News...
Biba Conference Special 2009
Insurer
Strategies - Small Brokers, Big Love
07/05/2009
Once the pariah of the intermediary sector, Rachel
Gordon looks at the recent trend for insurers to court smaller brokers.
Small is beautiful - at least this appears to be the mantra for insurers in
2009. Among the latest initiatives is Norwich Union's recent launch of the
Broker Independence Group, which offers smaller brokers a range of packages
and services. Any independent intermediary with an account of under £800,000
a year is automatically a member. It promises more personal service, a new
profit share scheme, more products, access to schemes and compliance and legal
advice/HR helplines, along with a new commercial quote system.
Jo Thoy recently joined Norwich Union, lured away from her role as sales director
at the Broker Network, to become head of sales at the Broker Independence
Group.
She says brokers should make their minds up once they have experienced BIG.
"I can understand if some brokers are cynical, but there is going to
be a lot happening in the next few months, and I think this shows we are geared
to supporting them. I would not have taken on this role if I did not think
it was going to be exciting. For example, I have been blown away by the quality
of our new online commercial system."
Norwich Union - Aviva from June - has also revamped its invitation-only Club
110, for brokers providing it with premium income in excess of £800m.
However, will brokers go for the carrot and will BIG ultimately mean more
business for Norwich Union?
Disillusioned brokers
The insurer may have its work cut out, particularly amongst brokers disillusioned
with insurers generally. Rod Lynn, joint owner of Hove-based Scullard &
Prosser, says: "This is too little, too late." He expresses disillusionment
with insurers, and is exasperated by service levels. He observes: "Insurers
got rid of inspectors. These were people who knew what they were doing. Instead,
they cut costs. They thought brokers would disappear but they were wrong.
Customers are flocking back to brokers because we look after them."
Mr Lynn says he prefers the service from wholesale brokers. He singles out
Holman's as being particularly good in terms of service, adding that insurer
Equity Red Star is also efficient.
Andrew Holman, chief executive of Holman's, comments: "Brokers use wholesale
brokers because they perceive it to be a better service - and we live and
die by this. Other reasons are it's a non-standard case and that we do not
require a minimum level of business. Wholesalers are probably one of the only
ways a start-up could get off the ground too."
He adds wholesalers are thriving. "It's not trendy, it's just about a
quick turnaround, having people who can help brokers with queries and a bit
of hand-holding on occasion. It's a simple concept."
Steve Brindley, Sales and Marketing Director for large independent broking
group Barbon, says: "Most insurers are struggling to provide good service.
It can be different if you are among the top 50 and in a club, but while technology
has come along in leaps and bounds, this has not been mirrored by the service."
He explains Barbon's wholesaling property specialist division, Keelan Westall,
has experienced a boom in business. "Brokers tell us they like dealing
with brokers. They like old fashioned things - like knowing the point of contact,
being able to get through to someone easily and that the documentation is
going to be right. Insurers have failed to have enough experienced staff within
their broker divisions."
And, Ian Drewe, managing director of K Drewe Insurance Brokers, which specialises
in caravan insurance, agrees. He says there is room for improvement. "Not
all recognise business from us has extra value or are willing to listen to
schemes proposals. Even those we do deal with can make it difficult. We, as
their customers, have frustrating problems with lack of communication and
co-operation. For instance, we still get notification to immediately increase
rates and/or change underwriting terms on our binding authority schemes, without
any discussion or appreciation of what we have to do to make that happen."
Despite broker unhappiness, other insurers are joining Norwich Union in saying
they are changing. Alan Griffett, Head of Broker Sales and Distribution at
Allianz, says his company values all brokers and improving service has been
under review. "I live in a small town and use a community broker. We
were already well aware that such brokers' customers tend to be more interested
in the cover than price and such brokers have a good business model."
Following feedback, it was decided to bring personal lines broker telephone
contact back into the UK, after this was taken offshore. "It is more
expensive for us, but we listened and now have our people working in small
teams. We've had a big CRM investment, which means we know more about our
brokers, and beyond this, the culture means that our employees are talking
to brokers for longer, both to provide better service and to listen as well
as visiting if appropriate."
His colleague, Chris Garrett, Broker Partnership Manager for Allianz Commercial,
adds: "There's no reason why an insurer can't work with a broad spectrum
of brokers and have different strategies. We're not shouting about what we
do, but it is a well-rounded proposition. We're committed to local service
with 14 branches."
He adds Allianz also provides brokers with technical, IT and soft skills training
through its Underwriting Academy. "This is very accessible, and around
1000 brokers have been through it."
Working with consolidators
For insurers such as Allianz, which target large commercial risks, working
with the consolidators is unavoidable. And, Kevin Roberts, RSA's Sales Operations
and Strategy Director, says: "There are some very successful ones and
it is about offering different things - we want to work with everybody. But,
we have been quietly improving our service for smaller firms too. We have
launched an initiative called Broker first, which is based around getting
the basics right. We have increased the number of relationship mangers and
I think brokers will notice the difference, even though we are going about
this in a quiet and unassuming way." He adds RSA is also poised to launch
an improved SME focused service, building on its Enterprise operation.
Mike Crane, Commercial Director at LV, adds: "We've been seeing a big
increase in business, in part because we have fewer distractions and legacies.
We've also quickly set up regional offices. It's straightforward - brokers
want accuracy, access to decision makers and to be the local champions in
their areas - you don't need any clubs to provide this. You can still find
insurers turning documentation round in 21 days. I don't tolerate mediocrity
and brokers should not have to. Insurers are always going to have different
arrangements according to the broker, but if they are skewed too much towards
one sector, then it can fall off a cliff if these differences come out."
John Seaton, Underwriting Director with MMA, comments: "A smaller insurer
has more agility and can be closer to its broker customers. I think brokers
know that insurers are going to flex their books, change rates and increase
or reduce commission - but they want to see continuity, local presence and
to be able to speak to decision makers. Insurers also need to invest in electronic
trading and in terms of networks, it's about understanding the proposition
and both insurer and network being satisfied with the arrangement."
Smaller insurers, wholesale brokers and other specialists are looking to promote
the service they can offer. Acumus offers let property and travel cover through
intermediaries, and managing director John Bibby, says: "In personal
lines, there is now a sharp realisation that aggregators are not only focused
solely on price, but that they also may not be helping consumers. Insurers
are realising now that brokers are in fact doing the best job for the client."
He adds: "It's good if insurers say they are doing more for brokers -
but time will tell if these are PR exercises to get brokers interested or
if they are backed by actions, such as good terms, e-commerce solutions and
a more level playing field."
Brokers also continue to be targeted by the networks, who say they are continuing
to secure favourable deals and to offer other benefits.
Anne Williams, General Manager, Partnerships, at Broker Direct, says: "We
have an advisory board of brokers and we're all about helping brokers remain
independent, developing their propositions and championing what they do -
along with finding them better deals. The independent broker is sustainable
and will always have a place."
Meanwhile, Michael Rea, Chief Operations Officer of Towergate, which is an
underwriter, consolidator and network owner through the Broker Network, comments:
"There is room for different models - insurers want to back a few horses
and that's sensible. But, in terms of networks and other offerings, I think
there is something in the phrase, 'you get what you pay for'. Brokers should
look carefully at what is being provided and then decide on what is going
to be of most value."
A huge investment
UKGI says it is not a network in the traditional sense but is focused more
on compliance support services. However, it did work with Norwich Union prior
to the setting up of BIG. Managing Director Mike Williams says pilot work
went extremely well, although the insurer later decided to run BIG in-house.
"All I can say is you need to make a huge investment if you are to provide
real value. We have what can be described as traditional inspectors visiting
brokers, we provide a massive amount of support and this is what brokers appreciate."
He has witnessed a major shift in attitude towards smaller firms from insurers
and growing friction when it comes to networks and alliances. "Independent
brokers are not toxic - they churn less, they have low exposures and good
customers. No wonder they are flavour of the month." UKGI is currently
working with three insurers to provide some sponsored places for brokers,
a scheme Mr Williams says is "working like a dream".
The issue of service remains a thorny one and in this economic climate brokers
may well be wary of new insurers' initiatives. But, at least for those still
in a state of independence, a few good vibes coming their way - no matter
what the motivation - is welcome news indeed.
View from the frontline
Independent broker Rowett Insurance has two offices in Cornwall and one in
Devon. Managing Director Glyn Rowett says: "In the recession there seems
to be a better community spirit. Commercial prospects are more approachable
and keen to support local, like-minded businesses. In a rural community like
ours, we have flown the Cornish flag, which has gone some way to prising business
away from the consolidators."
He adds: "Insurers have now recognised the large national concerns are
not giving them value for money in terms of bullying for very large commissions.
The tables are turning somewhat."
He is now seeing insurers try to retrieve old relationships with high street
provincial brokers and that there are now more insurer representatives visiting
- although he says few will be won over that easily. "There is a feeling
insurers left the small independent brokers to sink, as their heads were turned
by larger firms."
He also says: "We now see the likes of Norwich Union reviving the old
Commercial Union 'Club Elite' idea (Club 110), and other carriers trying to
deliver a full spectrum of products to brokers."
Rowett Insurance is a member of alliance Westinsure. "When insurers were
focusing so much on large national brokers, the support in terms of compliance,
smart groups, and so on has proved invaluable."
He concludes: "It's good to see some new entrants into the market, such
as LV. And, having talked to many brokers who have sold to large national
concerns and lost their independence there is regret - the target-driven pressure,
loss of focus on customer care and loss of flexibility to a distant head office
seems to be driving good people out of the industry. Independence is the best
way for us."
