties. However there was a
hesitancy over how to handle phoenix firms but the issue was thoroughly debated and some sage insight imparted.
Nevertheless, the claws came out when the subject of Swiftcover’s 60 second quote facility was broached. What
started with disbelieving cynicism ended in an experiment in which one member took 1 minute, 57 seconds to get his
quote and called for an ASA report. As members shared their disappointments, it became abundantly clear that the broker forum does not suffer fools gladly.
On a different note, the Insurance Age team announced its venture in to social networking. IA is now part of Linkedin
and Twitter (www.twitter.com/BrokingLiz).
Fully-hosted broker software
www.carbonasp.com
01273 852 111
Enabling the general insurance industry to do business
10
Insurance Age
October 2009
broking.co.uk
News
MCE Insurance Brokers takes
away two UK Broker Awards
By Martin Friel
M
CE Insurance Brokers walked
away with two prizes at this
year’s UK Broker Awards.
The bike insurance specialist bagged
the prize for Marketing Campaign of
the Year, as well as the coveted title of
Intermediary of the Year.
Its in-house strategies, including the
creation of ‘Big ‘Ed’ as the public face
of the company, which lead to it experiencing a 23% policy growth in the last
year, won the judges over.
The event, the industry’s only
broker-dedicated awards ceremony,
was held at the Troxy in London’s
East End and was attended by 500
people from across the broking and
insurance industries.
The Achievement Award went to
Alec Finch for his work in raising the
profile of the UK broking market
across the globe through his establishment and development of the
Worldwide Network. In addition, his
broking.co.uk
Industry veteran Alec Finch
receiving the
Achievement
Award
support for the development of professional standards in the industry was
recognised by the judges.
In his last year of eligibility, Temporary Cover’s Alan Inskip picked up the
Young Broker of the Year Award. He
has guided Temporary Cover through
its separation from a parent company
that was taken over by RSA, rationalised
its systems and processes, and boosted
the company’s profile and growth. And
all at the tender age of 29.
The winner of the inaugural Broker
Manager of the Year Award, was Ian
Gosden of fast-growing Higos Insurance Brokers. Mr Gosden caught the
judges’ attention with the impressive
growth his company has experienced
while persisting with a business model
that many had written off.
Winners and guests alike celebrated
their own and their peers’ success at the
1930s-themed afterparty playing roulette and blackjack, taking advantage of
the complimentary bar and mingling
with the resident flapper girls who
blended into the art deco-designed
Grade II-listed building.
For a full rundown of the award
winners, please see this month’s accompanying supplement.
For the latest insurance industry
news and views, visit
Broker market intelligence from Insurance Age and Professional Broking
NEWS IN BRIEF
Regal Insurance has boosted its midnet-worth ambitions by adding Sterling
Insurance Group to its panel. Andy Bray,
Regal marketing manager, said the move
would “further enhance its plans to
become a major player in the market”.
The insurance industry is likely to see
a pick up in mergers and acquisitions
(M&A) activity in 2010, according to Willis. Tony Ursano, chief executive of Willis
capital markets and advisory, said the
soft market was fuelling the search for
growth, diversification and specialisation through M&A. He added that M&A
would satisfy the pent-up demand for
liquidity from private equity owners.
PricewaterhouseCoopers has warned
that European Commission (EC) proposals for a‘super regulator’do not
sit comfortably with Solvency II. Mark
Batten, a partner at the firm, said:“The
proposed increased and centralised regulatory powers suggested by the EC may
counterbalance the potential frequent
use of supervisory discretion favoured
in the recent wave of Committee of
European Insurance and Occupational
Pensions Supervisors consultation papers.”
October 2009
Insurance Age
11
Results news
NEWS IN BRIEF
LV reported a 92% rise in its general
insurance gross written premium (GWP)
to £397.5m for the first six months of
2009 (H1 2008: £206.5m). New business
GWP of general insurance products rose
by 61% to £106.9m (H1 2008: £66.6m),
excluding the Highway Insurance
contribution. Direct business including
aggregator increased to £61.3m (H1
2008: £47.4m) while broker business
rose to £192.4m (H1 2008: £19.2m) – up
137% excluding Highway contribution.
Mike Rogers, LV group chief executive,
said: “Despite a difficult environment,
our focus on attractive markets and
helping customers to look after what
they love has served us well.”
Ecclesiastical achieved a pre-tax
profit of £25.7m for the first half of
2009, whereas it suffered a £21.5m loss
at the same point last year. The insurer’s
gross written premium was up £19.1m
(9%) on 2008 to £229.9m and its overall
combined ratio stood at 87.9%, compared to 104.5% last year. Ecclesiastical
group chief executive, Michael Tripp,
said that while the financial climate
remained challenging, its interim results
painted a “very positive picture”.
“We’ve increased our profitable premium income, reduced costs and
continued to invest in our people and
in new technology,” he added.
Lloyd’s profit before tax rose to
£1.32bn for the first six months of 2009,
compared with the £949m in the same
period last year. In a statement, Lloyd’s
said the result reflected continuing
underwriting discipline and a relatively
low level of catastrophe claims. Lloyd’s
combined ratio stood at 91.6%, compared to 89% last year, investment
return was £708m (June 2008: £346m)
with central assets of £2bn (June 2008:
£1.9bn). Lloyd’s chairman, Lord Levene,
said: “The market is in solid financial
shape and business volumes have
increased as a result of brokers and policyholders seeking to use the security
of the Lloyd’s platform. External conditions, however, remain difficult, with the
US windstorm season and recessionary
trends continuing to pose a threat.”
Fortis pledges continued broker
investment despite profit drop
By Louise Meeson
F
ortis UK’s chief executive said the
insurer remained committed to
building its broker proposition in the
face of a £11.5m drop in pre-tax profit
in its non-life business.
Barry Smith said the insurer had
plans in the pipeline for more products
and was also investing heavily in the
development of electronic platforms,
which he is convinced would make
it easier for brokers to do business
with them.
He said: “We are focused on developing products and aligning with
different distribution channels. In
regards to brokers, we were very clear
12 months ago that we want to build
12
hire and aggressive claims farming in
the motor sector as a major contributory factor to its fall in profits.
The insurer’s pre-tax profits fell to
£5.4m for the first half of 2009,
compared with £13.1m for the same
period last year.
However, revenues remained stable
for Q2 2009 at £225.9m (H1 2008:
£224.7m). Personal lines revenues
remained flat at £141.8m (H1 2008
£141.2m) while commercial lines revenue grew to £57.9m (H1 2008:
£54.7m).
Private medical insurance revenues,
targeted by Groupama Healthcare, fell
to £26.1m (H1 2008: £28.7m) following the cancellation of a number of
unprofitable schemes.
François-XavierBoisseau,Groupama
CEO, said: “As I predicted, 2009 has
been very challenging for Groupama.
The growing level of claims inflation
that we have seen in our personal
motor book over the first half of
the year has been significant. This is
Electrical Contractors’ Insurance Company Limited.
Registered Office: ESCA House, 34 Palace Court, London W2 4HY.
Registered in England No 1266206. Authorised and regulated by the Financial Services Authority.
Insurance Age
October 2009
and continue to build the proposition
for the brokers.”
Fortis UK reported non-life premium growth of 7% to £401.6m for
Motor sector accountable for dip Brightside profits
chief executive pointed as a result of the continuing impact
to fund growth
to the continued impact of credit of credit hire and aggressive claims
Groupama’s
Specialist job,
Specialist tools
A division of
Barry Smith: Committed to building
broker proposition
the first six months of 2009 (H1
2008: £375.3m). Non-life profit
before tax was down to £31.7m (H1
2008: £43.2m) due to a number of
factors including increased household
and personal injury claims and lower
investment yields. Fortis UK now has
6.9 million customers in the UK.
Commercial lines gross written premium (GWP) increased by 40% to
£53.6m for the first six months of
2009, compared to the same period
last year. Mr Smith said this was due
to a number of factors including the
growth of its van insurance proposition, which now has more than
100,000 customers, and the pilot of
its new fleet product. Personal lines
GWP was up 3% over the same period
in 2008 to £344.7m.
farming activities by direct writers and
some brokers that have continued to
drive up the number of injury claims.
“We have responded strongly and I
am comfortable that we will soon be
back on track.
“With the exception of private car,
our business has performed very well
and there have been some sparkling
performances from our household,
motorcycle and small fleet accounts
where we are building a growing
reputation for excellence. This bodes
well for the future.
“I remain very disappointed that
the major commercial players are
still not reacting to the wholly inadequate rating levels in the commercial
market and that we are still seeing
differential pricing for new business
and existing customers.
“There has again been plenty of
talk in the market over the first six
months of 2009 about increasing
rates but very little action. This needs
to change.”
We all know how important
it is to choose the right tool
for the job.
Choosing an insurer is just
the same.
B
rightside Group revealed it has
a number of acquisitions in the
pipeline as it reported a rise in revenue
and profits.
In the group as a whole, revenue
increased by 39% to £21.7m for the
first six months of 2009 (H1 2008:
£15.6m) while pre-tax profit rose by
28% to £3.2m (H1 2008: £2.5m).
Its insurance broker division reported
a rise in revenue to £14.4m (H1
2008: £12.6m) while profits increased
to £2.2m (H1 2008: £2m).
Arron Banks, Brightside Group’s
insurance director, said the company
was well funded, and while historically
had mainly pursued organic growth,
was on the lookout for suitable candidates. He said an announcement could
be made by the end of October.
For the latest insurance industry
news and views, visit
Broker market intelligence from Insurance Age and Professional Broking
n Electrical contractors
n Heating, ventilation and
air conditioning contractors
n NFRC roofing contractors
n Lift engineers
08450 343250
www.ecic.co.uk
broking.co.uk
Action.
Our new TV ad could help
drive more business.
Our first-ever business insurance TV advertising campaign is
now directing commercial customers your way.
The ads are encouraging businesses to talk to you, their
broker, about insurance and the expert, individual advice that
only you can provide. And that, with our experience, we’ll
work with you to provide the best cover that’s just right for
their business.
You can watch the advert now at aviva.co.uk/broker
We’re in business to keep you in business.
For more information about the campaign visit aviva.co.uk/broker
Issued for use by Insurance Intermediaries only. This information has not been approved for use with customers.
Aviva Insurance UK Limited. Registered in England No. 99122. Registered Office: 8 Surrey Street, Norwich NR1 3NG.
Authorised and regulated by the Financial Services Authority.
BFPAG9036
News
NEWS IN BRIEF
The UK private motor insurance
industry made a £1bn underwriting
loss in 2008 – more than double the
amount reported (£493m) to the Financial Services Authority, according to
consultant Watson Wyatt. The research
revealed that UK insurance companies
used reserves from previous years to
offset the actual loss. According to the
findings, the 2008 result was slightly
better than the 2007 underwriting loss
of over £1.1bn and represented a break
in a continuous trend of losses, which
started in 2004 – the only profitable
year in the past decade, when the market made a profit of £77m.
The Association of British Insurers
(ABI) has called for the Government to
improve UK competitiveness. According
to an ABI survey, 80% of UK insurance
executives felt that if the Government
failed to improve competitiveness,
there would be a drop in the number
of insurance firms based in the UK. It
also showed that almost two-thirds of
senior management were tempted to
move abroad because of the current UK
personal tax system.
Experts debate prospect of rate
recovery at Towergate conference
By Liz McMahon
K
ey industry experts have disagreed
over whether a hardening of the
market could be imminent.
The difference of opinion was voiced
at Towergate’s first broker conference,
Look into the Future, at the Magic
Circle headquarters in London.
Andrew Sibbald, co-founder and senior partner of Lexicon Partners, said that
rates must rise and used the perceived
hardening in the motor sector as an
example of how the market was changing, although he admitted this was by
no means universal or consistent.
“Rate rises will come but I don’t
know when or how much. Nevertheless, I feel I can predict calm waters
ahead,” he added.
However Deloitte partner, Ian
Clark, put the rising rates in the
motor industry down to a “dead cat
bounce” saying: “Motor pricing is the
exception, not the norm. Property has
Peter Cullum:
“Schizophrenic
industry”
actually seen a continued softening.”
He continued to argue that rates
would only harden if a prominent
insurer made a move to increase premiums or if everyone in the market made
the shift together adding that he could
not feasibly see this happening.
The panel of underwriting experts
speaking at the event all agreed that
while rate increase was necessary for
the long-term health of the insurance
industry, they could not predict an
immediate change for certain.
Geoff Moylan, director of underwriting at Allianz, said: “It will take a crisis of
liability reserve to bring about a change.
It will come but it isn’t here yet.”
In his speech, executive chairman of
Towergate Partnership, Peter Cullum,
echoed Mr Sibbald’s theory saying that
rates needed to rise and that he knew
of a leading motor insurer that had
already raised its rates by 25%.
On his predictions for the future,
Mr Cullum spoke of a schizophrenic
industry and labelled himself head of
worry, rather than of Towergate.
“Organic growth is essential – standing still is going backwards. Companies
should change every three years. They
should not settle for incremental
change but be responsible for transformational change. Doing nothing is not
an option,” he added.
When Broker Network chief executive, Grant Ellis, pressed the panel
for their opinion on dual pricing, Mr
Moylan admitted that prices for the
same policy could differ for renewals
and new business but said that this was
far from condoned.
Strength in
three letters
HCC - ensuring
financial strength for
specialty insurance
www.hccint.com
14
Insurance Age
October 2009
broking.co.uk
What if the
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Schemes news
NEWS IN BRIEF
Markel International has teamed up
with Johnstone Insurance Brokers to
create new online brand covermyday.
co.uk. The brand has been created to
provide a range of insurance products
for private events, with wedding insurance being the first product available
from the website. Markel said it was
eager to work closely with the broker
community to develop new products
and business models. Gary MiltonWhite, senior specialty underwriter
at Markel, said: “This is the first step
in a strategy to build Markel’s online
business, and we are pleased to be collaborating with brokers on innovative
web strategies that can bring insurance products directly to consumers.”
Purple Partnership has joined
forces with legal expenses provider
DAS to offer a new and improved
uninsured loss recovery (ULR) facility
to members. Key features include the
recovery of uninsured losses, such as
arrangement of rehabilitation services, a first-response claims handling
service, UK motor prosecution defence
cover and an online claims tracking
facility for broker and policyholder.
Gary Chandler, director of Purple, said:
“With DAS ULR, Purple’s members
can assure their clients that they have
access to top-quality insurance and
legal expertise.”
Welsh-based broker Motaquote
has announced it is expanding its
home insurance portfolio with a new
flood risk insurance product targeting
homeowners at high risk of flooding.
The decision followed an announcement from the Welsh Assembly
Government stating its intention to
invest £13.3m for new flood defence
measures in east Wales. According
to research from the Environment
Agency, one in six properties in Wales,
or a total of 357,000, are at risk of
flooding. Motaquote said this translates to nearly 600,000 people living
or working in flood risk areas, while
it was also claimed that this number
was set to rise in the future due to the
impact of climate change.
16
Insurance Age
October 2009
Biba protects holidaymakers from
online travel providers going bust
By Liz McMahon
More people are choosing to
book holidays online
A
s part of a wider shake-up of its
travel offerings, the British Insurance Brokers’ Association (Biba)
has written a new scheme to protect
against financial failure when booking
holidays online.
Written in partnership with Tokyo
Marine, the scheme covers travellers
against the risk of online holiday providers going into liquidation.
Peter Staddon, head of technical
services at Biba, said: “This is a real
issue. The traditional route of the
travel agent provides protection but
a lot of people in today’s society want
to book their holiday online. Up until
now, if you booked your flight online
and the airline went into liquidation,
you were scuppered.”
Mr Staddon added that the scheme
would include hazardous pursuits,
such as elephant riding and bungee
jumping, explaining: “We realised
arranged, prepaid excursions could
equally go into liquidation so we made
the decision to extend the policy to
cover it.”
To coincide with the move, Biba
has also amended its cover for motorcycling holidays. The previous policy
covered bikes of up to 125cc. This has
now been extended to up to 1200cc,
where the appropriate licence has been
held for a minimum of two years and
subject to wearing a crash helmet.
Mr Staddon said: “Our view is that
it is a bit rich when people spend
all of their days driving around on
big powerful motorbikes in the UK
and decide to go on a motorcycling
holiday abroad only to find that certain travel insurance companies won’t
cover the holiday.”
In addition, the upper age limit for
cover for an annual multi-trip outside
of the European Union has been
extended from 70 to 75.
Biba has also changed how it deals
with medical screening for certain
conditions. Steve Foulsham, technical
services manager at Biba, explained:
“What we’ve now agreed to do is
to alter our approach for common
controlled conditions like hypertension and diabetes where there have
been no recent changes in levels of
medication. For these relatively common conditions, there will now be no
requirement to go to medical screenings. We are trying to make it simpler
in terms of accessibility.”
Overseas cosmetic surgery scheme unveiled
T
ravel insurance specialist PJ Hayman has launched a new scheme
for medical tourists, which it claims is
the first policy of its kind to offer cover
for complications.
Free Spirit Travel for Treatment,
which is underwritten by Axa Insurance, provides cover for cosmetic
surgery, dentistry and elective procedures and complications that occur
abroad at least 48 hours and up to 31
days after treatment.
Peter Hayman, director of P J Hayman, said: “This comprehensive policy
fills a gap in the market as this is the first
time complications have been covered.
About 100,000 people are choosing to
travel abroad for procedures and that
is likely to increase. At the moment,
many are travelling without this added
cover, which is a huge risk if anything
goes wrong.”
Peter Hayman: “The policy fills a gap”
Other features include emergency
medical expenses, repatriation and
cancellation cover, cover against
financial failure of travel/accommodation provider as well as medical
emergency helpline.
It is available to UK nationals resi-
dent in the European Economic Area
up to the age of 74.
Mr Hayman added: “PJ Hayman is
already a leading travel insurance provider and one of the largest offering
specialist cover for those travelling with
pre-existing medical conditions. We see
offering cover to those travelling for
treatment abroad as a natural extension
of our expertise in this area.
“It is vital that anyone considering
treatment abroad ensures that they
have full insurance cover and is aware
that standard travel insurance schemes
do not provide this. While there are
some specific policies that will provide some protection for additional
travel/accommodation costs, they do
not cover medical costs arising from
complications; without full cover there
is a risk of incurring large medical bills
and increased expenses.”
broking.co.uk
Risk management/claims
MIB campaign launch targets
uninsured driver hotspots
By Louise Meeson
T
he Motor Insurers’ Bureau (MIB)
has launched its new nationwide
Stay Insured campaign, highlighting
the UK’s uninsured hotspots.
Speaking at a press briefing, Keith
Morris, chairman of the MIB, said he
was keen to ensure that the recession
did not cause a “backslide” in uninsured
driving. The launch coincided with the
publication of the country’s top five
uninsured hotspots, which identified
the London Metropolitan region as the
worst offender with 13% of cars uninsured, followed by Merseyside (12%),
Greater Manchester (10%), West Yorkshire (7%) and West Midlands (7%).
Talking about the Stay Insured campaign, which will run online and on the
radio for six months, Mr Morris said
unemployment was at a 14-year high
and that while there was not yet evidence of a rise in those allowing their
insurance to lapse, the MIB wanted to
“pre-empt the phenomenon”.
According to MIB research, there are
currently 1.7 million uninsured drivers
on the road, and three out of four driv-
MIB’s Keith Morris
(left) and Ashton
West (right) warn
of the growth in
uninsured drivers
in the economic
climate
ers were looking at ways to cut their
motor insurance costs.
Mr Morris called on those working in
the sector to use the research to encourage clients to maintain their insurance,
and pointed out that the consequences
were far-reaching, including vehicle seizure, a minimum of six penalty points
and a fixed penalty of £200.
By postcode, Barkerend in Bradford,
West Yorkshire was identified as the
uninsured driving capital of the UK,
with almost half of all vehicles registered flagged as uninsured.
While the West Midlands came fifth
in the overall table, the region as a
whole contained six out of the 10 worst
Claimtrack receives BIS funding
A
new internet-based software system
that aims to make the entire claims
process transparent has attracted the attention of the Department of Business,
Innovation and Skills (BIS).
Claimtrack owners Richard Nolan
and Jim Pankhurst said they wanted
the product to become an industry
standard for brokers, insurers, providers and policyholders.
They told Insurance Age they were
currently in negotiations to provide the
platform to a national company.
While Mr Nolan admitted there were
products available to track claims, he
said: “Key to the success of our system
is that each level of organisation in the
claim process can manage a range of
claims with data referenced through a
specific claim reference number. Thus,
a builder can work for many repair
networks, which in turn can work for
many insurance companies; integrity of
data is assured.”
Mr Pankhurst continued: “We have
approached it from a different angle
– from the bottom down. I had a
broking.co.uk
‘eureka’ moment – the key to Claimtrack is the data structure. It doesn’t
exist anywhere else.”
Sam Stephens has been working with
Claimtrack as a business advisor since
the BIS provided support.
He said: “Everyone gets frustrated
with insurance claims. Here at last is
a system where the claimant can see
exactly what is happening, and everyone involved with the claim has access
to the right information they need to
make decisions. This clever product
could revolutionise how the public sees
the insurance industry.”
Mr Pankhurst added: “The system
works for the man on the ground who
could have four or five jobs on the go,
because that’s who developed it. But at
the same time, it also works for Mr Big
at the top who has 50,000 contracts.”
For the latest insurance industry
news and views, visit
offending postcodes, with an estimated
total number of 127,000 uninsured
vehicles on its roads.
Ashton West, MIB chief executive,
said: “The fact that 1.7 million motorists still take to the roads without
insurance is staggering, but there is
no doubt that the number of drivers
caught each year is increasing significantly, so drivers simply cannot afford
to be complacent.
“Indeed, the number of drivers across
the UK who were caught without
insurance last year would fill Wembley
Stadium more than twice. The message
to motorists is clear: driving uninsured is
simply not worth the risk.”
NEWS IN BRIEF
Brokers using Risk Analysis Services’
(RAS) online risk management tool
could benefit from more competitive
cover as a result of growing insurer
approval. So far, four major insurers
have endorsed the company’s product
ActionPro Online and another two are
in the pipeline. Joe Aspey, managing
director of RAS, which is supported by
Axa, said while insurers would develop
their own protocols, the incentives were
likely to be more competitive cover or
wider terms. “Placing has been relatively
easy in the soft market, but this advantage will become even more important
when the market hardens and underwriters take a more selective approach.”
DnA Group has become both an
awarding organisation and a provider
of a new national qualification in fraud
and claims investigation. Under the
Qualifications Credit Framework (QCF),
DnA’s training arm has become an
awarding body. Lin Hyde, qualifications
and accreditations director at DnA
Awards, said: “We have long wanted a
national vocational qualification in our
field of training. When I heard about
the QCF, I knew this would be a great
opportunity for us to create national
recognition for our training and a
method of maintaining standards.”
RISK PERSPECTIVES
Should I stay or should I go?
SeanO’Reilly,disasterrecoverymanager,RegusGroup,inassociationwithCrisisSurvivor
M
ost businesses struggle with the concept and actuality of disaster workplace
recovery (DWR). After all, it’s not easy to decide how many business-critical
people you need to re-house or how many, given the prevalence of residential
broadband and flexible working, can work from home. However, in the event of a
crisis, only businesses used to remote working will find this type of solution viable.
For the majority, a denial of access to their office, regardless of how it comes
about or whether it is even an insured peril, would throw the organisation into
disarray. More often than not, the managing director must make arrangements
on-the-fly, with their home acting as the de facto workplace recovery site, when
in reality it is no more than an emergency management location. Businesses that
depend on call centres are even more exposed, as the entire business will need
rehousing. The same applies to manufacturing or food processing. After all, how
many fully equipped shop floors or meat packing plants are lying fallow? Even if
you have multiple sites, do they have enough redundant capacity to cope? What if
the site is 150 miles away? Do your employment contracts allow for staff relocation?
Brokers and their clients must think much more actively about DWR and,
with business interruption claims typically taking 18 months or more to reach
final settlement, how long can a business hang on before it is fatally compromised? Moreover, with few business interruption policies providing coverage
for non-material damage triggers, what chance your business then?
In summary, business-as-usual facilities are vital. DWR needn’t be a problem
or a huge cost, but it does need the broker to help their clients work through
the issue in a more considered fashion.
October 2009
Insurance Age
17
The interview
The rate
debate
Swiss insurer Zurich is the latest to attempt to push
through rate increases. David Smith speaks to
Martin Friel about his determination to make the
increases stick and explains why he needs brokers
on board to make it happen
W
e’ve been here before haven’t we? One
of the big players says it is determined
to push rate increases through as they have
no choice if they want to remain profitable.
The market is made only too aware of what
is happening in an attempt to gain support
from competitors.
Earlier this year, it was Aviva that was
increasing its rates. This time it is Zurich and
the insurer is talking a good game. But looking
back at Aviva’s experience, can we be blamed
for declining to hold our breath on this one?
Back in January when Aviva very publicly
increased rates, there was much support from
its peers as the general consensus for some
time had been that increases were not simply
desirable but necessary. Some have pointed out
that one of the mistakes it made in doing so
was that it introduced blanket increases across
all lines, regardless of the individual risks.
Secondly, and this should act as a cautionary tale to Zurich, at least one insurer publicly
lauded Aviva for its bold stance and then
proceeded to hoover up as much business as it
could. In the end, Aviva couldn’t take the pain
of lost business at the level it was and had to
perform a red-faced U-turn.
It seems there are still too many companies
that are willing to write for growth and are
happy to take advantage of the bigger beasts
when they at their most vulnerable.
So can Zurich get the rate increases it so
badly wants without crippling itself by shed-
18
Insurance Age
October 2009
ding volume? Why should it succeed where its
larger UK rival failed?
The Swiss insurer believes it has made a
critical consideration. It has made a significant
investment in terms of time and money in
getting brokers on board and crucial to this
is David Smith, Zurich’s UK managing director of general insurance (broker division) and
head of broker, European general insurance.
As the second title suggests, he is responsible
for Zurich’s broker operations not just in the
UK but across Western Europe too. He likes
his brokers, does Mr Smith, and it appears he
enjoys spending time with them: “I’m out
there seeing brokers every day. It’s very unusual when I’m not.”
But his close relationship with the sector could come under pressure as he tries to
convince brokers that rate increases need to
be applied. He has to persuade them of this
when many end clients are up against it financially and the last thing they want to hear is
that their premium is going up. It’s the kind
of thing that could make them change provider and what broker would want to lose a
client now?
“Increases are necessary for the whole of
the industry,” says Mr Smith. “We are simply
taking our decision. If you implement those
increases you have a duty to explain why you
are doing it. We want to help the broker be able
to explain it and provide information that helps
him stand in front of a customer and sell it.”
And he claims that on the whole, brokers are
buying into the move.
“From the research we have done, they have
been unanimously supportive over the rate
increases. In the reality of day-to-day trading,
our new business is still outstripping lapses and
we are very happy that brokers are taking the
message on board. Brokers know they would
prefer to go to a customer with a small increase
– the last thing they want to do is destabilise
the relationship with the client,” he says.
Loyal ties
Although he says new business is outstripping
lapses, surely it’s better to hold on to existing
business – a company is more familiar with the
risk and there are no acquisition costs. New
business is notoriously more expensive. Is there
a fear that by being out there on its own with
rate increases that these lapses will increase in
frequency as others look to take advantage?
Zurich need look no further than the wounded
Aviva for the perfect example of what can happen. But Mr Smith is not unduly concerned.
“No one insurer can move the market on its
own but sometimes you have to be a leader.
You have to do what is right for your business,” he says in his soft Midlands burr.
“The maths is quite simple – if rates have
come down by 25% over the last three to four
years and claims inflation has increased by 25%
in the same period, we are 50% worse off than
we were in relative terms,” he explains.
broking.co.uk
The interview
“You come to a point where rates have to
rise and if you look at the economy and our
investment returns, there comes a time where
you need to take a stand. We’ll put up rates
wherever we need to, to maintain profitability,” he says firmly.
He’s right, of course, but this does not take
into account those insurers that are still in
the growth phase of their development. Some
companies are simply writing for growth and
are only too happy to see bigger operators
hike their rates – it’s a green light to attack
new business.
Mr Smith is aware of this, but he is convinced that natural market forces will soon
bring these rogue elements into line.
Needs must
“People take different stances on rates and
most of the larger insurers need to apply rate
increases. It’s not a case of rhetoric anymore –
they need to do it. Falling investment returns,
rising claims costs, falling profits – they can’t
avoid it,” he says.
“There are ‘outliers’ who are prepared to
price for growth – but you have to make your
own decisions.
“We don’t feel we are out on our own as a
company in raising rates. There are others that
are not just talking about it – they are actually
applying rates. Most of the major composites
are trying to do it,” he believes.
But these ‘outliers’ as he calls them are not
going to go away.
“It’s never been any different. In every cycle
you will always get outliers and the market
will start to move again. Eventually, they will
find that the rates they are writing business at
cannot be sustained – they will suffer substantial losses,” he predicts.
He adds that if they are owned by a large
corporation (with perhaps one particular
regional player in mind),
the underwriting authority
becomes more restricted
as the losses rise and
the insurer is forced to
increase its rates.
“It’s a matter of time,”
he says nonchalantly.
“You can’t buck the system. Claims inflation is pretty well accepted at
the level it is; we all accept investment returns
are falling; and we all accept that rates have
been falling for a number of years. The simple
fact is that rates have to rise,” he says.
His conviction is admirable but it is understandable that there may be some scepticism
surrounding Zurich’s commitment to this
strategy. Can they see it out in the long term?
Well Mr Smith says they will and points out
that increases are not being applied across
the board. They will be seen in certain classes
and, more importantly, on certain risks. But
expect to see them applied to casualty classes
as the 6% inflation in claims costs seen in that
line of business has to be offset.
But Zurich is confident in its strategy. It says
it is applying increases on individual risks and
that brokers will have the knowledge and evidence at their disposal to be able to sell it to the
client. The best laid plans of mice and men…
If the official party line fails to trickle
down to the front line, then all this rhetoric
is useless. It will be the experience of brokers
dealing with Zurich’s underwriters that will
ultimately decide whether Zurich can stay
the course.
Remember we mentioned Mr Smith is
responsible for Zurich’s broker relationships across Western Europe? Well he spends
roughly 50% of his time on the Continent so
it’s not all rate rises and ‘outliers’.
On the most basic level, how does he communicate effectively and command the respect
of those who report to him in the Western
European business?
“I don’t speak any European languages,”
Mr Smith admits, “but I think that is just a
British thing.” He confesses that the extent
of his Italian is the ability to order two beers,
but that would be true of most of us. Is
this not a handicap to his job? He says not,
although he does say that sometimes it makes
him feel ashamed to be British. Again he’s not
alone there.
“In all the other countries they speak English. In fact, they speak two or three languages.
But I’m not running businesses over there. My
job across Western Europe is to bring together
and disseminate best practice and work with
the chief executive of a particular country to
bring that to bear,” he explains.
“I will never know the German market well
enough; I will never know the Spanish market
well enough. It’s a combination of me trying
to bring broker knowledge and expertise and
the local CEO bringing the country colour
and knowledge of his market.”
No one insurer can move the
market on its own but sometimes
you have to be a leader and do
what is right for your business
broking.co.uk
He also gets involved in the nitty gritty of
the local businesses.
“I spend a lot of time on their figures – I
share responsibility for the profit and loss
with the CEO of each local business. They are
there to produce the operating profit in their
respective countries and grow the business
year on year.
“It’s my job to stimulate new ideas and to
get them to grow their business in a profitable
fashion and to bring best practice from other
countries,” he says.
Now most people in the UK would assume
that what he means here is that the expertise
and best practice is a one-way street from the
UK to the Continent. That simply reveals an
BIOGRAPHY – DAVID SMITH
David Smith was appointed head of broker, European General Insurance (EGI) in November 2008, which runs alongside
his existing position of managing director, Broker division
within UK General Insurance. Mr Smith is responsible for
the strategic development and profit and loss of the broker
channel, which currently writes some $5bn of gross written
premiums across the EGI business.
Mr Smith’s career at Zurich spans over 20 years, where he
started as an engineer with the Eagle Star engineering division, leading its consultancy services from a cost-to-profit
centre. At the time of the merger with Zurich in 1998, Mr
Smith had moved into the commercial side of the business
and has since held various sales, distribution and operation
appointments.
Before joining Zurich, Mr Smith worked on a pan-European
basis with the EU at its nuclear research centre in Holland.
Following this, he held positions at Swiss inspection business, SGS.
arrogance in the UK market that, as it is the
oldest and most mature, by extension it must
be the most efficient. Mr Smith admits that he
has exported many ideas and practices from the
UK, but stresses that it is a two-way street.
“There is a lot of expertise that can be
exported from the UK and leveraged in
Europe. Quite simply, we are very small in
middle markets, financial lines and property
investors in Western Europe so it’s easy for me
to utilise some of the talent from the UK to
help the rest of Western Europe,” he explains.
“But there are pockets of excellence in the
broker market around the other Western
European countries that can be utilised in the
UK – definitely. For example, in Switzerland
and Germany we have some great expertise in
packaging a range of policies for professional
people, which we don’t do so well in the
UK,” he says.
So it’s a cross pollination but it’s fair to say
that there is more coming from Britain. It’s an
interesting position for Mr Smith. It’s easy to
get tied up in the UK market and feel you are
at the centre of the earth but he has another
perspective. He is open minded enough to
realise that there is much to be gained from
looking at Continental models and that the
UK doesn’t have all the answers.
Regardless, it looks like it is the UK that is
going to take up most of his time in the coming months. These rate rises are crucial for
Zurich’s ongoing profitability in the UK and
his role in broking is pivotal to the success of
it. It’s too early to say whether he and Zurich
can pull it off but they seem to be going about
it in a more measured way than their peers
have. But those ‘outliers’ are lying in wait
ready to boost their market share. Mr Smith
and Zurich will have to stay alert if their push
for rate recovery is to be successful. And not
for the first time, an insurer’s fate lies in the
hands of the broker. n
October 2009
Insurance Age
19
Agenda
Is big still
beautiful?
A
chief executive of a leading composite
insurer recently commented that as the big
insurers held such a large share of the market,
there may be little point in investing a great
deal of money to improve service to brokers.
The inference was that the large insurers were
vital to brokers and the commercial market. Is
this the case or has big ceased to be beautiful?
The half-year results for 2009 show a worrying picture for the five big commercial insurers.
Net written commercial premiums dropped by
over 10% from £3.3bn to under £3bn. Aviva
lost over 20% of its commercial revenue; giving
up its top spot to RSA. The latter still reduced
by 4% and, in fact, the only one to prosper
was Allianz, whose growth was about £38m.
So where did the £300m of lost revenue go?
The deficit could be recession driven, but more
than likely it moved to other insurers. The big
five’s supposed stranglehold on the market has
loosened and the control seems to have moved
to the smaller, specialist and overseas insurers.
There is a similar trend in personal lines. Size
no longer appears quite so pertinent.
The larger insurers traditionally had various
advantages: capacity; stability; brand awareness
and economies of scale. These were the drivers of the merger and acquisition spree of the
late 1990s and early 2000s but the reality is,
even some years later, the impact is still being
felt. The models are slow to adapt to changing
market conditions, outdated IT systems hamper efficiency savings and the constant need to
cut costs leads to deskilling and poor service.
Smaller insurers seem more adaptable and are
eroding the benefits of being big.
Most of the old brands have disappeared,
the latest being Norwich Union. Allianz and
Zurich are foreign and RSA dilutes its brand
by using ‘More Than’ for the public. Even
Axa hides behind Swiftcover for its fast growing, direct business. Consumer brand loyalty is
likely to rest with the AA, Saga, Tesco, Kwik
Fit and Direct Line rather than the traditional large composites. Businesses, in reality,
are indifferent. Their insurance is arranged
through brokers that tend not to recommend
20
Insurance Age
October 2009
insurers on size but on value and service. The
rush to support managing general agents
(MGAs) has made insurer branding and size
even less relevant
Capacity has become more important
as subscription business wanes, however it
tends not to matter for fleets and commercial
motor, micro business, liability and the small
to medium-sized property market. In fact, it
only helps for the very large property risks.
These are less than 10% of the market and are
not sufficient to satisfy the voracious appetites
of the big players. Capacity of some of the
overseas players, which are small in the UK but
large elsewhere, can match the market leaders
and there is still a large London subscription
market – leaving little business that cannot be
placed outside the top five.
Distribution links
Big insurers have large distribution networks
and were traditionally close to their suppliers.
Market consolidation, office closures and the
growth of networks and buying groups have
reduced their importance. There are 25 broking organisations that control or influence 75%
of the commercial market – these are now the
distribution kings and can equally be targeted
by smaller players. The remaining market,
while still important, is declining. Smaller
insurers can grow rapidly at the expense of the
larger ones through targeted distribution.
Stability, consistency and claims service were
always good reasons to support the big players. However, their advantages in these areas
have reduced. Staff changes and re-engineering has resulted in unstable contact, varying
underwriting strategies has failed to produce
long-term consistency and tackling claims
leakage and fraud now means there is a level
playing field in claims attitude. The days when
a broker recommended a large insurer because
they were likely to be more generous or provide a speedy claims settlement have vanished.
Technology solutions are one area where
the big boys should dominate. They have the
resources, money and expertise to efficiently
deliver solutions to brokers. However, there
is little evidence that they rule this form of
distribution. E-trading in personal lines is now
equal across all the market and, in commercial, smaller insurers, MGAs, wholesalers and
schemes providers seem as capable, or even
more so, of delivering online services. They
often produce online quotations, policy issue at
point of sale and total electronic solutions more
effectively and seem more able to offer partner
brokers exclusivity. In this area, size seems a
handicap as the big five try and work fairly with
everyone, but satisfy few. The doctrine of the
same net rate for the same risk has disappeared.
The rationale for big being beautiful is
driven normally by economies of scale,
reduced expenses and therefore lower prices
or higher profits. This has proved to be an
illusory objective. The majors have squandered their competitive advantage by passing
on the savings and more in additional commission to distributors. This was often
necessary to protect their dominant market
share and make up for their inadequacies in
service. Instead of benefiting by being big,
they have paid dearly to stay big. Now as they
try and readjust the balance, their service levels are exposed leaving the market open to the
smaller service-driven players.
Even the one real advantage of size has been
challenged. It was always felt that large players
were secure and could attract capital to fund
their business. The collapse of AIG – the largest insurers in the free world – changed this
perception and now their only advantage is
that governments are likely to step in to save
them rather than allow them to fail.
Most of the advantages of being big have
been thrown away in bad decision making. Big
insurers are seen as dinosaurs that are slow to
react and adapt to changes, relying on their
strength to survive against more nimble species. The erosion of their market share may
mark an irreversible decline, which can only
be halted by more takeovers to restore dominance, before the whole process is repeated
again. In Axa parlance, ‘C’est la vie’. n
broking.co.uk
Opinion
Your letters
Insurance Age welcomes your letters. We are happy to not print your name and address if requested
but these details must be supplied. Send your letters to Martin Friel, editor, Insurance Age, VNU House,
32-34 Broadwick Street, London, W1A 2HG or email [email protected]
The value of sound advice
Ian Gosden writes a fine letter (Insurance Age,
August 2009, p15) on the subject of education and
the Financial Services Authority’s (FSA) role –
educating the public on financial matters and
providing it with a better understanding of how
insurance works.
In my view, this should have been the mission
statement of the FSA but, instead it has become the
measure of how much this organisation has failed in
its objectives.
Ian’s letter also takes up the matter of how appointing a broker can add value.
Road risks insurers regularly offer £1m third-party
property damage as standard and, without a broker
to advise them, most traders would accept this as
adequate.
On the fleet side, brokers can add value to the
process by being involved in risk management programmes and monitoring claims trends.
In the same way, the broker can take a proactive
role with underwriters in the formulation of renewal
terms and quotations. This helps avoid any nasty surprises at the renewal meeting.
These are only a few examples from the field of
motor insurance but there must be countless areas,
across all classes and trades, where broker knowledge
can prove its value to clients.
Roy Rodger
Insurance Training & Consultancy
Keeping out of trouble
As a fellow expert witness, I concur with Miles Emblin (Insurance Age, September 2009, p1). In addition
to the points made, I would add that clients are
becoming much more demanding and there is still a
lack of clarity in information passed by brokers to clients despite the requirement for clarity in instructions
required by various codes.
Problems often arise when cover has been transferred from one insurer to another and, more
particularly, when a broker has been under competition and concentrates on the price of the insurance
product as opposed to its quality.
It is essential that brokers earn adequate fees to be
able to provide a true professional service and this is
of course reflected in Mr Emblin’s comments regarding more output expected from staff, many of whom
are comparatively inexperienced.
Tom McGrath, CBE FCII
Back to basics
While I share some of Steve Hackney’s sentiments
in his letter entitled ‘Conservative Thumbs Up’
(Insurance Age, September 2009, p21), I would
urge caution.
The Conservatives are advocating a Consumer Protection Agency (CPA) and have, up until now, talked
about taking half of the Financial Services Authority
(FSA) staff and simply renaming and redeploying
them. This, in my eyes, misses a golden opportunity
to deliver a proportionate and accountable regulatory
regime that is really in touch with the industry that
it regulates as well as consumers who need a sensible
level of protection.
When we had the General Insurance Standards
Council (GISC) we had simple and proportionate
regulation, which was not bureaucratic. Questions
put to GISC staff were answered and there was no
huge workforce yet they managed to engage well
across the industry. Staffing was well within 50 and
all monitoring/audit work was outsourced. The rulebook was only 44 pages long and was a delight to
read – who can say that about the FSA Handbook of
Rules and Guidance that we have now?
In advance of the general election, I urge the
Shadow Treasury Team to engage with industry
spokesmen and deliver, on time, a commonsense regulator that we can all work with rather than against. I
am also hoping that the Chartered Insurance Institute
will be asked to put forward a mandatory foundation
level paper that all practitioners have to take (general
and life side) so as to ensure robust and qualified
advice at all levels.
Branko Bjelobaba
Branko Ltd
Editor’s comment
T
he holiday season is over and the rumour
mill has gone into overdrive. There’s all sorts
of tittle-tattle doing the rounds and Polly C, our
resident gossip monger, has been inundated
with juicy tidbits.
But the subject that keeps coming up is still
the Conservative party’s proposals to axe the
Financial Services Authority (FSA) if and when
it gets into power. If our roundtable panel (p22)
is anything to go by, opinion over whether it
is a good idea seems to be split. Some believe
the FSA has no credibility left and disbanding
it is the only option if we are ever to regain
consumer confidence. On the other hand, it has
been argued that the whole process of setting
up two alternative regulators would not only be
a waste of time, but also money. At the moment,
however, all this is hypothetical.
What is more concerning, as our front page
shows, is the broker trade body approach
to the issue. Both the Institute of Insurance
Brokers and the British Insurance Brokers’ Association have been quick off the mark in getting
in touch with the shadow cabinet to get the
broking voice heard ahead of any changes. But
they are presenting two views. What we need is
a unified approach. A fragmented one will only
give the impression of a divided market, an
impression that will make any future regulator
more suspicious of brokers.
I am in no way advocating the unification of
both trade bodies – I’m not a broker, that’s none
of my business – but surely the two could come
together as they did on commission disclosure?
Pride needs to be swallowed and differences
need to be put aside. This is a unique moment
for brokers to get involved in the formation of a
new regulatory environment and the last thing
the industry should be doing is presenting a less
than united front.
Martin Friel,
Editor
[email protected]
broking.co.uk
October 2009
Insurance Age
21
Power hour
Out with the old?
Following the Conservative’s regulatory proposals, this month’s power hour
contemplates the future of the FSA. Louise Meeson asks if the insurance
industry would benefit from regulation that differentiates it from the banking
sector and examines how brokers would fit into this hypothetical landscape
The Conservative Party recently announced
that if it comes into power at the next
election it would disband the Financial
Services Authority (FSA) with regulatory powers transferring to the Consumer
Protection Agency (CPA) and the Bank of
England (BoE).
Is it really necessary to abolish the FSA
– has its performance really been that bad?
David T: In a sense I’m not sure the question
matters, because the political reality is if you
assume there will be a Conservative government, that decision has already been made.
There is a danger about trying to have a discussion about a decision that has happened.
David P: From the perspective of the Lloyd’s
market, it’s not doing a bad job. The difficulties that have provoked these proposals are to
do with failures in the banking sector, not the
insurance sector.
Tina: I’d like to support that. In terms of
the insurance industry, we have managed our
risks relatively well and the banking sector
has had significant problems that have driven
this. Is what’s happening a reflection of what
our industry needs or is it a reflection of the
requirements of banking?
ATTENDEES
Tina O’Reilly
Regional director, Ecclesiastical
Michael McManus
Special adviser for Lord Hunt of Wirral, and partner at
Beachcroft
David Powell
Manager, underwriting, Lloyd’s Market Association
David Ragan
Group compliance officer, Groupama
Steve Tearle
Compliance director, Capita Insurance Distribution
David Thomson
Director of policy and public affairs, Chartered Insurance
Institute
22
Insurance Age
October 2009
Michael: First and foremost there’s a huge
political imperative here because we have gone
into a painful recession, the banks are being
seen as largely to blame and regulation in turn
is being blamed for that. The FSA is not a
popular body with the voters and therefore the
question of structure is not only an economic
and regulatory one but a political one.
Is this just a vote winner?
David T: If you look in an international context, the model that the Conservatives are
proposing, in broad terms, is operated in other
territories. Whatever model you have there
will be challenges. With the FSA, the tripartite
regime was a so-called under lap where things
fell between the three players. This proposal
would create a different set of tensions.
Steve: You have an inherent conflict in the
twin peaks model, which we see across other
parts of the world. Banks, building societies
and other significant institutions, including
insurers, will fall under the BoE remit, but
it’s quite silent on some of the others. Where
do insurance brokers fit in? That is the vital
question.
Michael: The need to maintain stability and
confidence has a natural tension with consumer protection and at the moment it’s
contained within the FSA. Under the proposals, the BoE will take over the whole lot
initially and then the consumer bit will be
teased out of it to create the CPA. The tension will then be between two bodies rather
than contained within one.
David P: One of the clear issues is where you
have an industry that is regulated in two different places depending on the type of business.
That’s the way the law is going – a proposed
split between insurance contract law for consumers and for commercial contracts. Things
are moving in that direction but how will it
work for regulators?
Michael: The other question is how the Financial Ombudsman Service (FOS) is played into
that because the FOS looks more and more
like a consumer-orientated body rather than a
form of alternative dispute resolution.
David R: I would agree with the emerging
consensus here that the FSA has been, more
or less, an effective regulator for the insurance
industry. If we had misgivings, it’s around the
cost and that it is a model that’s designed to
be one size fits all.
Steve: It has improved. Look at the fate of
Independent in 2001 and the Tiner project,
which was tasked specifically with insurer
regulation.
David P: That’s what’s vital wherever we end
up, to maintain that differentiation. Banks
are obviously going to come under the cosh
to hold more capital and perhaps to split into
different legal entities the retail arm and the
investment arm.
Tina: Is it just the same animal by a different
name to a certain extent?
Steve: There has to be more than just
new business cards. There has to be a clear
approach to get the right people doing the
right job at the right level.
Tina: There’s another problem. Are the right
people going to be attracted during that
interim period?
Steve: The White Paper actually talks about
increasing the levy to ensure the right people
are in place. Let’s not forget, the FSA has the
right skill sets and the right people. There
is a question of consistency, as there is with
any organisation but they are there. Let’s not
forget the history of the FSA. The macro-economic prudential regulators for the FSA came
from the BoE.
Michael: I think there’s a general trend in the
Conservative party’s thinking around giving
broking.co.uk
Power hour
From left: Tina O’Reilly,
David Ragan, Steve Tearle,
David Thomson
handling risk while the insurance industry
has performed well?
David T: One thing that comes through,
especially from smaller firms, is about certainty.
Small firms in particular struggle with the
concept of principles-based regulation as it’s
quite difficult to get your head around what
that really means. It’s quite interesting how
many small firms, from many sectors, have
responded with glee to the idea of getting rid
of the FSA. There needs to be a word of caution about that – be careful what you wish for.
I think tucked away within the proposals are
some quite dramatic powers for a consumer
champion. A lot of smaller firms might find it’s
a tougher regime.
David T: Does that mean the industry
makes the case for opting out? I think that’s
beguiling.
Tina: Some of the smaller firms, including a
lot of the provincial brokers, have got some
great concerns, regardless of any change,
because of the cost of implementation. They
will need to take time out of their day jobs
to work out what they need to do and to
implement it. Any form of change now is
a challenge to any of the smaller operation
because it takes them away from their business.
David T: A lot of senior leaders in the insurance sector have made the point that the
insurance industry has come out of the credit
crunch much better as it learnt the lessons
from previous years and managed risk far better than some of the investment banks. You
would expect some sort of regulatory dividend
for sectors that actually followed a clear regulatory path.
Is this not the perfect time to do that now
that banks have shown their failings with
broking.co.uk
David R: Yes, I think we need to make that
clear.
David R: It’s unrealistic.
David T: It’s unrealistic but is beguiling.
David R: The big problem with the FSA is
it is a super regulator. If we look at levies for
instance, they have taken great care to split out
the cost for the Financial Services Compensation Scheme (FSCS) levy across the various
sectors, so they are, and are seen to be, acting
fairly, but the reality is they are still a huge regulator. Because you have this vast Goliath you
have to service, the cost will always be inflated
in a way that is not always proportionate to the
type of industries it is regulating.
Steve: I agree but there are benefits that come
from economies of scale.
Michael: It makes the point that what matters
is the policy. The structure has to make it work
but it’s about the policy. From what George
[Osborne] was saying, the internal structure
may not be changing very much in the early
days. Because the headline was ‘the FSA is to
be abolished’ there was some sense of panic
in the market for a time because people read
the headline and not the policy. The policy is
rather cogent and sensible but the headline is
slightly alarmist but then the headline is not
the party’s headline it’s the media’s headline.
David T: The FSA came into being as a kind
of legal/statutory requirement. What George
Osborne said was it would be the same sort
of model, partly to reassure people so they
wouldn’t be running around thinking how are
we going to be regulated?
Could they not have made these structural
changes within the FSA?
David T: That’s what Adair Turner has done.
He probably provided the clearest explanation of what caused the crisis in his economist
lecture. But, the fact is there is a public mood
and sometimes these things override an intellectual logic. What the Turner report says
makes perfect sense but if the public opinion
is that the FSA had
its chance and
blew it then its
lost political
capital.
Michael:
I think it’s
a reasonable
assertion
to make if
one of the
prime regulatory objectives
is confidence in
the market. If the
FSA has terminally
lost the confidence
24
▲
emphasis to accountability. There’s a slight
sense of bringing in an independent quango
into the BoE, into the state apparatus. It will
still be arms length from ministers but the
accountability is a little bit clearer.
Michael
McManus
Steve: And that’s what the FSA did originally.
October 2009
Insurance Age
23
Power hour
of the people in this country you have got to
do something about it and I think that’s the
calculation that has been made. The perception probably is that the BoE has bailed us out
whereas the FSA got us into this.
David R: But is that good policy? You end up
with a situation where you move the furniture
around and you actually create additional cost.
David P: There are technical triumphs around
these proposals as well – around combining the
operation of prudential monetary and financial
policy in the same place.
Steve Tearle
David Powell
David T: There is an argument that all you are
doing is creating a new series of risks.
Michael: If you look at the party policy, it’s all
about banks and insurance is just mentioned in
passing.
Tina: A lot of what the regulatory environment was like for insurance companies meant
we didn’t experience the same problems as
the banking sector and making sure that
whatever happens now doesn’t create a disruption. Don’t forget the brokers as well because
the smaller businesses are in a very difficult
financial environment and do they need any
additional stresses and strains on their business?
At this time probably not.
I think the FSA has been quite
poor at rewarding. Maybe that’s
one opportunity for a new
regulatory framework
David Thomson
Michael: Insurance hasn’t come under attack
in the last year or two – the banking sector
has. I would take heart from the fact there’s no
great disruption implied in any of this for the
insurance industry.
What do you think these changes will mean
to the broker market?
Steve: The proposals themselves are relatively silent about brokers, who will regulate
them, how will they be supervised? Prudential
solvency matters on a spectrum. It is fundamentally important for a deposit taker they
have solvency, absolutely, but is it as important
that a broker maintains solvency if they don’t
handle client money, if they don’t touch the
customer apart from give advice? There is a
spectrum of risk there that has to be acknowledged. It’s inevitable there will be change.
Even reprinting stationery for a small broker is
a big cost.
David P: A broker will be asking – OK, here
24
Insurance Age
October 2009
is the cost, where is the benefit? What am I
going to get from this?
Steve: The CPA benefits from division of
labour. The whole regulatory framework will
benefit from division of labour in terms of
there will be specialists with a primary focus
that will not be distracted as you could be with
a non-twin peaks model.
David T: It is time to be heard. There’s danger in sitting back thinking it’s nothing to do
with us.
Michael: The whole sector must engage
including brokers because we are formulating
policy at the moment.
Are brokers even on the radar?
Michael: Is it not that the policy targets where
the problems have been? One would expect
that.
David R: Success would be that we don’t have
a similar crisis in five years time given the way
that finance tends to work outside the bread
and butter sectors that we have been talking
about, including broking and insurance. There
will always be that level of creativity, there is
always someone wanting to try something new,
which potentially will bring us back to where
we are now regardless of how tightly we are
regulated.
Steve: You can’t have a zero failure regime.
What you must have is zero failure on a systemic fundamental basis.
David T: I think the FSA has been quite poor
at rewarding. Maybe that’s one opportunity
for a new regulatory framework, whether
it’s through economic drivers or different
methods.
Michael: It’s the conundrum of regulation,
that the best-behaved firms with good internal
government are spending a lot of money internally and they are also contributing externally
to regulation.
David R: That’s the downside of servicing
a large beast and we are also talking about
increasing costs here. We are talking about
phenomenal increases, not doubling or trebling the FSCS every couple of years, in some
cases we are talking about 20 times of what
it was two years ago. It means that the cost
of regulation goes from an incidental item on
your balance sheet to something that determines what our financial strategy is going to be
for the coming year.
Is there any risk in split regulation with
insurers coming under the BoE and brokers
coming under the CPA?
David R: It’s going that way anyway. They are
starting to split prudential and business regulation, that is one of the first things that has
happened as a result of Turner.
Is the FSA in danger of being disregarded?
Michael: It’s a very wounded beast. However,
I don’t think people in the financial services
sector should regard it as a dead duck, it’s still
the regulator.
Steve: A lot of the same people will end up
doing similar roles with different titles. It
would be naïve of anyone to think that this an
appropriate time to change their practices.
Are we in favour of the abolition and will
the insurance industry be heard?
David R: It’s about moving the furniture
around. Its about public opinion to a certain
extent and, while I understand that in a democratic society you have to do that, changing
the organisation makes no real difference to
the way it’s going to be managed.
Michael: The answer is it must be heard. To
deliver these massive regulatory objectives the
regulator needs to have authority and the FSA
has now lost this. It had the early warning sign
with Northern Rock, a year later absolutely
blown away. Can anyone argue it can retain
full authority? n
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THE EVENT WHERE BROKERS DO
BUSINESS
Now in its fifth successful year, 2009’s Insurance Age Broker Expo promises to be the
biggest and best yet. With over 80 exhibitors, expert led workshops and unparalleled
networking opportunities, this is one event you cannot afford to miss.
12 November 2009, Ricoh Arena, Coventry
www.insuranceageexpo.com
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Broker Expo 2009
How do you measure the value
of attending any kind of industry
conference? They are great for catching
up with contacts and sometimes it’s nice
to get out of the office for a day but is that
enough? Can you really afford to take that
time away from your business for what
can essentially turn into a jolly? Probably
not. So why bother with the Broker Expo?
There are several reasons. First of all,
it is a concentrated day of networking,
presenting real business opportunities. It
is held in one day, which minimises the
loss of precious time in the office and with
clients. It also cuts out the cost of paying
for accommodation for yourself and any
staff that you bring with you. And if you
are a broker, it’s free. Just register on the
insuranceageexpo.com website to secure
your attendance.
For one day out of the office, you
can scrutinise the offerings of over 80
insurance and service providers of every
shape and size. They are queuing up to
do business with you and competition to
exhibit at the Expo is tough. They are all
vying for your attention and getting to talk
to them face to face may be the perfect
opportunity to drive that bargain that
would be difficult to clinch over the phone.
In addition, there are four job-useful
workshops to attend covering topics
from regulation to how you use and read
body language. Attendance is limited
to keep them intimate allowing those
attending to interact as much as possible
with the speakers.
Oh yeah, and there’s a free lunch.
If you’ve never been before take a look
at some of the testimonials from previous
years, consider the range of providers in
attendance, look at the content of the
workshops and ask yourself whether you
really can afford to miss it.
28
Insurance Age
October 2009
Explore Expo
“
WORKSHOP 1
Holding the fort in a recession:
strengthening your business and
building solid foundations
● How
can you measure the impact of the
recession on your business specifically?
● How do you maintain staff motivation
levels in difficult trading conditions?
● If the worst should happen, how do you
deal with potential staff redundancies?
● Top tips for strengthening your core
business and coming out of the recession
stronger.
Speaker: Stephen Alambritis, head of
parliamentary affairs, Federation of Small
Businesses
“Superb event, great
representation of
exhibitors with senior
representatives
present. One of the best
insurance events in the
calendar”
WORKSHOP 2
Moving marketing initiatives to the next
level: utilising online marketing
● What
are the benefits of marketing
online?
● How should you practically go about
raising brand awareness online?
● What are the non-formal
marketing options open to you
online?
● Will social networking sites play a
part in the future of marketing
insurance online and if so, how
do you use them effectively?
● How do you
effectively follow
up leads generated from online
marketing?
Speaker: Andrew
Golding, director
and strategic
consultant, TDG
Financial
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Beazley
Bluefin
Casualty & General Insurance Company (Europe)
Catlin UK
Chaucer Insurance
Close Premium Finance
Cobra
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Equity Red Star
Event Assured
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broking.co.uk
Broker Expo 2009
WORKSHOP 3
Nothing to declare? Practical help on
commission disclosure and transparency
● Why
does commission disclosure still
matter to your business?
● What is best practice when it comes to
handling the possible conflicts of interest
and maintaining transparency?
● What is the minimum you must do to stay
within the guidelines as set out in the
industry solution?
● Whose agent are you when you set the
premium?
Speaker: Mike Cranny, Create Solutions
“Thoroughly enjoyed the day. The venue
was excellent – not too big, easy to find
and park. A very well run event”
“The Insurance Age Expo is by far
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WORKSHOP 4
Using body language in a business environment
●A
practical and interactive workshop exploring the impact
of non-verbal communication.
● How does your attitude affect your body, voice and words
and, more importantly, how do people perceive them?
● How can you recognise and interpret other people’s
subconscious gestures and use your own body language to
your advantage.
Speaker: Marc Hogan, body language expert
“Best insurance exhibition I have
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Home & Legacy
Hospitality Insurance Underwriting Agencies (HIUA)
Howden Insurance Brokers
HSBC
IGI Insurance Company
Ignition
imarket
Ingham Underwriting
Ink Underwriting
Institute of Insurance Brokers (IIB)
Insurecom
KGM Insurance
KL Underwriting Agency
Liberty International Underwriters
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Market Form
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Policyfast
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Provident Insurance
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Insurance Age
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Cover Feature
Risk management focus
Risk management is rapidly becoming a must-have
for brokers that want to stand out from the crowd.
This month, we look at making sure your offering
really does make a difference; we ask whether clients
really care about it; profile a risk management
company; and investigate how it can give brokers a lead
in the motor fleet market.
Making an
impression
Edward Murray explores how
brokers can ensure their risk
management offering stands out
Who cares?
broking.co.uk
34
Fleet risk
32-33
36
Profile
October 2009
37
Insurance Age
31
Broker use of risk management
Making an impression
Despite their sound risk management knowledge and close client
relationships, brokers are not always the obvious choice when businesses
seek operational advice. Edward Murray explores how to stand out
W
earing white on an alpine skiing holiday
is only advisable for special forces personnel trying to keep a low profile; everybody
else should be as visible as possible.
Similarly, insurance brokers should appear
big and bright in their clients’ viewfinder if
they want to strengthen the relationships they
have in place and develop them in the future.
Expanding the range of services on offer is
one way for brokers to do this and many have
sought to offer risk management solutions in a
bid to stand out. However, for such a strategy
to be successful, the service must be delivered
professionally and not simply as a short-term
revenue generator.
There also needs to be some thought around
how risk management is delivered on practical
terms, how it is paid for in financial terms and
whether clients realistically need it.
Perhaps the first consideration is whether
clients need risk management services and
what sort of opportunity there is for insurance
brokers to provide it. Sometimes ridiculed for
an overly cautious outlook on life, figures from
the Heath and Safety Executive (HSE) are difficult to laugh at.
In its Managing Health and Safety, Five Steps
to Success booklet, the HSE says: “Every working day in Great Britain, at least one person
is killed and over 6,000 are injured at work.
Every year, three-quarters of a million people
take time off work because of what they regard
as work-related illness. About 30 million work
days are lost as a result.”
It continues: “Accidents and ill health are
costly to workers and their families. They can
also hurt companies because, in addition to
the costs of personal injuries, they may incur
far greater costs from damage to property or
equipment, and lost production.”
While some of these risks will be covered
by insurance, businesses have to pick up the
32
Insurance Age
October 2009
biggest chunk for themselves and rarely can
they get out of paying for the likes of sick pay,
production delays, overtime and temporary
labour, investigation time and fines.
HSE studies have found that uninsured
costs significantly outweigh those covered by
insurance policies and have shown the total
uninsured losses from day-to-day accidents
range from double up to 36 times the total
paid in insurance premiums in the same year.
The HSE says in its booklet: “The average
was around 10 times the amount paid in premiums. So in some cases, you could think of
accident costs like an iceberg, with the majority
of the losses uninsured and hidden below the
water line.”
However a business thinks about these costs,
they should not be taken lightly and there is
clearly a need to address risk management in
the small to medium-sized (SME) sector.
The question, then, is how well placed are
insurance brokers to meet this need? Despite
their knowledge in this area, the relationship
they supposedly have with clients and the fact
they are already talking to them about business risks, brokers tend to feature pretty low
on the list of contacts that firms turn to for
business advice.
First port of call
When it comes to seeking help with the regulations that govern how they have to operate,
firms go to accountants, lawyers, consultants,
and trade associations before they think of
calling up their insurance broker for help,
according to the Department for Business
Enterprise and Regulatory Reform.
Surely brokers could improve their performance in this area, and Simon Taylor, sales and
marketing director at Primary General, believes
it is something the entire insurance market
should focus on.
He comments: “We have slipped into this
habit of talking to SMEs about price and so
it is no surprise that they in turn come to us
looking for the cheapest policy. What we don’t
do is talk about the cost of risk, the cost of
uninsurable risk and how we can manage the
risk for the client. We simply get them the
price for the insurance and both insurers and
brokers need to go back to being risk consultants, rather than just firms that can place cover
for their clients.”
Rather than simply pitching up at renewal
time with a quote in hand, Mr Taylor wants
both insurers and brokers to look at ways of
interacting on a more regular basis with clients
and helping them to protect against the risks
that threaten their business.
To help brokers do this, Primary General
has developed a website focusing on all of the
things that firms have to deal with when it
comes to employment and health and safety.
Users can search out information for themselves, get help for individual problems and ask
for advice on how to put specific things into
practice.
Mr Taylor explains: “The health and safety
website allows the insured to log on and get
advice on issues affecting their business on a
day-to-day basis. This creates interaction at a
time other than renewal or when they are making a claim. It also allows us to help explain
that we are risk managers rather than purely
insurance providers and that we are trying to
help them keep their business going.”
For such an initiative to be successful, the
broker attitude towards risk management is
essential. At the moment, Neil Emerson, corporate sales director for Towergate Partnership,
says there are three general broker views on
risk management.
For some, Mr Emerson says, offering
risk management services is purely a way of
generating income, whether it is through consultancy work or providing software solutions
to clients. Unfortunately, this approach is nonspecific and rarely meets the individual needs
in question.
For others, risk management is driven out
of the insurance requirement. This approach
broking.co.uk
Broker use of risk management
is taken by brokers that are very comfortable
in the insurance space and understand that if
clients do some measure of risk management
they are likely to be able to enjoy a better
insurance experience over a period of time.
This strategy will help businesses keep their
insured risks in check, but what about the
uninsured risks they face?
According to Mr Emerson: “There is the
third approach, which sees risk management
as something that protects the client’s business. The difference between the second and
the third is in the level of understanding of the
business and how the processes and procedures
in place actually affect that business.”
This is a much more involved and labour
intensive approach to risk management and,
unless brokers are doing this for clients, are
they actually offering a full risk management
service?
Responding to demand
Whatever the answer, some brokers may
question if it is actually a full risk management service that clients want and this is a
point raised by Paul Hopkin, technical director at the Association of Insurance and Risk
Managers.
He says: “One of the unwelcome trends
I am becoming aware of is that risk managers who are responsible for buying insurance
are continually under pressure to cut costs.
Although purchasing insurance is still a headoffice responsibility, the risk management and
control function is being devolved to individual
locations and there is a worry that standards
will fall.”
If this is the case, are businesses really looking to implement an involved and, potentially,
costly risk management programme and is any
reluctance to do so actually a false economy?
In many ways, online information portals – as
provided by Primary General – and some of the
risk management software that has been developed over the years, offer a halfway house but
if they are to genuinely offer positive benefits to
businesses then the delivery must be excellent.
As Mr Hopkin comments: “Access to information is useful, but it is the interpretation
of that information that requires professional
consideration.” If SMEs are unable to effectively use the information they have then it is
unlikely to improve the risks they face or their
overall performance against them.
Where brokers do provide clients with a
broking.co.uk
face-to-face risk management service, it is
important that they do so properly if they are
to justify any fees charged and enhance their
own commercial reputations.
It is not unusual for an experienced and
competent account handler to offer up suggestions or give an overview of risk management
requirements, but this should not be mistaken
for a full risk management service and where
such advice is dressed up to be something it
isn’t, it can often create more problems than
it solves.
Mr Emerson highlights one example where
poorly performing fleet risks are often directed
towards driver training as a solution when
there are other considerations such as vehicle
security, the routes taken and the business
pressures on drivers to be considered.
He comments: “One firm installed satellite navigation systems in all of their vehicles
because as drivers got close to their delivery point they were having to shuffle maps
around to find out where they were going
and in turn were having more accidents.”
Driver training would have been the default
advice offered by many brokers here, but it
would have done little to manage this risk
effectively. Without the requisite time, effort
and professionalism being invested to assess
the risk properly, the most effective solution
would have remained hidden and the client’s
loss ratio would not have improved.
Where brokers do offer a complete risk
management advice service, they then have to
decide whether it is a speciality they want to
carry in-house.
Towergate has decided not to reinvent the
wheel, according to Mr Emerson and is happy
to refer clients on to an established network of
suppliers that can help them depending on the
nature of their issues.
Similarly Brian Jackson, director at broker
BiB, says the firm does not look to provide a
fully comprehensive risk management service
internally. He comments: “We have health and
safety consultants that we refer queries to and
we also do the same for employment issues.
When it comes to disaster planning and business continuity there are also partners that we
can use.”
Mr Jackson says BiB’s expertise is in insurance and rather than dilute that with a
half-baked risk management approach, it is
better to pass clients on to risk management
experts where necessary.
Although Mr Jackson says there are agreements in place for BiB to earn from referrals,
the aim is not to generate a significant revenue
stream, but to offer a fully rounded and professional service to clients.
Interestingly, Belmont International also
takes the stance that risk management is not
something it seeks to make large amounts of
money from, although it does retain an inhouse risk manager and is very serious about
offering a professional and in depth service.
Insurers and brokers need to go
back to being risk consultants,
rather than just firms that can
place cover for their clients
Simon Taylor
Paul Harrison, schemes manager for the
broker, says: “We have a true risk manager on
the staff and he has more letters after his name
than those that actually make up his name. He
offers a full-blown risk management service,
looking at all of a business’s processes and giving firms advice in respect of them.”
Whether a broker decides to carry this sort
of speciality internally will, in many cases,
depend on both its size and its client base
and whatever way it decides to address the
problem, it must make sure that clients get a
valuable service that improves the performance
of their business.
As such, it is important for brokers that
provide risk management services to also help
clients set out clear goals that need to be
achieved and to establish benchmarks against
which to measure the performance of the risk
over the years. Without such measures in place,
it becomes difficult for brokers to prove their
worth or for clients to judge value for money.
When there are so many options for brokers in providing risk management services to
clients, offering an ineffectual and over-sold
service will ultimately eat away and destroy the
client relationships in place.
Where, through an internal offering or an
effective referral system, brokers manage to
address clients’ needs properly and establish
ongoing interaction, they will achieve the very
opposite and help their businesses to stand out
in a competitive and crowded market. n
October 2009
Insurance Age
33
Risk management – who cares?
Am I bothered?
How much do customers really care about risk management? Louise
Meeson asks if the industry is tuned in to clients’ needs or simply
searching for ways to cut claims and rake in revenue
A
lthough traditionally insurers are most vocal
about its benefits, brokers are increasingly
embracing risk management. While the industry may
view it as a differentiator and a way to add value
to its proposition, are customers as keen? Does the
practice appeal to some sectors more than others
and, given the current economic climate, are clients
willing to splash out on non-compulsory risk management measures?
Simon Mabb, managing director of Romero
Insurance Brokers, says: “Clients have become
more aware of the benefits of risk management not
only in their claims experience and related costs of
insurance but also in the smooth running of the
business. Good risk management is about minimising risks while allowing businesses to continue
day-to-day operations.”
He explains that the broker mainly gets involved
in health and safety-related risk management and
that it also works with clients to improve business processes and reduce downtime. However, he
admits “some clients really buy into this, while others just want to tick the boxes to be compliant if the
Health and Safety Executive visits”.
Mr Mabb says lucrative businesses are most
receptive while small manufacturing businesses, or
companies with low profit margins or high turnover
of staff, tend to be less engaged.
Similarly, Mark Matthews, head of risk engineering
at Zurich UK, says while “attitudes are very different
across the spectrum of customers”, smaller businesses are not necessarily “totally transactional” and
do embrace it.
“Historically, we think of insurance risk management as being a service function. Thirty years ago
it was seen as a pseudo factory insurance, there to
protect the insurers’ bottom line but it is far more
about working in partnership with customers and
is extremely valuable especially in relationship-type
accounts where it encourages loyalty and customer
retention,” he adds.
Staying power
As well as improving customer retention across the
corporate sector by 7-9%, Mr Matthews says it offers
technical pricing certainty, enables the insurer to
target rate increases where needed and ensures quality in the Zurich portfolio. However, he admits the
recession is affecting customers’ appetite.
On the other hand, Paul Jenkin, assistant technical
manager of property at Groupama, says: “The focus
tends to be more on risk management when we have
got a recession. Clients become aware they are a
target for theft and vandalism, and the potential for
their insurance premiums to go up. We take no joy
34
Insurance Age
October 2009
in increasing anyone’s premiums – it gives the broker and the client the opportunity to look around
the market. If we can help them help themselves
and, by doing that, keep competitive then that’s a
good thing.”
Groupama operates in the small to medium-sized
market, focusing on businesses with about £7.510m exposures. “Risk management
doesn’t necessarily involve upgrading or
installing alarms, it’s all about commonsense – good quality locks, a good set of
work practices that ensure the property
is secure,” Mr Jenkin adds.
He says it should be a tripartite
arrangement between the broker, client
and insurer. “Risk management helps
keep the claims costs down, maintain
premiums for the client and means the
broker doesn’t have to keep renegotiating,” Mr
Jenkin says.
solutions. Everyone would recognise that they just
don’t address all the risk that businesses face. Independent brokers (which includes many in networks)
sort of understand that they need to change and do
more but, day to day, it is the insurance that delivers
the revenue. The longer they keep doing that, the
more they fall behind competitors that are adapting
and developing their services in tune with what clients want and need.”
Mr Aspey believes true risk managers “see insurance as part of a wider strategy of risk control and
contingency planning and their client services are
designed to achieve that”. He adds: “They appeal
to the best clients, spend more time with them
and command a high degree of client loyalty. They
employ staff with risk management qualifications
and training. They have internal or external services
that meet every client need, including business continuity, health and safety and HR.”
I can’t think of the last client that
has both risk management and
insurance services from us that
has left at renewal
The art of listening
However, Steve Carroll, managing director of
Markel UK, believes a more targeted approach is
required adding that “as an industry, we are good at
giving people what we think they want rather than
what they want”. He says, as Markel specialises in
areas such as professional indemnity and social welfare, it focuses its approach to risk management.
He points out that risk management adds value
“where it is appropriate”, should help with retention
for brokers and insurers alike, as well as revealing
“what the client is up to” and mitigating claims.
Certain of the broker advantages, Risk Analysis Services (RAS) was established in 2001 to
supply regional brokers with software tools
to support their risk management services.
Talking about these benefits, Joe Aspey,
managing director of RAS, says: “If you
were to reinvent broking for the modern
age, it is unlikely that you would
come up with an industry that, in
the main, just provides financial
Simon Mabb
In agreement, Mr Mabb says: “The key motivation for us as a broker is to provide additional
support and help to our clients. There is a direct
link between risk management and claims and as an
independent broker we want to be in a position to
offer something more than just a cheap quote and a
great claims service. We want to help the client do
something about the issues they face. Having risk
management and insurance working hand in hand
has real benefits for all parties, including insurer, client and broker.”
He says the service has helped it win business
and that he “can’t think of the last client that has
both risk management and insurance
services from us that has left at
renewal”.
However, Mr Mabb maintains that many brokers need
to up their game in order to
compete with consultancy
firms. “There are some very
good brokers offering better
services than the consultancy
firms out there. Unfortunately, they [the good
brokers] are being tarred
with the brush of the
brokers – large and small
– that pretend to offer the
services, but either don’t
or simply do not have the
capability,” he says. n
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Fleet risk management
Shifting up a gear
The number of casualties on UK roads is at an all-time
low, but now is not the time for complacency. Roger Ball
explains how brokers can triumph in the motor fleet market
by providing effective risk management advice
I
n April this year, the Government published proposals for a new post-2010 road safety strategy
targeted at reducing the number of road fatalities, by
at least 33% of the average for 2004-2008, by 2020.
According to police reports, the number of people
killed in road accidents is decreasing – by 14% from
2,946 in 2007 to 2,538 in 2008. This is the lowest figure reported in the UK since records began in 1926.
While these figures seem encouraging, the UK
Statistics Authority accused the Department for
Transport of underestimating the number of people
seriously injured in traffic accidents and highlighted
that a ‘significant proportion’ of accidents are not
actually reported to the police.
So, are the results indicative of outstanding performance in respect of road safety initiatives or
pessimistic target-setting by the Government? Do
they send out the right message to businesses and
fleet managers? What are the incentives for them to
improve and maintain good risk controls?
The International Transport Forum says the
Government’s figures reflect improved road safety
measures and enforcement, but they also highlight the economic downturn’s role in reducing
the number of road deaths, as motorists look to
economise by minimising travel to reduce fuel consumption or use alternative travel methods altogether.
These factors, along with the significant proportion
of accidents not reported to the police, suggest the
Government’s figures should not detract from the
ongoing need to promote effective management of
‘on the road’ risks.
The decline in the UK economy has also forced
companies to cut back in the face of reduced business activity. Datamonitor recently reported that the
number of fleet vehicles insured by the Association of
36
Insurance Age
October 2009
British Insurers members in 2008 declined by 4.2%
to 2.5m.
With most analysts predicting a further decline in
GDP – in the region of 4% in 2009 – a further contraction seems inevitable. However, it is also likely
that fleet vehicles will be worked harder, particularly
when the UK economy emerges from the recession.
It is estimated that one in three fleet vehicles are
involved in an accident every year. Road accidents
are the biggest cause of work-related accidental death
with 800 to 1,000 people killed annually – four times
the fatality rate for non-road workplace accidents.
Therefore, risk management measures for commercial fleets are paramount to reducing the number
of road deaths. Convincing companies of the benefits of risk management was difficult enough when
fleet insurance rates were falling and cashflow was
comfortable. But, as rates rise, introducing and maintaining good risk control measures can reduce claims
costs and allow businesses to control their premium
more effectively and meet regulatory obligations.
Regulatory compliance
Fleet operators should be well aware that on-road
work activities must adhere to a generic range of
health and safety legislation – such as The Health
and Safety at Work Act 1974 and The Management of
Health and Safety at Work Regulations 1999, aimed
at effectively managing and assessing the risks to
employees’ health and safety.
The Driving at Work booklet, produced by the
Health and Safety Executive in September 2003,
clarifies the obligations of employers to manage the
number of risks and incidents.
The focus on legal obligations has been heightened
by the arrival of the Corporate Manslaughter Act
2007. The primary purpose of this Act is to make
it easier to prosecute organisations when their gross
negligence leads to death.
Businesses will need to be extra vigilant in a
number of areas relating to vehicle suitability, driver
competence and journey length to ensure employees
take the required duty of care.
As the recession continues to affect many businesses, the prospect of premium increases will be
daunting. Many may be tempted to reduce expenditure on risk controls. However, it could be argued
that many fleets hold the key to reducing costs by
implementing effective risk management strategies.
Generally, organisations with effective controls in
place have the lowest incident rates compared to
their peer group. Consequently, companies able to
demonstrate a proactive attitude to risk management
are much better placed to control their insurance
costs and achieve a competitive advantage.
Now is the time for companies to invest in risk
management services and reduce long-term costs.
The challenge for brokers is to ensure the importance of risk management is understood by clients
and offer them access to the independent expertise
needed to make improvements. This presents an
opportunity for brokers and insurers to work closely
to add value for clients.
The insurance industry needs to be more than a
financial mechanism. It should provide access to, and
recommend, independent specialist advisers to promote the importance of effective risk management.
Existing data should be analysed to pinpoint where
risk management measures can be most effectively
applied. By working with specialists in these areas, we
can help to minimise the disruption to business.
As rates continue to rise, insurers and brokers need
to differentiate in terms of service and quality of
products to grow and retain business. n
Roger Ball is head of commercial motor and motor
trade, Allianz Commercial
broking.co.uk
Cover
Risk
management
Feature
profile
Brace yourself
While businesses have become more vigilant in preparing for the worst,
insurers must make certain they provide suitable risk management. Liz
McMahon explores how brokers are getting in on the act
T
he psychology behind how we manage risk is
changing. Ten years ago the process was far
more reactive: companies tended to learn from their
mistakes and for some that unfortunately meant a
few harsh economic lessons. Over the past decade,
risk management has undoubtedly been affected
by advancements in legislation and technology
and maybe it is a sign of the times but it seems the
industry has gradually started to adopt a more preemptive approach.
In these tentative and cautious times, businesses
want security and are now prepared to discuss how
to manage risk appropriately with brokers. The
question is how are insurers adapting to cope with
modern risk management needs?
Aviva risk management systems (ARMS) currently
conducts 38,000 traditional, face-to-face surveys
per year. However, with 800,000 clients, the firm
has had to think of alternative ways to communicate
meaningfully with its customers. This has led it back
to the drawing board to work out how its relationship with brokers could fill the void.
Information updates
One way in which it has tackled the problem is
through the implementation of new information
services. ARMS’ bi-monthly bulletin, Netrisk, provides a regular insight into events and news that
businesses need to know in order to ensure their risk
management is up to date. Alongside the newsletter,
ARMS has built a bank of around 200 Hardfacts.
These static information sheets are never longer than
two sides of A4 and aim to provide simplistic and
immediate information on specific issues.
Telephone surveys have also become more
significant due to advancements in technology. With the use of software such
as Googlemaps, Multimap and digital
photography, insurers can
make small risk decisions
over the telephone, releasing underwriters to concentrate
on visiting larger or more problematic sites.
“With technology as it is
now, we have had to adopt a
more flexible approach to our
customers. Some of them are
happy to chat about their risk
management over the phone;
others want to see you face to
face. But what we have tried to
do is go beyond insurance and
add value to all our clients,”
broking.co.uk
says Brian Wallace, head of ARMS.
“All brokers have some risk management capability
but where Aviva is different is its training. No one
else offers the whole suite and, over the years, we
have trained so many brokers and I don’t mind saying that includes many of our competitors,” he adds
with a smile.
ARMS mainly focuses on two fields of expertise
– property, where business continuity is key, and
liability, which concentrates on the importance of
health and safety.
The mentality behind business continuity has
changed over the past 10 years. As Mr Wallace
points out, previously many businesses operated retrospectively but that has changed: “Companies now
want to operate on the premise of what could happen. Insurers want to work in advance to minimise
risk and maximise recovery ability.”
ARMS offers small to medium-sized enterprises
(SMEs), which have no formal business continuity
plan, one-day workshops where they can build their
own individual plan. The insurer offers bespoke
courses tailored to client needs and brokers can also
approach ARMS with a group of like-minded clients
with a workshop proposition.
This approach has been growing within Aviva for
the past two to three years and SMEs that are finding times tough can now access a series of templates
free of charge, providing they are insured with Aviva
via brokers.
A final product ARMS offers is a health check
that covers 15 areas
of the business,
checking for vulnerability and offering
feedback and suggestions for improvement.
Alan Trueman, business interruption risk adviser
for ARMS, says: “Lots of incidents I see are down
to failure of risk management. We work with small
brokers and partnerships, many of which don’t have
their own risk advisers. Brokers need to embrace
risk management. The old days of ‘us and them’ no
longer has any meaning; at the end of day, no one
wants a claim.”
On the changes he has witnessed in liability, Kevin
Chicken, training and consulting manager, says:
“Ten years ago all organisations were operating
under quite prescriptive legislation. Now, there is
much more scope for goal-setting and companies are
expected to control risk for themselves.”
Qualified for the job
Last year, 100 brokers from Club 110 took part
in ARMS’ National Examination Board in Occupational Safety & Health (NEBOSH) general
certificate training course, which leads to the award
of a nationally recognised qualification. It involves
two weeks of intensive study followed by a fourhour exam and a practical assessment. Overall, the
pass rate was an impressive 82%.
Chris Chubb, managing director of Chubb Insurance Brokers, attended the NEBOSH course in
2008 as part of the Club 110 scheme. He passed
with flying colours and when asked what he gained
from the experience, he says: “I’ve been an insurance broker for over 25 years yet had no formal
health and safety training, let alone holding a qualification in this subject. I felt that I needed to bring
my knowledge up to date.”
When asked what the main thing he learnt from
the course was, Mr Chubb simply answers: “All accidents can be avoided.”
Statistics from the Health and Safety Council
(HSC) reveal the importance of continuing to
develop an understanding of health and safety in the
workplace. In 2007-8, there were 229 fatalities and
Mr Chicken says that while this figure is dropping
year on year, it still does not include members of the
public who are killed within these incidents such as
train passengers or people at a fairground and therefore the death toll due to poor risk management
could be much higher.
Last year, major injuries in the workplace stood at
28,000 and there are lesser known statistics such as
driving fatalities while at work, which average
between 800-1,000 a year. Overall, the
HSC estimates the loss to industry
to be between £2-3bn per year.
ARMS is innovative, there is no
doubt about that. While it is offering
exciting opportunities for brokers, with its
extensive client base, it would be impossible for it to conduct traditional surveys
alone. Aviva therefore needs brokers as
much as they need the insurers’ expertise.
It could be argued that brokers are almost
being employed as secondary underwriters
and, as the training programme expands
and broker responsibility for risk management grows, it is worth questioning
whether they could end up liable if a risk
goes undetected? n
October 2009
Insurance Age
37
Legal expenses
Off the hook?
Louise Meeson delves into the murky side of legal expenses and asks
why hold harmless agreements are still allowed to exist, especially given
the industry’s focus on treating customers fairly
D
espite the dubious nature of hold harmless
agreements, which in effect protect the provider from paying out on a claim and arguably turn
insurance contracts into ‘sham ghost policies’, they
continue to thrive in the legal expenses landscape.
While evidence is often anecdotal, hold harmless
agreements between solicitors and legal expense
providers appear to be most prevalent in the beforethe-event (BTE) personal injury motor market,
although the practice does also still appear to exist in
the after-the-event (ATE) sector.
It is clear to see why they may be attractive to
solicitors, after all there is a huge volume of this
type of case and it could be a sure-fire way of securing a coveted seat on a provider’s panel. However,
while cases understandably only go ahead if there is
a ‘reasonable chance of success’, many have argued
that if a hold harmless is in place the firm is unlikely
to proceed unless it is certain of winning – as failure
will result in it picking up the costs.
Concerns have also been raised about the broker role in this side of the market, and, whether
by selling this type of policy on, they are treating
customers fairly. Paul Hurley, business development
and marketing director of Arag, describes it as a
“commercial arrangement” but adds that as a policy
wording has been issued, if something goes wrong
in the chain, the insurer is still liable.
In agreement, John Mullin, managing director of
Composite Legal Expenses, says: “If you issue an
insurance document it can’t be meaningless even if a
hold harmless agreement is in place.”
Regulator duty
Although he points out that evidence is anecdotal,
and that Composite Legal Expenses “wouldn’t
touch” such arrangements, he says there is a
“strong case for the Financial Services Authority
(FSA) to get involved”.
Indeed, a number of industry experts have
called for the FSA to step in, however the watchdog refused to comment.
Mike Timmons, head of underwriting at DAS
Legal Expenses Insurance, says: “It is our view
that the FSA, as part of its risk responsibilities,
should put the customer first, ensure they are
treated fairly and make certain they are protected
properly by outlawing hold harmless agreements.
The capital adequacy of underwriters partaking in
hold harmless agreements must also be taken into
question if they are not making allowance in their
ICA [individual capital assessment] for their ultimate
exposure if the intermediary or their supply chain is
bought or goes bust.”
38
Insurance Age
October 2009
He continues: “This practice represents a stain on
the legal protection insurance industry. It is inherently wrong for an insurer to issue a policy on the
understanding that there will be no claims – frankly
it is not insurance.”
Rocco Pirozzolo, solicitor, senior underwriter of
legal expenses, casualty, at QBE, says: “The main
issue is access to justice. If you are a firm that has to
pay out if a case is unsuccessful then you will only be
interested in ‘dead certs’.”
He says while most personal injury cases must
have at least a 51% prospect of success, for firms
with hold harmless agreements in place this would
be much higher.
Taking responsibility
A spokeswoman for the Solicitors Regulation Authority (SRA) says: “It is a solicitor’s responsibility to
ensure they do not become involved in dubious
arrangements that might involve a breach of the
Solicitors’ Code of Conduct, specifically in relation to
rule 1, dealing with integrity and the duty to act in
the best interests of the client. The SRA would treat
any breach seriously, which puts clients at risk.”
Referring to the practice in ATE insurance, Mr
Pirozzolo says: “I can see why it’s attractive
to solicitors, it’s the concept they can earn a
second revenue stream. The lawyer strikes a
deal with the insurer that states ‘give us your
policies with your name on it but you won’t
ever see a claim as we have a hold harmless
in place’.”
He explains while the solicitor pays a nominal
amount to the insurer for the policy, they stand
to recover far more from the other side if successful and, as they are acting under a no win,
no fee arrangement, would charge their hourly
rate to the other side as well as an uplift.
“There are all sorts of irregularities about
this practice looking at the Solicitors’
Code of Conduct,” he adds. “They
don’t tell their clients it’s a contract
they have bought and they don’t say they
are earning out of the premium. They don’t
say that if unsuccessful the firm will pay. Clients are being kept in the dark, there’s no
transparency.”
Mr Pirozzolo says while in the ATE market the practice has abated, in BTE it is
“quite prevalent”, adding that “the rating
of most BTE motor legal expenses cover
is viable on the basis that premiums are
subsidised by referral fees”.
He says the solicitor pays for
the referral and also
agrees to
enter into a
no win, no fee
arrangement. Mr
Pirozzolo adds that
“in addition, sometimes
panel solicitors also enter
into either a formal or
informal hold harmless
agreement” whereby if the
case loses, the firm is prohibited from passing on the
costs back to the insurer for
fear of being thrown off the
panel. “This also means that
solicitors will be more selective
about what they take on and,
accordingly, access to justice is
hindered,” he adds.
The strong backlash against
hold harmless agreements provides a cautionary tale for brokers.
While cut price policies may be
attractive to customers, intermediaries must ensure their clients are
clear about what they are buying.
Sooner or later it seems certain
that the practice will appear on
the FSA’s radar, and, with its
firm focus on treating customers fairly and transparency,
those that fail to comply
could risk the wrath of the
watchdog in the future.
As solicitors are not
regulated by the FSA,
others in the supply
chain could find
themselves in
the firing
line. n
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Appointed representatives risks
Pass the baton
As the approved persons regime
is tightened, Charles Maddocks
highlights the personal risks run
by directors of firms with
appointed representatives
O
ne of the less appreciated risks in our brave
new regulated world is that of ‘regulation
creep’ as insurance is affected by activities elsewhere.
Following the banking crisis, the Financial Services Authority (FSA) was stung by criticism of how
it regulated the financial markets, in particular the
principles-based approach.
Hector Sants, chief executive of the FSA, sounded
the death knell in a recent speech. He claimed the
approach had been misunderstood, that the policymaking framework made it difficult, Europe has a
particular penchant for rules and in some key areas,
such as Prudential, rules were necessary. He went
on to say: “Furthermore, the limitations of a pure
principles-based regime have to be recognised. I
continue to believe that the majority of market
participants are decent people. However, a principles-based approach does not work with individuals
who have no principles.”
So principles-based regulation will be replaced by
outcomes-based regulation, joining the existing pillars of evidence-based and risk-based approaches.
An outcomes-based approach helps emphasise that
what really matters is not that any particular box
has been ticked but rather when making decisions,
executives know they will be judged on the consequences – the results of those actions.
So the emphasis has been switched to individuals and the results of their decisions. The approved
persons regime is being tightened up as a result.
Non-executive directors and others wielding significant influence over a firm are being brought under
the regime.
Handing over power
Another area is that of appointed representatives
(AR). This is where an authorised firm allows individuals or firms to use its licence to trade in the
financial markets. The authorised firm (the principal)
takes on the role and responsibilities of the FSA in
deciding whether or not to approve the applicant.
The FSA is concerned that unsuitable firms will
enter the legitimate arena in this way. In the
independent financial adviser arena they are concerned about “phoenix firms”. This is where the
directors of one firm seek to close that firm and
transfer the business to a different entity in order to
avoid past liabilities.
They are also concerned that insufficient
control will be exercised over the AR – leading to
rule breaking.
The risk is therefore to the principal taking respon-
40
Insurance Age
October 2009
sibility for the appointment and monitoring of the
AR. Imagine giving your driving licence and car to a
stranger. You risk losing it without sufficient controls.
A recent case highlights this issue very well. The
FSA fined a principal – Richard Holmes – personally and publicised the details of his failings to act as
a deterrent to others. As ever, the cases they make
public in this way are cut and dried. Under this
level there will be a raft of less blatant cases where
the FSA can still make life difficult through tools
such as Arrow visits, skilled persons reports and
increased supervision. The FSA expects the principal
to maintain high standards of conduct in both the
appointment and monitoring process and, as ever, to
have written evidence of compliance.
The fine imposed on Mr Holmes of £20,020 was
for breaches of Approved Persons Principles 6 and 7
in his capacity as CF1 director.
Principle 6 says: “An approved person performing
a significant influence function must exercise due
skill, care and diligence in managing the business of
the firm for which he is responsible in his controlled function.”
Principle 7 says: “An approved person performing
a significant influence function must take reasonable steps to ensure that the business of the firm for
which he is responsible in his controlled function
complies with the relevant requirements and standards of the regulatory system.”
These principles are the stick with which to beat
the wrongdoer. Just what did he do to warrant
being held out as an example to the rest?
Firstly, the appointment of the AR.
Mr Holmes appointed a firm as an AR on the
basis of recommendation by two business contacts
known to him for over 10 years. The FSA said he
did not carry out a detailed assessment of the AR or
its staff’s suitability prior to appointment. In fact,
Mr Holmes had never met two of the three directors
of the AR (one of whom resided abroad on a permanent basis). The regulator said the appointment
was also made in the face of evidence that the AR
was balance sheet insolvent and thereby not meeting
the FSA’s minimum requirements.
Even more damning, Mr Holmes became aware
that the FSA had subsequently taken action against
the two business contacts that had recommended
the AR for serious misconduct but did nothing.
Secondly, monitoring the AR.
He said he had communicated with the AR by
telephone on a daily basis regarding administrative
matters, but only attended the AR’s offices on three
occasions to formally discuss the running of the
business and compliance issues. He relied on the AR
to raise specific issues rather than having monitoring
systems in place, including regular reporting.
Mr Holmes relied on the AR for quality control
and to ensure compliance with regulatory standards.
He did not have sufficient resources to provide any
training for the AR’s staff and the FSA had seen no
evidence that training and competence was assessed
on a regular basis, or at all.
In addition there were serious issues over control
of client money held by the AR, which left clients
uninsured after failing to pass on premiums. The
principal firm had to pay £27,000 to ensure cover
was maintained.
Breaking the rules
The FSA concluded that, while it did not consider
that Mr Holmes deliberately contravened regulatory
requirements, his conduct was reckless and fell well
below what they believed was reasonable.
Jonathan Phelan, FSA head of retail enforcement,
said: “Senior managers should ensure that their
appointed representatives are appropriately overseen.
As a director of the firm, Richard Holmes failed to
carry out sufficient initial checks and then failed to
monitor adequately the activities of the AR over a
period of almost a year despite identifying a number
of concerns early on during the AR agreement. This
falls below the standards the FSA expects of firms.”
And Mr Holmes? “I would urge others to make
sure, whenever dealing with ARs, that they do a
huge amount of due diligence,” he warns.
It is therefore essential for firms with, or considering appointing, ARs to take a long hard look at their
selection and monitoring procedures to ensure they
are sufficient for purpose. n
Charles Maddocks is marketing manager at Insurance
Compliance Services
broking.co.uk
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Viewpoint
Worlds apart
If the Conservatives come into power and the FSA is replaced, will the
new body prove to be more than just a rebranding exercise? James
Sharp calls for specific regulation within the financial services industry
A
pparently, if Mr Cameron wins the next election, then it’s adios to the Financial Services
Authority (FSA) in fairly short order. Would this be
a positive move, or are we better off sticking with
the devil we know?
Of course, it really all depends on what the Tories
have in mind – assuming they do have something
specific – in terms of a replacement. I am not convinced that the regulation of insurance brokers is
high on anybody’s agenda and, consequently, we
are most likely to be stuck on to the end of whatever compliant-looking conga line that happens to
be passing.
Undoubtedly, one can argue that the FSA
has become a tainted brand as a result of
the banking crisis and – at the very least – a
change of name is required. But, will anybody’s interests be served better by merely
conjuring up a new three-letter acronym and
a revamped colour scheme? I doubt it.
And yet, the post-election suggestion
seems to be that the Bank of England (BoE) will
assume sole responsibility for the regulation – in
terms of their financial stability – of large financial institutions; including insurance companies.
Effectively, this takes us back to the days when the
Department of Trade and Industry (DTI) had oversight of insurers from a solvency point of view, but
with the BoE now trumping the FSA, which in its
turn had trumped the DTI.
theless, within a reasonable period, I believe that the
industry deserves something else; something better.
Over the years – in wine bars and coffee shops
across the land – wherever brokers have gathered,
the question has been asked: “What was wrong
with the old Insurance Brokers Registration Council
(IBRC)?” Not a lot seems to be the general consensus. It did its job at a reasonable cost. It was staffed
by people who obviously knew about insurance
brokers and whose sartorial choices evidenced a
pay scale and retirement package that was not grotesquely out of line with the vast majority of those
being regulated.
There was never any humour to
be derived from the IBRC and,
surely, that’s how it should be
Looking after consumers
What is more, we can look forward to a Consumer
Protection Agency (let’s call it the CPA), which will
safeguard consumer interests, accepting that these
interests may not be always foremost in the minds
of said financial services institutions or, indeed, the
BoE. In which case, we could envisage such a body
covering all aspects of financial services, being split
into various divisions based upon industry sector and
located somewhere in the Canary Wharf area.
Therefore, it may be a trifle premature for insurance brokers to begin ordering the party hats and
laying down bottles of vintage ‘Bolly’ in their corporate refrigerators. Alternatively, it might be prudent
to consider diminishing the stocks of letterhead stationery, in anticipation of the now more than likely
regulatory statement/logo replacement sometime
within the next 12-15 months.
Clearly, any changes that may occur cannot include
a root and branch regulatory reform on day one. We
are bound to see a superficial rebranding exercise as
the tentative first step of any new regulator, be that
the CPA or whatever they end up calling it. Never-
42
Insurance Age
October 2009
And that’s exactly the problem with the FSA:
neither it, nor our perception of the people within,
bears much of a resemblance with the reality that
the rest of us inhabit. We are aghast at how many
FSA staffers receive a six-figure salary, at the £20m
paid in bonuses even after all of those ‘systemic failures’, at the final salary pension scheme, the alleged
endemic racism, and a turnover of staff that would
equal a sum deployed infantry regiment circa 1916.
General insurance (GI) brokers are plain
ordinary people who, nevertheless,
appear exotic and risqué when compared with those who inhabit
insurance companies. That said
we are all a bit bemused
by a regulator
that provides
regular and
hilarious fodder for Private
Eye. There was
never any humour to be
derived from the IBRC
and, surely, that’s how it
should be.
Over at the
BBC, they
argue that
the corporation’s pay
structures
need to be
competitive
with packages elsewhere, so as to attract the talent.
The FSA deploys a similarly self-serving logic and,
in relation to banks and hedge funds, one might
grudgingly accept the point. For most GI workers
however, whether in a broker or an insurer – and
even up to a fairly senior level – it is a pretty marginal economic decision whether to work in this
industry or go for a weekend shift at KFC.
Consequently, any pan-financial services overseer
must either adopt a ‘poor relation’ policy in respect
of its GI division, or our regulators must be some
of the best-paid people around. I’d imagine we all
suspect the latter and rather resent the fact. Hence
we mourn the passing of the retro-suited and kipper-tied IBRC folk, whose industry knowledge was
always impeccable and their genuine enthusiasm for
fly-fishing and/or the Campaign for Real Ale was
somehow endearing, grounded and to scale.
Moving on
But, let us be clear, I am not arguing for a return
of the IBRC, or for self-regulation of brokers by
brokers. I am certainly not arguing for a lax regime,
but I do think something more affordable would be
nice. Perhaps an institution that is GI specific and
not so monumental.
There is really not a lot of common ground
between the regulatory requirements of a bank, a
mortgage lender, a stockbroker, an independent
financial adviser and a GI broker. OK, banks may
dabble in all of the above sectors, but that’s no reason
to consolidate all regulation under one roof. All the
better to keep an eye on what the banks are up to.
If this was indeed the reasoning behind the FSA,
then it rivals The Charge of the Light Brigade and
the unimpeachable flotation characteristics of The
Titanic as the greatest ever British conceit and consequent disaster.
In future, something smaller and singularly competent would be better. n
James Sharp is director of TEn Insurance
broking.co.uk
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NEWS IN BRIEF
Bluefin has chosen SSP as a strategic
partner to streamline its IT infrastructure. The move comes after a six-month
review of the existing systems. The
initial project will support over 550
Bluefin users. SSP will host and manage
applications including commercial lines
and London market broking, schemes
management, document management,
Microsoft Office, email and anti-virus
software, with users accessing applications via a secure connection.
Open GI has launched Active Quote
– a pricing tool designed to enable brokers to apply real-time rating flexibility
through their core trading system. The
product was originally designed to provide brokers with pricing control in an
online environment but recent developments have meant they could also
apply the same functionality through
Open GI. The software house has also
become the first to integrate with Timebox, a specialist online time recording
solution from Alphatec.
Electronic records are twice as likely
to be unmanaged compared with
paper records, according to research
body AIIM. In its survey, 26% of organisations questioned admitted that no
records management disciplines were
applied to the majority of their electronic records. AIIM’s report found that
IT staff, rather than records management staff, were expected to carry out
records management processes on
electronic documents and emails.
RISC Authority has launched Robust
to support small to medium-sized
enterprises in producing business continuity plans and managing incidents
to recovery. The software is available
for free from www.robust.riscauthority.
co.uk. Dr James Glockling, director of
RISC Authority, said: “There is little in
place to help those considering undertaking business continuity planning to
take the next step without significant
commitment of cost and effort.”
Multi-quote-and-buy-software
stands up to aggregator threat
By Louise Meeson
P
rofessional Insurance Agents has
made its multi-quote-and-buy software available free to brokers and insurers in a bid to battle aggregator competition in the small to medium-sized
enterprise (SME) sector.
Products offered via the system, which
can be white-labelled, include professional indemnity, directors’ and officers’,
charities and trustees, public liability,
employers’ liability, medical malpractice,
residents associations and clubs and
associations – with more to follow.
Currently, six suppliers sit on the
broker’s panel – Aviva, Catlin, Hiscox,
HCC Insurance, Marketform and WR
Berkley Insurance – with a further two
in the pipeline.
Graham Hearsey, director at Professional Insurance Agents, said the
software, which was developed inhouse over the past five years, could
give brokers the chance to fight back
against aggregators.
“The SME market is in danger of dis-
Graham Hearsey: “Single-quote systems were extremely time consuming”
appearing to the comparison sites in the
future. We can compete with that by
having our own online system, which
means customers can contact the broker 24/7. The client will also benefit as
they have access to the broker’s advice
and expertise, which is necessary in the
professional sector,” he added.
Edge’s latest offering eliminates IT middleman
E
dge IPK has launched the latest version of its flagship product, edgeConnect 4.5.
The company claimed the product
would allow brokers to bypass IT specialists for the first time and enable
them to create their own solutions.
Independent analyst, Butler Group,
has estimated that brokers and insurers
can save 40% of the cost of developing
applications when using the software
for the first time.
Company founder, Dharmesh Mistry,
said: “EdgeConnect allows non-technical staff, in other words the business
guys, to create the online forms for
themselves, leading to much faster
implementation and reduced costs.
It allows them to use their business
insight to ensure the software is aligned
with the company’s overall needs.”
Arista, Allianz and LV have already
used the software for simple inhouse development and a case study
with ABN Amro reportedly showed
that edgeConnect delivered a software application at 20% of the cost
against traditional approach using IT
developers, with a team size of 10% of
normal projects.
Dave Cheeseman, head of business
systems at Arista, said: “Arista needed
to develop a front-end presentation for
each product that would suit the work-
Delivering ...
quality insurance for brokers and customers
44
Insurance Age
October 2009
Mr Hearsey said that single-quote
systems were extremely time consuming as the broker had to input the same
details a number of times.
The software has also been made
available free to insurers. Mr Hearsey
said that it could give insurers exposure
to a potentially huge network of brokers and tens of thousands of quotes.
Mr Hearsey said: “This software
allows visiting clients to compare prices
and policies and then immediately purchase without the process of being
referred to another website. Cover and
policy documentation can be delivered
within minutes. Unlike most aggregator sites, the multi-quote-and-buy
facilities are generally faster to use and,
more importantly, clients can always
speak to a broker with any queries.”
Professional Insurance Agents is
also currently developing its Live Broker broadcasting proposition, which
allows customers to speak to its brokers
directly using a webcam. Mr Hearsey
said the aim was to get the broker,
clients and underwriters talking to each
other face to face, in real time.
ing practices of brokers before caching
the necessary information and delivering to our back-office system. Our
situation was not uncommon but we
knew that there were very few parties
capable of providing both the system
and toolkit to allow in-house development at such short notice.”
Mr Mistry and edge IPK’s cofounder, Mike Williams, launched
the world’s first website for buying
car insurance for EagleStarDirect
in 1997. Mr Mistry said that it
was this background that helped him
see the need for a solution to allow
business people to create their own
online applications.
Fleet Haulage Vans
Taxis Minibus Agric
broking.co.uk
E-commerce
PowerPlace intent on doubling
distribution through internet
By Liz McMahon
P
owerPlace’s new chief executive
has stated his intention to double
its broker base by taking the facility
beyond Open GI to provide access directly via the internet.
Matthew Reed revealed his plans
in response to Towergate Partnership
executive chairman Peter Cullum’s
demand for PowerPlace to achieve a
£100 gross written premium (GWP)
by next year. The company’s current
GWP is £18m.
Mr Reed, former sales and marketing
director for Towergate Risk Solutions,
said: “I think Peter Cullum has more
experience than anyone and if he says
we can do this, I believe him. However,
in order to achieve our goal, there are
several key areas we need to focus on.
The 300 brokers that are already members need to use PowerPlace effectively
and support the structure. I also want
to add another 300 brokers. It’s about
distribution – it’s as simple as that.
“Beyond this, I want to create an
extranet solution so that we can go
beyond Open GI and offer our services
Matthew Reed: Plans to add 300 brokers
to all brokers through the internet.”
He will work with managing director,
Mark Armitage, who has been at PowerPlace since the company’s launch. Mr
Reed said PowerPlace was currently in
negotiations with several lead insurers
and that shortly he hoped to add to the
seven existing insurance providers – LV,
NIG, Zurich, Groupama, Fortis, MMA
Insurance and Towergate Underwriting – and its 30 live products.
“I think it would be an interesting
proposition for insurers in the London
market to start distributing PowerPlace
to their regional offices and contacts,”
he explained. “It is now time to move
PowerPlace from the laboratory to the
spotlight. I truly believe we are on the
cusp of greatness.”
Other plans for expansion include
developing an insurer strategy where
PowerPlace has seven or eight
brokers for any line available. Mr
Reed said he was also excited about
becoming a more dominant presence
in niche markets.
Mr Cullum commented: “Matthew has already made a difference to
our retail business and has the
drive to help PowerPlace fulfil its
enormous potential.”
“I’m not a ‘techie’ but I have to
say that, in my 30-odd years in the
business, I have never been so excited
about technology – this will change the
face of how commercial insurance is
transacted,” he claimed.
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news and views, visit
Broker market intelligence from Insurance Age and Professional Broking
Plum provides brokers with instant MNW risk binding
P
lum Underwriting has launched
the first online quote-and-buy
facility for brokers to obtain mid-networth (MNW) home insurance with
Lloyd’s capacity.
The company said the website would
allow ‘clean’ risks to be bound instantly
and is based on its established online
rating and quote engine.
It added that it hoped the facility
would dramatically shorten the time
it takes for brokers to bind a risk from
initial quotation compared with traditional methods.
Plum director, David Whitaker, said:
“I think, purely and simply, we have
worked in the market for quite a while
and there is no one else that provides a
facility like this with Lloyd’s capacity.
“The thing that makes the product
different is that our facility provides
the best of both worlds. You can get
a quote for the higher MNWs – for
example, £150,000 – and you will
get an immediate decision without
having to sit and wait for a response.
We have combined technology with
the fact that you can still talk to us
directly – we are not hidden behind a
software house.”
When asked how the boundaries were
drawn between Plum’s MNW offering
and its sister company Oak Underwriting’s HNW facility, Mr Whitaker
explained: “The Plum product starts
at £50,000 and there is always a referral. The sweet point for the facility is
£75,000 to £150,000 but the facility
can quote up to £250,000. The Plum
product is appropriate for the MNW
market as the policy coverage isn’t as
wide as Oak. If there is a client with
£150,000 worth of contents, Oak, on
balance, will be the best market for
that client.”
NEWS IN BRIEF
1 Answer Network has launched a
lead generation service that enables
members to benefit from new business
introductions. After a successful pilot,
the service provides openings from five
different lead generation companies,
meaning that companies can select the
offerings that best suit their expertise
and targets. The launch coincided with
the network’s decision to enhance its IT
consultancy and support service.
Acturis has been included in the
Sunday Times Tech Track 100 for 2009.
The league table ranked Britain’s fastest growing private tech companies
based on sales growth over the latest
three years, from 2005 to 2008, or 2006
to 2009. Growth ranged from 38% per
annum to 189%, with sales typically
between £5m and £30m. The Tech
Track 100 is compiled by Fast Track
and published each September. David
McDonald, co-chief executive of Acturis,
commented: “This is a great achievement for the company and reflects the
hard work that all our colleagues have
put in over the past few years.”
New research from Markel
International has revealed that electronic
claims file (ECF) processing is now faster
than paper processing. Graeme Veale,
claims operations manager at Markel,
and Regan Gilbert, claims manager,
revealed the findings at Markel’s ECF
breakfast briefing. Barnabas Hurst-Bannister, new chairman of MRG, opened
the briefing with the proclamation, “the
tortoise has now overtaken the hare.”
Marsh said its UK brokerage clients
can now obtain services from GreenRoad at favourable rates. GreenRoad
provides a technology-based facility
that provides real-time, in-vehicle driver
feedback designed to reduce fleet risk
by changing driving behaviour. Using
GreenRoad’s risk analysis tools, Marsh
said it would work with clients to make
informed decisions about risk retention
and insurance.
s Motor trade road risks Motorcycles Private car Classic car
cultural vehicles Motor breakdown Household Personal accident
broking.co.uk
October 2009
Insurance Age
45
Market moves
A monthly look at who is moving where…
BROKERS
Aon Risk Services has appointed Jim
Herbert and Ian McLellan as managing directors of its corporate and affinity
businesses. Jim joined the company in
October 2008 as regional director and
will now take the role of MD for corporate. Ian has been appointed to the
role of MD for affinity and will remain
MD for the product design and development unit, which he joined at the
beginning of 2009 from Aon Australia.
Motaquote has
appointed Nigel
Lombard as its
new managing
director. Nigel
has been in the
financial services
business for 16
Nigel Lombard
years. He most
recently worked
as sales director for Cheltenham and
Gloucester. Prior to this, the company
said he worked for Lloyds TSB for 10
years. Nigel is notably recognised for
starting the online quote system in
1999 for insurance at Lloyds TSB.
Chris Adams has taken up the position
of product manager at JSW Insurance
Services and will run its lettings industry
offering landlordsure.co.uk. Chris will be
responsible for the complete offering,
driving the team to deliver on growth
targets via a partnership approach with
letting agents. Chris previously spent
nine years at Equity Insurance Brokers, most recently in the acquisitions
department helping locate and develop
potential broking acquisitions.
Towergate has made appointments to
its retail operation and specialist broker,
Towergate Coverex. Rob Browne has
been appointed as account executive
at Towergate based in Warwick. Rob,
who has 22 years’ experience within
the industry, joins from SBJ where he
was a divisional director. Natalie Wood
has joined Towergate Coverex to help
www.Tacticapf.com
develop new business opportunities
in the event, film and media insurance
sector. Natalie has more than 12 years’
experience in the entertainment and
media insurance industry. She joins
from FML Insurances Services.
John Barlow has joined Hill Dickinson’s
professional risks team in London.
John joins the practice from Chadbourne & Park, where he was partner
for four years. John advises financial
institutions and project companies
on political risk, sovereign guarantee,
credit default and protracted payment
insurances. He has also advised Government departments on the insurance
aspects of the Private Finance Initiative
and the Public-Private Partnerships
projects. John is a member of The Law
Society of England and Wales.
Kwik Fit Financial Services has
appointed Stephen Robertson as
group pricing director. Stephen, who
has been with Kwik Fit Financial Services since 1997, assumed his new role
on 1 September and has overall responsibility for pricing strategy within the
KFFS group. Brendan Devine, group
managing director, said: “Stephen
has an outstanding track record with
KFFS, having forged a successful career
in various roles within our business.
With consumers increasingly shopping around to find the best deals for
insurance, it’s crucial that we remain
competitive. Stephen’s appointment
will allow us to stay ahead of the game.”
Jardine Lloyd Thompson has taken
on Kelly Crouch as head of terrorism
within its credit, political and security
risk team. Kelly joined JLT from Miller,
where she worked within the risk team
specialising in terrorism insurance
for seven years. Nick Robson, head of
credit, political and security risk, said:
“Kelly is a great addition to our team as
we look to build our expertise in this area.”
INSURERS
Brit Insurance has appointed Steve
tel: 0845 123 3990
Richardson as group claims director.
Steve will hold overall responsibility for
claims strategy throughout the group’s
three business units – Brit UK, Brit
Reinsurance and Brit Global Markets.
Steve joins Brit from PricewaterhouseCoopers where, as a director, he oversaw
insurance and claims advisory services.
MMA Insurance
has reinforced its
senior management team with
the appointment
of Bob Perry as
claims director.
Reporting to chief
Bob Perry
executive Garry
Fearn, Bob will
be responsible for all claims functions,
including motor, property and casualty
claims, anti financial crime and claims
supplier management. He joined MMA
in May 2009 as interim claims director, but has now taken up this post
permanently.
Peter Taylor has returned to Davies
Group following a six-month stint at the
Cotswold Group. Speaking of the move,
Peter said he would always be grateful to Cotswold for the opportunity it
offered him. However, as soon as he
joined, he realised that his heart lay in
working within the wider claims solution environment.
Allianz Commercial has appointed
Kingsley Oji
to strategic
account manager.
Kingsley will be
responsible for
the ownership
Kingsley Oji
of designated
broker accounts.
Working alongside the relevant key
stakeholders, he will manage and
optimise commercial relationships.
Kingsley, who is ACII qualified, joins
from Groupama, where he was a key
account manager within its partnerships business development team.
OTHERS
Simon Hurt has joined Affinity
Insurance Management (AIM) from
Groupama as business development
manager. His appointment is the first
of a number of roles being filled at AIM
under the leadership of national sales
director, Fintan Griffin, and managing
director, Neil Revill. Simon will be based
in the North East and East Midlands,
where he has built broker relationships
during his time with Groupama.
FitzGerald Consulting has taken
on Clive Munnings, Gary
Paton, David
Rogers and Rob
Sinclair as senior
consultants. Clive
Rob Sinclair
has joined from
a major insurer,
where he specialised in catastrophic
personal injury claims. Gary’s career
in loss adjusting spans 35 years. David
has 30 years’ experience of handling
litigated insurance claims. After 35 years
in the industry, Rob recently led a major
motor claims audit managing a UK/Italian team focusing on loss/injury cases.
Commercial lines underwriter Arista is
gearing up for further growth with the
appointment of Neil Hammond as head
of liability. He will be based at Arista’s
London headquarters and report to
underwriting head, Richard Addis. Neil
will be responsible for growing Arista’s
liability account and managing its profitability. He joins from Allianz, where he
spent four years as liability underwriting manager. Neil has 20 years’ liability
underwriting experience, including senior positions at AIG and Eagle Star.
If you have any new appointments
for the Market Moves page, please
email them to Liz McMahon at:
[email protected].
All images must be print quality
JPEGs and 300dpi
Tactica Premium Finance Limited
Putting the broker in control –
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Meet us at Broker Expo 2009
46
Insurance Age
October 2009
broking.co.uk
Take a look at the
bigger
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Policy Gold
Scott Banks, Managing Director of
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Towergate Underwriting and Towergate Underwriting Household are trading names of Towergate Underwriting Group Limited
Registered in England No 4043759 Authorised and regulated by the Financial Services Authority
48
Insurance Age
October 2009
broking.co.uk
Policy Gold
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Professional Insurance Cover from the Professionals
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broking.co.uk
October 2009
Insurance Age
49
Policy Gold
Classified
ON GUARD SINCE 1989
Tech Cover
Specialist computer cover
underwritten by Aviva
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Insurance Age
October 2009
CLOTH 1.09
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responding
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Authorised and Regulated by the
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broking.co.uk
October 2009
Insurance Age
51
Classified
Policy Portfolio
Electrical Contractors
Educational
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insurance
professionals, the
choice is clear:
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Age call
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52
Insurance Age
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broking.co.uk
Policy Portfolio
Haulage
Household
Let Properties
LLOYD’S BROKER
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MOTOR FLEET
Ally Templeton
DL 020 7816 1251 [email protected]
PROPERTY & LIABILITY
Richard Stiling
DL 020 7816 1269 [email protected]
TRANSIT & CARGO
Neil Woolner
DL 020 7816 1220 [email protected]
Household
For full information visit our website at
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London, EC3A 5AH
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Insurance Age call
Chris on 020 7316
9632
Authorised and Regulated by the
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broking.co.uk
October 2009
Insurance Age
53
Classified
Policy Portfolio
Motor Fleet
Lift Engineers
Nightclubs
P/.I Inurance
Recruitment / Employment
Agencies / Consultants
Professional Indemnity Insurance For
Computer Consultants
Burnett & Associates Plc are a specialist
Broker within the Computer Industry and
provide Professional Indemnity Insurance for
clients within the IT industry, inc IT
Consultants, Web Designers and
Telecommunications.
MOTOR FLEET
HGVs, Vans, Cars, Buses & Coaches,
Private Hire, Self-Drive Hire
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DL 020 7816 1251
[email protected]
We can also assist with other types of
businesses including Management
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DL 020 7816 1267
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Telephone: 02380 442227 Fax: 02380 442210
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For full information visit our website at
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R.L.Davison & Co. Ltd.,
Bury House, 31 Bury Street,
London, EC3A 5AH
Burnett & Associates Plc
39-41 Victoria Road, Woolstone, Southampton SO19 9DY
www.burnett.co.uk
Authorised and regulated by the Financial Services Authority.
Nightclubs
Recruitment
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Marine
Authorised and Regulated by the
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Nursing, Residential & Rest Homes
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TEL: 020 7480 4180 /
FAX: 020 7702 1441
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( )*
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To advertise
in Insurance
Age call Chris
on 020 7316
9632
#
$ # % & #
Please mention
Insurance Age when
responding to these adverts
Authorised and Regulated by the
Financial Services Authority
54
Insurance Age
October 2009
Authorised and Regulated by the
Financial Services Authority
broking.co.uk
Policy Portfolio
Security
Self Drive Hire
Spanish Holiday Home
Classified
Tree Surgeons
Unoccupied Properties
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Schemes and facilities for Unoccupied
Property, Commercial & Residential,
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Nightclubs & Takeaways
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DL 020 7816 1311
[email protected]
Authorised and Regulated by the
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Theme Parks and Zoos
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DL 020 7816 1269
[email protected]
Unoccupied Properties
For full information visit our website at
www.rldavison.co.uk
R.L.Davison & Co. Ltd.,
Bury House, 31 Bury Street,
London, EC3A 5AH
LLOYD’S BROKER
To advertise
in Insurance
Age call
Chris on 020
7316 9632
Please
mention
Insurance
Age when
responding
to these
adverts
!"#
Authorised and Regulated by the
Financial Services Authority
!
""" !
$
$ % & $
broking.co.uk
Authorised and regulated by the Financial Services Authority.
Please mention
Insurance Age
when
responding to
these adverts
Authorised and Regulated by the
Financial Services Authority
October 2009
Insurance Age
55
News Review
News review: September
Axa became the first topfive insurer to withdraw from
the credit-hire general terms
of agreement after criticising
the code for “not reflecting
changes in market conditions”.
The move followed the insurer’s development of its own
operating model, which it said
it hoped would lead to quicker
claims settlements. Axa confirmed that it held a number
of discussions with credit-hire
organisations and was encouraged by the likely impact its
model could have. Axa managing director, Mike Keating,
revealed that credit-hire costs
accounted for up to 10% of
Axa’s motor premiums.
Head of the association of
chief police officers vehicle
crime intelligence service,
detective chief inspector, Mark
Hooper, claimed insurers had
“shot themselves in the foot”
over one-day motor cover. DCI
Hooper referred to the Motor
Insurers’ Bureau database as
a “fantastic bit of kit” but said
that its merits combined with
police powers to take drivers
off the road were meaningless if it remained so easy to
reclaim an uninsured vehicle.
After revealing an overall
general insurance gross written
premium rise of 92%, LV’s managing director, John O’Rourke,
announced his intention to
increase LV’s limits on commercial property to £20m. LV
had written up to £10m so the
move doubled its exposure,
meaning it would now compete with insurers like Axa,
Aviva and RSA.
Axa sealed its largest
commercial affinity deal to
date, after finalising a 10year contract to provide
insurance to HSBC’s small to
medium-sized customers. At
the beginning of next year,
Axa Solutions staff in Glasgow
will take over the account
from Allianz. The win came
three months after Allianz was
appointed insurance provider
for Lloyds TSB’s 850,000 customers, a contract which Axa
had held for six years.
Jubilee chief executive
Andreas Loucaides signalled
his intention to increase the
gross written premium the
insurer writes by £100m
after launching a single
brand across its operations.
Along with the removal of
the Cassidy Davis brand, Mr
Loucaides said the merging of
Jubilee’s Lloyd’s underwriting
and administrative operating
companies would provide a
platform for growth.
Home and Legacy (H&L)
increased its broker agency
base by 300 in the past 18
months and announced
plans to expand it further.
Its current broker base stood
at between 1,700 and 1,800
agencies. Managing director,
Barry O’Neill, said H&L’s
household business rose by
40% in the past 12 months.
The high-net-worth insurer
was also set to expand its
motor panel, which launched
in April and consisted of
Groupama and Chaucer.
Swinton announced plans to
recruit up to 60 call centre staff,
six months after increasing its
headcount by 250. The broker
said it wanted to hire 35 staff in
its Halifax office and a further
25 at its Norwich office. The
latest recruitment drive came
after Swinton completed several pilots involving a number
of services. Swinton estimated
that its call centre headcount
was likely to swell to around
450 staff on completion of the
new hires.
Fortis Insurance and Tesco
decided to establish a
separate Financial Services
Authority-regulated business to underwrite motor
and home policies under the
name of the supermarket
chain. It was decided Tesco
Insurance would be managed
independently of Fortis’ other
businesses, with its own board
and management team. Fortis
said it would be the major
shareholder, with a 50.1%
stake after investing a sum in
the region of £100m. Tesco
said it intended to invest a
similar sum.
Insurance 4 Retirement
(I4R) geared up to expand
beyond home insurance
into the motor industry after
becoming a subsidiary of the
Insurance Australia Group
(IAG)-owned Equity. After buying a further 26% share in I4R
from Bridges Venture, Equity
owned 50% of the company.
Founder of I4R, David Holden
remained managing director, reporting directly to IAG
UK group chief executive
Neil Utley. Mr Holden said his
immediate plan was to reinvest profits into growth and
into increasing product range.
Legal and General (L&G)
outlined plans to re-enter the
motor market and increase
visibility on aggregator sites.
After pulling out of the industry in 2006, L&G said while it
still would not underwrite the
book, it planned to work with
a third-party administrator
to draw up a panel. Possible
contenders for the partnership
were believed to be Junction,
BDML and Fortis.
Delivering solutions to
be proud of. Abbey Legal Protection - A Partner You Can Trust
Trust us to provide your clients with comprehensive commercial insurance solutions, specialist schemes for
trade sectors and affinity clients, as well as facilities for property owners and the construction sector.
56
Insurance Age
October 2009
Polly C
[email protected]
THE HOTTEST INSURANCE GOSSIP
P
olly hears on the grapevine that the regulator was surprised
to the see that the turnover of one of the largest consolidators in an industry magazine listing did not match what it
had been told the figure was. A call was swiftly put into the
famously abrasive boss of said consolidator to get an explanation
for the discrepancy. What the outcome of that call was remains
shrouded in mystery.
R
umour in the market persists that a couple of high-profile
job changes aren’t what they seem. Apparently the imminent departures from the roles weren’t as voluntary as we have
been led to believe. Word has it that the two individuals involved were so unhappy at the strategy their boss was pursuing,
they went over his head to the global boss to complain. Polly
isn’t sure of the veracity of the rumours but the fact that new
business cards will have to be ordered suggests that their bold
strategy didn’t quite work out.
C
leanliness is next to godliness in Polly’s book and that is
why she has been so perturbed by the filthy exterior of one
of London’s most prominent insurance buildings. Her concern
prompted an investigation into the reason for this tardiness.
Had the window cleaners gone on strike? Apparently not. The
explanation was far more complex. It turns out that window
cleaning cradles on the roof have been out of action due to an
engineering inspection that had called for immediate health and
safety measures. Until these recommendations have been put in
place, the cradles remain out of action. Polly hopes it won’t be
too long or she may have to get the Windolene out herself.
P
olly has heard whispers of another mystery this month but
this time from foreign shores. Apparently a broker conference on the high seas, which should have been a rip-roaring affair, ended badly for some – the holiday-brokers got the riotous
turbulence they had anticipated but it seems it came in a much
more literal sense. The boats that whisked the intermediaries off
into the sun were manned by a local crew who, it is alleged, had
not carried out the stringent risk assessments a party from the
insurance industry would normally expect. Polly is told that several brokers ended up green at the gills while three claimed to be
seriously ill. She would be very interested to hear from anyone
who knows anything more about this strange affair.
A PARTNER YOU CAN TRUST
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