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Making your mind up
Despite the growth in insurance business from regional brokers, some believe the standard of service they get from underwriters based in the capital is compromised by a lack of understanding of regional needs. Stephanie Denton investigates the 'local or London' dilemma.
According to a survey by Liberty International Underwriters in January, one in four brokers think the quality of service provided by London based underwriters deteriorates the further away from the capital that intermediaries are located.
The survey found that 25% of respondents thought the service provided by underwriters was compromised in the regions, mainly due to lack of understanding of the needs of regional brokers and the London-centric view of some underwriters.
“Some insurers do take business outside London less seriously,” acknowledges David Smith, market management direct at Zurich. “Regional presence is limited or non-existent. And this undoubtedly has an impact on value to the broker and underwriting result due to lack of local knowledge and engagement.”
Geoff Crisp, director at underwriting agency Fusion Insurance Services, agrees: “Different markets have different needs and so you should service them differently. Manchester and Leeds needs are different, so it is no surprise that Manchester and London’s are different.
“You do not necessarily have to be local but you must understand the needs and then deliver a service that meets those needs. This might mean a local office but the problem is that companies are trying to do the job from London with a London perspective.”
Regional authority
Authority in the regions is an issue, according to David Paterson, business
manager of corporation insurance at Towry Law’s Glasgow office. He says:
“In terms of the London market I have always felt, being based outside
London, that there is a perception that London based composites or underwriters
have more underwriting authority and capacity than those based in the regions,
even if they are working for the same insurer.”
However, Brent Escott, managing director of Brit’s UK division, says there are examples of regional underwriting that are better than London’s and also more relevant to the market. “Regional underwriters in the long term make more profitable business; Lloyd’s has lost money,” he explains, “Regions demand different things but there has been too much consolidation of underwriting lately so there is not always the level of experience and expertise brokers demand.”
One problem for brokers trying to place their business in London is that their customers may not be attention-grabbing as those of London brokers.
“National brokers that place both London market and regional business
have to prioritise their work and they might put a £20,000 London policy
over a £5000 local policy,” says Julian Goodall, managing director
of Illium Insurance Services.
Mr Paterson agrees: “Most regional brokers do not have FTSE 250 companies
as clients, which is not to say that they don’t have very large clients
and will still be looking for a quality underwriter.”
Another issue is that regional brokers often have to access the London market through third parties, which can make the process more complicated and long-winded.
Mr Goodall says: “Access is quite difficult for regional brokers but this is not due to the geographic proximity of risk to the underwriters but the number of people they have to go through to access the London market. To use the Lloyd’s market you must use a Lloyd’s broker and the company market consists of national brokers that use their internal terms.”
Mr Paterson agrees: “For Lloyd’s business you have to have a good relationship with the wholesale broker and must have confidence in them. It adds an extra link in the chain and there is the potential for error to creep in – the final message could be different from the one you started with.”
So direct access to the London market could be something regional brokers would welcome. Ian Brown, compliance director at Welsh broker Protectagroup, says: “We go through wholesale brokers to get into Lloyd’s and there are times when I think direct access could help; sometimes there are long discussions, delays and toing and froing. This means a long time to turn business around and the customers only see the complete time and do not realise why it has taken so long.”
Taking this a step further, regional brokers would also welcome underwriters in their own part of the country. However, Mr Crisp says it can be hard for some firms to move to the regions and be successful: “Some London insurers operate only in London and there is a different relationship here. It would be difficult for these companies to set up outside London because they will need key people and some firms would not know where to start.”
Regional presence
Underwriters acknowledge how important it is to have a local presence. David
Sweeney, UK development director at Hiscox, says: “We recognise that
to be close to brokers is the way to give them the service they want. In the
past six years we have opened up several regional offices: we opened one in
Bristol at the start of the year and hope to open one in Manchester by next
year. We recognise that if you are based in London it is more difficult to
understand regional brokers.”
He says Hiscox’s UK retail business during the past five years has become bigger outside London than in the city: “Face-to-face is not as important on transacting or underwriting business but you need to be in brokers; minds emotionally and in contact with them.”
According to Mr Brown, having regional offices is the best way to build up
relationships with brokers: “Some local relationships have died in recent
years as companies move away from local offices and account managers have
to work harder and cover a wider area. This means they are sometimes harder
to get hold of. Our best relationships are with insurers that are still here.
It is much harder to have this when you have to make an appointment before
you can see someone or swap e-mail continually.”
However, Mr Paterson adds that it is less important for underwriters to physically
go to brokers than it is for whoever the broker speaks to having the authority
to make a decision: “It is not so much getting them out of the office
but the need to access underwriters with capacity and authority to underwrite.
Regional business is find but we need the same authority and capacity in the
regions as in the capital.”
Stuart Quinlan, underwriting director a Novae, claims this is exactly what his firm is doing: “We have a belief in local presence and cutting-edge technology. Our model is to have leading underwriter expertise on hand to deal with businesses and brokers. Our offices have experts in them to meet the local region’s needs and they have the authority to write business there and then.”
And business is moving out to the regions, according to Mr Escott: Lloyd’s only deals with around £2bn to £4bn of the commercial market, about 10% to 15%, and three-quarters of the commercial business is placed outside London. Lloyd’s has reduced and with technology there s less of a need for London. I believe this trend with continue.”
Even if underwriters with authority do move out to the regions, Sian Fisher, head of agency at Oxygen Insurance Managers, says the Lloyd’s market will always be important to brokers: “Despite the moaning that goes on, Lloyd’s is the first place brokers look if they need specialist policies or business that needs underwriting because solutions from composite insurers are very basic and they often cannot place unusual business.”
Brokers agree that they are likely to have strong relationships with underwriters in their area and some people think this is enough for them to choose the place business with them over a London underwriter.
Mr Crisp explains: “Regional brokers tend to place business with composites and those that have a presence in the market and provide the service they want. A local office would help in the decision of where brokers place business but if they needed special cover they would take it to Lloyd’s.”
He adds: “if you are comparing apples with apples then it is the relationship and the services that are important and insurers in the regions will be the preferred market. People who are trying to offer the products but have no local presence may be overlooked.”
“This is a factor when brokers are choosing where to place their business,” admits Mr Goodall, “but is is only one factor and brokers will also consider expertise. The London market is still the expert and using regional insurers may limit choice. Brokers may have to choose London and sacrifice face-to-face contact and have more people in the chain to get the deal.”
Local considerations
Brokers confirm that locality is an issue when choosing an insurer. Mr Paterson
says: “Having a local underwriter is a consideration when placing business
because when a problem arises it is easier to sort out if you can go and visit
the underwriter and their claims department. If it came down to two underwriters
and everything else was equal, apart from London or local, then I would go
with the local office, so it would make a difference – it is a comfort
factor.”
Some issues with distance also transfer over to the claims service, according
to Mr Goodall: “If a claim goes to a call centre in India then you feel
very remote. Quality of service, access and flexibility can be made more difficult
if centralised and this geographic area is miles from the claims centre.”
However, John Dutton, a director of broker John Holman & Sons, says London is the insurance capital of the world and it would not have achieved this status if it did not pay its claims.
“The majority of London business emanates from the US, the most demanding nation on Earth,” he states. “So service, distance and technology cannot be the problem. Provisional brokers not using London would be missing out on an entrepreneurial spirit that has existed for more than 300 years.”
Future business
So what would regional brokers like to see from London insurers in the future?
“If you ask a regional broker what they want then they will say they
would rather place business in the local market with someone they can see
and meet up with” explains Mr Goodall. “Broking is a very personal
business so, by implication, brokers feel more of what they want will be in
the local market, although they have to be aware they will have limited options.”
Mr Paterson agrees but adds that authority is the main issue: “The key message is accessibility to the right people with authority to place and write business and spend time on a claim. This is where distance becomes a factor. Local offices with delegated authority solve the problem but if it is only a front office then it is not addressing the issue.”
Mr brown says he would be pleased to see underwriters who make the effort to contact him: “We are one of Wale’s largest brokers but we are not overwhelmed with people coming out to see us and contacting us to say they want to do more business with us. I would like to see this more.”
It is clear that a lot of insurance comes from regional brokers and their customers. Although for specialist services they certainly need the London market, for more common covers brokers are leaning towards underwriters with a presence in their area.
London insurers may need to make some important decisions in the near future, especially if the market becomes more competitive, and opening offices in the regions may well be the best way to corner the regional markets.
POST MAGAZINE-BROKING APRIL 2006
