Tax Bombshell Legal Expenses

March 2010 www.broking.co.uk

Tax bombshell Confusion reigns over IPT Legal expenses An explosive start to 2010 for LEI

Beyond Zenith Why Markerstudy’s Gary Humphreys is so bullish Contents March 2010

24 The PB Interview View from the rock Gary Humphreys of Gibraltar-based Markerstudy tells Andrew Tjaardstra why Zenith is such a good opportunity.

CONTACTS 05 News Analysis 28 Market Watch Editor – Andrew Tjaardstra Late payments on the rise; property under- Legal expenses Tel: 020 7316 9316 insuranceisanincreasingproblem;Jelf’sresults A ﬂurry of changes makes LEI an exciting [email protected] Reporter – Emmanuel Kenning mightspelltroubleforconsolidators. arena, discovers Emmanuel Kenning. Tel: 020 7316 9653 [email protected] Sub editor – Laurence Gunn 10 Editor’s Comment and Viewpoint 30 Disaster recovery Art editor – Nicky Brown Promoting disaster recovery Group editor-in-chief, insurance division Anthony Gould 12 Legal Many businesses still fall well short with [email protected] Mathew Rutter warnsontheincreasing their continuity planning, writes Jane Sales manager – Oli Henry likelihood of punishment for bribery. Bernstein. Tel: 020 7316 9071 [email protected] Head of key accounts – Sajeeda Merali 14 Management Clinic 34 On the Move Tel: 020 7316 9765 [email protected] Ian Ritchie clariﬁesthemireofcharging Sales executive – Insurance Premium Tax. 35 Director’s Q&A Chris Finnegan PB Tel: 020 7316 9632 Martin Thatcher of Thatchers tells about [email protected] 16 Broking Success his cider brewery’s broker requirements. Commercial director – Phil Davison Group production manager – High expectations in High Wycombe Lorna Graham EdwardFinchofMRIBtellsEmmanuel Kenning 36 Statistics Production controller – Matt Parle about the wisdom of spending on marketing. Thetop-20UKpersonallinesinsurers. Marketing manager – Ro Osborne Circulation manager – Sarah Smith Publisher – Alex Broad 18 Focus 37 Policy Market Tel: 020 7316 9382 [email protected] Regulation Group publishing director, Ralph Savage reviewsthecomplexwaveof 42 Competition and Puzzle insurance division – Derek Peck Win £50 of John Lewis vouchers. Managing director, insurance division incoming national and international regulations. Graham Harman

Subscriptions and enquiries Incisive Media, c/o WDIS For the latest insurance industry news Units 12–13 and views, go to Cranleigh Gardens Industrial Estate, Southall, Middlesex UB1 2DB Broker market intelligence from Professional Broking and Insurance Age www.broking.co.uk tel: 0845 155 1846 fax: 020 8606 7303 [email protected] Subscriptions: UK £95pa, Europe £100pa, Rest of World £130pa ISSN: 1355 N/0519 Reprints and e-prints enquiries to Alex Hall otherwise disposed of in a mutilated condition or in any Sales and marketing manager unauthorised cover by way, or by trade, or annexed to Incorporating Policy Market The Reprint & Licensing Centre, 4 Ingate Place any publication or advertising matter without first obtaining 32-34 Broadwick Street, London, SW8 3NS written permission from the publisher. Incisive Financial London, W1A 2HG Tel: 020 7501 1085 Publishing, does not accept responsibility for the loss or Published by Incisive Financial Publishing Limited [email protected] damage to unsolicited photographs and manuscripts, and © Incisive Media Investments www.incisivemedia.com [email protected] www.rl-centre.com product samples. The cost of returning such materials Limited must be paid by the original sender. Printing BGP, Biscester. No part of this publication may be Average net circulation reproduced, stored in a retrieval system or transmitted from 1 July 2008 to in any form or by any means without the prior written 30 June 2009 is 11,664 permission of the publisher or editor. This is considered Cover photography: a breach of copyright and action will be taken where this Fiona Compton occurs. This magazine must not be lent, sold, hired or

March 2010 3 Write a will, change your name, let the ﬂat, appeal a ticket, create a pre-nup, apply for probate, sell a horse, get divorced...

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DAS Legal Expenses Insurance Company Limited is authorised and regulated by the Financial Services Authority. News Analysis Cash ﬂow

35% Source: The FSB-ICM Liquidity dangers Voice of Small Business Annual Survey Emmanuel Kenning reﬂects on the 30% cash ﬂow challenges facing broker managers in 2010 25%

20% ACCORDING TO research by Data from the IoD backed up information services provider the challenges that this poses for Experian, 27% of debt payment brokers running their own busi- 15% in December 2009 was overdue nesses and advising clients. A and businesses making late pay- survey of more than 1,000 direc- ments were remitting at an aver- tors found that, since 2001, the 10% age of 20.88 days after agreed number of IoD members financ- terms; the insurance sector was ing their businesses through marginally better at 20.6 days. bank loans and overdrafts has 5% Further reports in February fallen from 85% to 64%. by the Federation of Small Much of the slack has been Businesses and the Institute of taken up by the use of credit 0%

Directors have also shown that cards, with 20% using them to NHS broker managers and their cli- finance their businesses. Olympics and colleges and quangos Private sector ents remain under severe cash EU institutions flow pressure despite recent Credit warning Local authorities Central government Schools, universities Devolved government Government agencies

signs of economic recovery. While credit cards can provide Police and Fire services The FSB surveyed nearly access to quick finance, Miles 10,000 members and discov- Templeman, director general at Hall of shame: late payment rates in 2009 by sector ered that the private sector has the IoD, pointed out: “Any con- the worst record for paying bills traction in credit card finance late. Central government was could see significant price hikes, more in 2010 because they are One way in which brokers the next worst offender, despite adding to the already grave dif- coming into a challenging area have avoided the pitfalls of cli- its Prompt Payment Code and, ficulties that many businesses for them. It would be naïve to ent cash flow problems has been in 2008, promising to pay within are having in accessing funds.” say that things will improve third-party funding. Howard 10 days. Research from Moneyfacts dramatically; the economy may Lickens, chief executive officer When a customer pays a bill highlights that interest rates grow but it will be tough.” at New Malden-based Clear late, in effect, the business owed on credit cards are now at a 12- Insurance Management, said is providing a loan. According year high. Call for restraint that his business has seen stable to the survey, 43% of businesses Trade credit insurers are ide- Share also pointed out that uptake of such funding during had used a bank overdraft as a ally positioned to forecast future companies that survive the the recession and that it is ben- source of finance in the previ- economic conditions: they recession need to take care with eficial for client cash flows as ous year, 41% had dipped into know when firms stop paying their cash flows, not overex- well as brokers’. their own savings and 4% took their bills, which can occur well tending themselves as growth He also pointed out that it out a second mortgage. Concern before they actually go out of returns. Brokers may also find should remove the risk of errors over cash flow (42%) was beaten business and adversely impact a that clients have deteriorat- and oversights in payment flows only by the recession (72%) as supplier’s cash flow. ing credit ratings because the for clients with multiple insur- the main obstacle to the success According to Andrew Share, information that credit ratings ers: “All too often, an insurer of a business. credit management services agencies use will be based on forgets to set payments up cor- John Wright, national chair- director at Coface, the situa- recessionary statistics. rectly and clients can find them- man at the Federation of Small tion remains challenging: “The He concluded: “Some can’t selves with catch-up payments Businesses, said: “Late payment number coming to us for collec- publically show that they have that can really hurt. It is by no has been a particular problem in tion was increasing in the fourth rebuilt their balance sheets. means an unusual experience.” the past year. It is more impor- quarter of 2009. Cash flow for Communication flows are key With challenges ahead, it could tant than ever that this worrying small and medium-sized enter- to get an accurate view of a well prove to be a key area for practice is brought to an end.” prises is going to suffer even company.” brokers this year.

March 2010 5 News Analysis Under-insurance

tions, which is fine for a couple Cunningham Lindsey, added Double trouble in property of years but not for 15.” that brokers should be aware Loss adjuster ﬁnds market IanShelley,technicalmanager of some policies having a pro- (property) at Aviva, pointed out: rata clause that could lead contradictions “Underinsurance has for some to reduced payouts in the time been an issue of concern event of a claim. He added: Emmanuel Kenning be insured. It is not just re- to insurers. For more compli- “Brokers are looking at profes- ACCORDING TO analysis by instatement or market value, cated or unusual buildings, pro- sional valuations increasingly QuestGates of nearly 140 prop- it may also be demolition and fessional valuations may be the because they protect them erty projects, only 12% of own- removal of debris.” most appropriate way to ensure from a potential professional ers paid the correct insurance Analysis of property invest- insurance premiums remain indemnity claim. A business premium. The loss adjusters, ment portfolio valuations adequate. Typically, we recom- might not survive a claim if which undertook the valuations also produced results that the mend updates are obtained at it is under-insured and has an from September to November company remarked that it has least once every three years.” average clause. It is only natu- 2009, found that 85% of com- never seen before: many were Luke Lockhart, valua- ral they would look to recover mercial properties were under- actually over-insured, by an tion services manager at it from a broker.” insured compared with 70% in average of almost £14m. 2008. On average, and just as Steward commented on the worrying, the level of under- findings: “Normally, you would Tips for brokers from QuestGates • Ensure the valuation includes the additional costs likely to be incurred insurance for each property, expect property portfolios to fit in enabling the building to comply with local authority regulations or 47%, is far higher than the his- the same profile as commer- legislation, such as disabled access or lift construction in public buildings. torical level of 25%. cial.” He cited properties having • Where possible, inspect the building needing to be insured. Its size, type Alistair Steward, direc- been disposed of from portfo- of construction even the number of storeys can often differ from the tor at QuestGates, said: “It is lios without a corresponding client’s description. shocking. It shows a lack of adjustment in premiums as one • When advising a client on the cost of a valuation, try to compare the understanding for the basis potential reason and added: cost to the potential impact that under-insurance would have on a claim on which buildings should “Companies index link valua- payment, not just to the current premium.

www.broking.co.uk poll and Brokers ‘lack the minimum fine threshold remarked: “There is an educa- results – Feb 2010 of £500,000 will be tested. The tion process that is still required Do you use social support’ on firm has pleaded not guilty. here; brokers should be talking networking sites to While fines and prosecution to their clients about it at their support your business? corporate costs would not be covered annual reviews. It becomes a by insurance, Gavin Reese, complex issue with the exclu- manslaughter partner at Reynolds Porter sions [in cover].” 60% Chamberlain, urged brokers to Roger Ball, head of commer- Emmanuel Kenning 50% check the small print of their cial motor and motor trade at WITH THE ﬁrst prosecu- clients’ cover to ensure that their AllianzCommercial,highlighted 40% tion under the Corporate defence costs would be met. He results showing over 20% of Manslaughter Act in progress, said: “A company may find they brokers estimate that, of clients 30% an Allianz survey has revealed have cover in their employment that employ five or more staff, that 42% of brokers feel that or public liability policies but less than half hold an up-to- 20% insurers have provided neither many don’t. They need to check date, written down health and 10% they nor their clients with suf- their policy wordings because safety policy. He said: “This is a ﬁcient support to manage their there may also be limits finan- statutory requirement that can 0% responsibilities. cially, or by type of court.” help businesses ensure they are No According to the study of The survey also showed that not only meeting their health Plan to

Regularly over 1,500 brokers working in 81% of brokers had been con- and safety obligations but also intention to Occasionally the commercial sector, 44% of tacted about the legislation by protecting themselves and their March’s poll question: Would respondents are unaware of the fewer than one-in-ten clients. staff from potential accidents.” a ban on referral fees in penalties proposed under the Steve Foulsham, technical The case is expected to last six personal injury cases impact Act. If the defendant of the case services manager at the British weeks and it is one that brokers your revenues adversely? being heard in Bristol Crown Insurance Brokers’ Association, should monitor closely (more To vote in this month’s poll, go to Court, Cotswold Geotechnical urged brokers to be active about details can be found at www. www.broking.co.uk Holdings, is convicted then keeping clients informed. He broking.co.uk/1564356).

6 www.broking.co.uk

News Analysis Jelf results

Jelf raises more money as profits tumble The broker has released a set of results that shows, perhaps more transparently than most, the difficulties of the consolidation model, raising questions over others’ ambitions to float, writes Andrew Tjaardstra

JELF’S SHARE price once Andy Homer, CEO at soared at around 250p at the Towergate, said: “I think height of the boom, when it we would make a great IPO snapped up brokers, inde- because of our scale and pendent financial advisers and because the market likes healthcare firms. Now, the something different, which we recession and investors’ chang- have with the likes of Open GI ing attitudes towards debt and Paymentshield.” Towergate mean that the broking group continues to outperform other is struggling with a share price consolidators by virtue of its of around 40p. It posted a large profit-to-turnover margin and operating loss of £9.7m for the Homer said that it won £200m year ending 31 October 2009, of new premium last year with after spending £4.8m on reor- retention at over 85%. ganisation costs and £7.5m in managing goodwill impairment Leaders’ challenge in its wealth management arm. Howard Lickens, CEO at inde- Tellingly, its earnings before pendent Clear Group, which interest, tax, depreciation and has just bought £3.5m gross amortisation fell from £10.1m Alway: Jelf clients hit by ‘economic depression’ written premium broker Lynas to £8.1m. Ebitda is often cited Vokas of Spalding, questioned as the rationale behind consoli- 2% of its clients had failed. office in Manchester and paying if some business leaders can dation and it will be disappoint- On the bright side for Jelf, the off £8m of net debt (which was change their approach: “Can ing that this fell given a revenue Yate-based broker has raised reduced by £15m last year). He the entrepreneurial owners who increase of 11% to £70.3m. In £19m in a share placement, added that the rest would be put built the business turn into the insurance broking, the posted with US private equity group aside for acquisitions. City animals we want to see? It’s operating loss of £1.3m com- Capital Z, former backers of an expensive exercise to float a pares poorly to the firm’s £2.68m SBJ, taking over 3i’s 25% stake. High flyer firm but it will always be hard profit in 2008 but revenues rose In addition, institutional inves- Jelf was a frequent buyer of work to entice long-term inves- 20% to £43.72m in 2009. tors and directors have taken businesses, especially between tors to this type of consolidation Chief executive officer Alex a placing of 27,713,939 shares, 2006 and 2008 and mainly in model and maintain a growing Alway said that its clients in the while 25,063,838 new non-vot- the south of England, though share price.” south have been hit by an “eco- ing convertible shares have one of its largest acquisi- It has been a trying time nomic depression”, while chief gone to Capital Z. tions was Manchester-based for companies looking to list financial officer John Harding Alway said that the money Manson. Helpfully for Jelf, Jon with high-profile withdrawals said that there had been 5% would be used for investment, Manson, chief benefactor of such as Apax-backed fashion “organic shrinkage” and that including a new 15,000sqft that deal, has decided to con- chain New Look. Once seen vert £2.8m of deferred consid- as the darlings of capitalism, eration from the deal into Jelf private equity had it too easy Fragile outlook shares at 36p each. for too long and 3i’s exit from A statement from Jelf Group chairman David Walker Consolidators such as Jelf is one such example of “The recession in the UK has now probably ended, confidence has stabilised Towergate and Oval have con- the industry over-expanding, and markets have rebounded, though the outlook remains fragile. The UK Government must deal with a huge budget deficit that will…require sistently expressed their wish although admittedly it has substantial reductions in public sector spending and increases in taxation. to float, as has insurance giant been replaced by another pri- Interest rates are expected to remain low in the near term but will gradually Acromas (owner of The AA and vate equity firm. It will hope increase as the economy recovers. Unemployment will probably stay above Saga), which this month denied that Jelf’s shares can recover long-term trend levels for years to come.” having plans to float in 2010. in the medium term.

8 www.broking.co.uk News Round-up

THE2010NationalManagement Salary Survey, published by Staff turnover up, insurer the Chartered Management Institute and Xpert HR, revealed a labour turnover rate of 13.6%, up from 12.4% in 2009. annual results down Resignations in the insurance sector stand at 6.2%, compared and Lark. Total revenues at tractors’ market. Backed by John Charcol has been added to 4.1% twelve months ago: the the insurer increased 3.9% to an A-rated UK general insurer, to the list of companies that average is 4.7%. £450.3m of gross written pre- the MGA will target employ- entrepreneur and Towergate The survey results show that mium, with the group’s brokers ers’ liability and professional executive chairman Peter employers are failing to per- producing £66.5m of revenues indemnity, including low Cullum has bought. The mort- suade staff to stay, with requests (2008: £66.4m). François-Xavier excesses, non-standard and gage broker will become part of for internal transfers as an Boisseau, chief executive officer highly regulated areas such as Towergate’s independent finan- alternative to leaving resting at Groupama, hailed a solid per- manufacturing. cial adviser firm Towergate at 3.4% for the sector against a formance in household, health- Mike Smith will take the Financial, having been snapped national average of 3.6%. Ruth care, motorcycle and small fleet position of managing director up for a nominal fee a matter of Spellman, chief executive at the and said that market conditions of Ink from March. Confirming days after it went into admin- CMI, said that “…money isn’t are improving. the move, a spokeswoman istration on 22 February. Ian the main motivator anymore. At Zurich, operating profit for for Giles said: “Compromise Darby, chief executive officer at Instead, employers must con- its UK general insurance oper- agreements have been agreed Towergate Financial, is former centrate on building remunera- ation fell from £295m (2008) to with Keith and Phil and we are managing director at John tion packages that incorporate £146m in 2009, with GWP fall- pleased that Phil will be acting Charcol, which was hammered earnings with development ing from £2.1bn to £2.03bn; its as a consultant to Giles.” in the mortgage market implo- opportunities, offer flexible combined operating ratio was sion of the last two years. approaches to work and rec- 100.1% compared to 97.8% in Blackham returns Meanwhile, Towergate is ognition of the need to better 2008. Zurich has announced Chris Blackham, founder of consolidating its businesses engage with staff.” that it will increase its personal Layton Blackham, which was near Manchester by opening There was an average salary lines motor rates by 20% in sold to Axa in 2007, has returned an office in Heaton Mersey. increase of 2.7% in the insur- March. Meanwhile, Catlin has to insurance as a non-execu- The former Broker Network ance sector compared to a increased its regional presence, tive director of London-based Insurance Brokers’ businesses national average of 2.5%. with 40% of its underwriting Howden Insurance Brokers, based in Altrincham, Wilmslow contribution coming from non- which grew its broking revenue and Tottington will be merged Increased ratio London underwriting hubs. 41% last year. at the site. Meanwhile, in corporate Celebrating 40 years in results, Axa’s UK and Ireland business this year, Perkins earnings were hit signiﬁcantly Slade is the latest broker to by £157m of general insurance be awarded chartered status losses, increasing the combined by the Chartered Insurance ratio in general insurance and Institute. healthcare from 99% in 2008 There has been some pur- to 102.2% in 2009. Axa suffered chasing activity this month. especially as a result of ﬂooding Peter Wood has taken con- in Cumbria in November. Also, trol of Esure, having bought having moved out of managing Lloyds’ 70% stake with fund- general agencies, commercial ing from a management buy- lines revenues were down 15%, out vehicle backed by Penta with liability down 24%, com- Capital to add to his existing mercial motor down 11% and 30%. It is reported that he property down 12%. paid cash “slightly” in excess Fellow French insurer of book value (31 December Groupama also reported a dif- 2008: £185m). ficult 2009, with profits diving MGA Ink’s founders Keith from £30.1m in 2008 to £14.1m, Syrett and Philip Thomas which includes figures for bro- have set up MGA Thames kers Carole Nash, Bollington Underwriting to tap the con- Blackham: returning to the profession

March 2010 9 Editor’s Comment and Viewpoint

Editor’s Comment A tale of contrasting fortunes

RBS INSURANCE has been one of the great RBS’s fortunes in 2009 contrast markedly with profitable success stories in insurance ever since it Gibraltar-based Markerstudy, which has snapped controversially promised to cut out the middlemen. up Zenith and is in the running for Provident. It Yet 2009 was a year of turmoil for the insurer, has kept to niches predominantly, thereby avoiding Andrew Tjaardstra seeing its profits plummet over £500m and closing much of the cutthroat competition in motor lines: its premium finance arm, Finsure. the company is set to gain as motor rates rise (see Since it began reporting quarterly results three The PB Interview pp.24-7). years ago, it recorded its first quarterly loss in the fourth quarter of 2009 as personal injury claims Motivation, recognition, engagement soared by £448m, something not helped by one On the back of The National Management Salary of the coldest winters since the 1960s. The firm’s Survey (see p.9), Ruth Spellman, chief executive combined operating ratio climbed from 93.6% to officer at the Chartered Management Institute, 105.9% and net claims rose 20%: the scale that warns that “employers must concentrate on once made it so attractive and expensively priced building remuneration packages with development has now come to undermine it and it is hard to see opportunities, offer flexible approaches to work and there being no redundancies as a result. recognition of the need to better engage with staff”. Meanwhile, RBSI’s partnerships and broker Her comments ring especially true in the insurance segment, NIG, declined by 10%, ‘in line with profession, one in which staff turnover is higher than business strategy’. The group has great brands and the national average, though so are salary increases. will bounce back. Did it ask for too much money Broker managers are well advised to take note. when it was trying to sell in 2008? Probably. Follow us on Twitter: www.twitter.com/probroking

Viewpoint Brokers being hounded over PPI

Readers of the British Insurance Brokers’ Association’s that have mis-sold payment protection insurance 2010 manifesto will note that the unfairness regarding policies being unable to compensate customers and funding arrangements for the Financial Services closing. The affected customers are then dealt with Steve White Compensation Scheme is a matter that Biba is by the FSCS and the costs passed on to all firms with lobbying to change. permission to undertake general insurance mediation The need for change is underlined by the activities. publication of the FSCS annual plan and budget and Biba supports compensating consumers in the event the Financial Services Authority’s consultation paper of a firm failing but these funding arrangements are on its fees and levies. The FSCS budget for 2010- out of line with the rest of Europe: there is no other 11 contains a levy of £50m from general insurance state in the EU where insurance intermediaries face intermediaries, up from £8m in 2009-10. Additionally, any element of cross-subsidy. The FSA has started its there is a £20m shortfall for the 2009-10 financial fundamental review of the FSCS and we call upon year for which the FSCS will soon issue a standalone them to amend how the general insurance mediation demand. sub-class is structured to ensure that brokers are A motor broker with a £20m annual commission better protected from those that have caused the mis- and fee income has told me that, over the last two selling problems. years, its contribution to FSCS had increased from Furthermore, we have yet to see the full effects of £3,000 in 2008 to £16,000 in 2009. For 2010, the bill 2008’s banking failures. would be £86,000. In addition, the call for the £20m shortfall could see it owe a further £60,000. Steve White, head of compliance and training, This huge hike in FSCS funding is caused by firms British Insurance Brokers’ Association

10 www.broking.co.uk Fasten your belts

Wehavethepowertohelpdriveyourbusiness Ifyou’reabrokerwhowantstogoplaces,wehavemorewaysthanevertohelpyouget there. Like high-proﬁle advertising to send customers your way (so successful last autumn, we’re repeating it this spring). With an eye on the future, there are our initiatives for helping brokers develop their careers. And there’s our increased focus on personal lines, givingyouaccesstoourmostcompetitiveprices.Toﬁndouthowwecangiveyoua boost, just give your account manager a call.

Bribery Bill enhances Serious Fraud Ofﬁce toolkit Where the Financial Services Authority has led, the Serious Fraud Ofﬁce could well follow in punishing those companies and employees caught committing bribery, writes Mathew Rutter

REGULATORY CONCERNS about bribery Authority. While the FSA had previously Bill is, in part, a response to international and corruption within insurance brokers expressed its concerns in a Dear CEO letter pressures to bring UK law up to recognised attracted widespread headlines in January in November 2007, the Aon fine galvanised international standards. There is also 2009 when many into action. growing cross-border co-operation in this Aon was The FSA is well aware of the deterrence area, making the likelihood of investigation fined effect of its fines and penalties and it and enforcement action much greater than £5.25m plans to increase fines still further; this is in the past. by the part of a bigger picture of a more hostile Under the Bill, a company will commit Financial regulatory environment for insurance a criminal offence if one of its employees Services brokers. Although the blame for the or someone else associated with it bribes financial crisis has largely been put at another person. The company will have the door of banks and hedge funds, the a defence only if it can prove that it had consequences, particularly in the form of adequate procedures in place designed tougher regulation, will affect all regulated to prevent persons associated with it businesses. committing bribery offences. The Bill carries criminal sanctions of unlimited Increasing action fines and up to 10 years’ imprisonment: The FSA now talks of intensive potential enough to make the FSA’s actions supervision, aggressive against Aon look relatively modest. enforcement and credible There are clear echoes here with the deterrence. While the FSA never FSA’s emphasis on systems and controls, (officially) liked the phrase ‘light although the FSA can bring action for touch’ to describe its regulation inadequate systems and controls without in the past, the risk of regulatory having to show that any bribery has action is now greater and the actually taken place. consequences likely to be The government has promised guidance more severe. Hector Sants, on what constitutes adequate procedures. the FSA’s outgoing chief Brokers would be well advised to review executive, has said that their systems and controls against this “people should be very guidance before the Bill comes into force frightened of the FSA”. later this year (along with their controls on It looks as though the the related issues of money laundering and Serious Fraud Office will financial sanctions) if they want to avoid have the chance to follow in the being in the SFO’s or FSA’s spotlight. FSA’s footsteps when the Bribery Bill, currently making its way Mathew Rutter, financial services through parliament, becomes law. The partner, Beachcroft

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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 Ofﬁ ce: 8 Surrey Street Norwich NR1 3NG. Authorised and regulated by the Financial Services Authority. Management Clinic IPT Troublesome premium tax Since the Chancellor made his announcement on extending insurance premium tax in December, nothing much more has happened. Should we be charging IPT to brokers’ fees or doing nothing until there is a further government statement?

IN COMMON with most people in the One important point is not to have a involving individuals buying in a personal industry, I was surprised by the way that knee-jerk fees increase to claw it back but capacity (excluding mid-term adjustments) this piece of legislation was presented, to make sure that any changes to charges from 9 December 2009. without really thinking through the are reviewed through your Treating • For more on IPT, see Focus on p.18 implications for the unpaid tax collectors Customers Fairly gap analysis process (such as you) who would be expected first. Ian Ritchie, director, RWA Group to implement and collect it. Needless to say, we had a number of enquiries from Politics our clients for guidance and, apart from Finally, bear in mind that the ultimate saying that they would provisionally need decision will be political. The to make provision for collection, there was government is only concerned with not a lot more we could add. the next election: if it wins then we The British Insurance Brokers’ will all be hit with a very hard time Association is in touch with HM Revenue as the Treasury tries to balance the & Customs and it is a changeable books. If it loses then the aim is to situation. It was clear that, following ensure that the Conservatives are the Homeserve case, the cash-strapped saddled with commitments that government identified an opportunity will be unpopular to cancel. to generate additional revenue through Until you hear more, the taxation. What is puzzling is that, had situation can be dealt the government researched properly with only as it stands the way in which the legislation was today: IPT is due on ultimately drafted, it would not have brokers’ fees, to become legislation in this form. In turn, be collected by it is perhaps an issue that the industry the insurers, should take up with the Treasury for the for policies future, to ensure that insurance-related legislation is workable when proposed and then implemented. There clearly needs to be better communication, done in absolute confidence. Issues raised by brokers Ian Ritchie carried out a poll among his consultants to try to give a flavour of what brokers are concerned about, though there are still few definitive answers. • When and how will the insurers want me to pay? • How will they know for how much to invoice my business? • How does my firm split a single fee request for several policies for different insurers? • Some insurers classify a lot of transactional small and medium-sized enterprise business as personal lines: will they expect me to charge IPT on small commercial fees? • Will clients incur IPT where they have been invoiced well in advance of renewals in September 2012? • Will brokers be subject to visits from HM Revenue & Customs to verify what they are telling insurers about their fees? • When will software houses amend their systems to cope with this? • Fees will have to rise to cope with the extra work, so the client pays twice • This is commercially sensitive information, I do not want insurers knowing about my fees and charges

14 www.broking.co.uk THE BRITISH INSURANCE AWARDS 2010 ARE YOU A FORMIDABLE FORCE?

Enter now at www.insuranceawards.com

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The British Insurance Awards are the unrivalled badge of excellence for the insurance market. They showcase top class performance and innovation, they reward achievement and they raise standards. They are the awards to win.

Winning a British Insurance Award sets you apart from your competitors and is a tangible demonstration to your customers that you have something special to offer. The BIA logo is widely recognised as a sign of genuine achievement so if you believe you have something to be proud of, then you should be entering the 2010 British Insurance Awards. You can download an entry form with full criteria from www.insuranceawards.com or call 020 7484 9711 email: [email protected] Closing date for entries: 5pm, 2nd April 2010 To book your table at the awards ceremony on 7 July, please call Jen Clarke on 020 8755 4441 or email: [email protected]

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2010

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first year we doubled the new business revenue by using the sales disciplines I had learnt at Independent. The next stage was picking up larger clients and improving the conversion ratio.” While appreciative of the negativity that continues to surround Independent, Finch is quick to thank the company for the training and exposure they allowed him from 1999 to 2001, initially as a graduate trainee focused on the London markets. After Independent, he worked for a short while at Alexander Forbes before joining MRIB in 2002. The company had been set up by his parents in 1973 to deal with motor and mortgage insurance. By 1975, it had its first office on the high street but by the late 1970s the company had switched its focus to business insurance. “Dad saw an opportunity; he was very entrepreneurial,” says Finch. In 1986, MRIB moved to its present location, which used to belong to Eagle Star.

Thankful MRIB became a limited company in 2006 and Finch was promoted to High managing director. His parents remain on the board, his father as chairman, splitting their time between France and the UK. Finch is thankful for their ongoing support and sets out the next expectations steps for the broker with great pride. He says: “My ﬁve-year plan comes to fruition in 2012: to double income. We are on target. From the latest statistics, we are around the 75th biggest broker in the UK in High and the 10-year plan is to be in the top 50 by 2018.” Finch knows that with growth must come increased proﬁts and fresh challenges. They are ones he is keen to face head on as he has done bravely in the past. Wycombe He recounts: “At the height of the

Photography: Fiona Compton credit crunch, we doubled our marketing team. It is now a team of six and we WHEN EDWARD Finch joined MRIB, he utilise it to cross-sell throughout MRIB.” Emmanuel Kenning was in his mid-twenties and it was already The marketing team is overseeing a meets the broker who a successful company with 35 staff and revamp of the company website as well gross written premium of £12m. His task as undertaking projects such as sending bucked the trend by was to bring greater marketing and sales letters to all residents in a particular doubling his marketing discipline to the organisation and, eight postcode and cross-selling to company years later, with GWP doubled and the directors. It also organises seminars to team at the start of the headcount having grown by 20, it seems support clients and create new business that success has been achieved. opportunities: Finch cites a recent example recession and is now Finch explains: “I came in originally on directors’ and ofﬁcers’ liability as having reaping the beneﬁts to look at corporate new business: in the been particularly well received.

16 www.broking.co.uk Over the last two years, the company “I’m delighted that the one cost we went over has grown GWP by 32% and Finch is confident that his expansive marketing budget massively on this year was exam bonuses: policy is bearing fruit, though he accepts that’s a nice place to be.” other steps will be needed. He says: “To hit the 10-year plan I need to make Edward Finch, MRIB some acquisitions, so we are looking at that.” The company has completed of the economy being hit. Instead, the According to Finch, the retention rates two recently: in 2007, it bought a local broker is targeting clients of a certain of 96% in corporate and 90% in personal broker with four staff and GWP of £1.5m size within a 200-mile radius. He adds: insurance have been consistently high while in 2008 it took on another broker’s “Where we are looking to be is in the for the last five years. He puts this down book. Finch is pleased that the head of SME larger side. Our hunting ground to knowing the clients and matching the acquired broker has stayed at MRIB is clients with a premium spend of over them to products that meet their needs, to lead the claims trouble-shooting unit, £150k. By default, they are more likely from those who demand only the lowest organising matters for those clients to be with a national rather than another price to those prepared to pay extra for needing round-the-clock support on independent.” higher-quality coverage. claims that go beyond the normal. It is also part of the reason why he With only one office, Finch believes Although keeping his cards close to his has kept MRIB by itself. He says: “We it is the quality of his staff and their chest, Finch is aware that making the right are independent and proud of that. It expertise that will keep these previous acquisitions will be crucial to hitting his gives MRIB strength because we are successes secure and help to hit the new targets. He says: “You have to make sure flexible; we have grown but if we see an business targets. All members of staff are that the people you are looking to work opportunity we can still go for it. As part encouraged to be active problem solvers; with are of the same mindset because there of a consolidator, you don’t have that. it was their ideas that created the is nothing worse than a firm coming in and “A lot of our success has come from paperless office policy that has improved after two or three years it just falls apart.” winning clients that were with an MRIB’s ability to trade, as well as freeing Clarifying the further elements that independent broker that has [been up staff to be deployed in other areas. will drive growth, he lists retail and subsumed by a consolidator] and the He admits: “I’m delighted that the information technology as two areas client doesn’t get the service or the one cost we went over budget massively in which the company has a lot of choice. I see being independent as a on this year was exam bonuses: that’s expertise. Dreams, the UK’s largest massive opportunity.” a nice place to be.” He is proud of his specialist bed retailer, provides one of company running its own qualifications the testimonials on the broker’s website, Wide base programme that gives staff access to though Finch points out that his broker The broker’s business splits as 70% Chartered Insurance Institute courses is not trade specific. His belief is that corporate and 30% personal, with and qualifications. It has also founded a wide client base provides MRIB with high net worth being a key section of a graduate trainee programme with two protection against any particular area the latter. Finch is determined that people on the course at any given time. this means the broker should have He says: “If you can grow from within, MRIB a wide agency base and open lines you have them ready as the businesses Managing director: Edward Finch of communication with insurers. He model grows.” Established: 1973 cites QBE, Catlin and Chubb as three With such a high level of forward Number of staff: 55 that MRIB has worked closely with planning already in place to back Finch’s Main lines of business: Commercial and private on technical trades, with Aviva and focused enthusiasm, high expectations Location: High Wycombe Allianz for more traditional corporate are the order of the day for this proudly GWP: £25m manufacturing clients. independent broker.

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March 2010 17 Focus Regulation The weight of regulation Ralph Savage writes about how the conﬂux of regulatory issues both here and abroad will present brokers with stiff challenges in the coming years

INSURANCE BROKING has matured The sector is far from immune to the Alistair Darling declared that any monies in its five years of Financial Services effects of an anaemic economy, currently by way of fees from personal customers Authority supervision and is now having to come to terms with serious – excluding mid-term adjustments and looking ahead to a range of challenges obstacles such as the new sales taxes cancellations – from 9 December were and opportunities, yet there are mixed that some fear will eventually envelop subject to IPT of 5%. If a broker has not feelings about the myriad regulatory the whole industry. While tax has the collected the tax on anything since then, issues affecting the market in 2010. potential to add administrative expense that figure will have to be calculated as Among the bridges are the potential where none existed before, brokers are including IPT. loosening of the reins enabled by a also under increasing pressure to justify “This is taking up the vast majority fundamental review of the Insurance supplementary sources of the British Insurance Brokers’ Mediation Directive and the prospect of of income from claims Association’s time at the moment,” lighter-touch regulation being dangled as handling, such as referral explains Steve White, head of compliance a carrot by the Conservatives, fees for solicitors and and training at Biba. He continues, which has many credit hire, with their days adding how Homeserve Membership brokers keen to know clearly numbered. v Her Majesty’s Revenue and Customs more. In addition, the This is by no means an had overturned a VAT and Duties FSA will have a new exhaustive list but it does Tribunal decision in July 2008 that chief executive after go some way to prove that ruled arrangement and administration Hector Sants being stuck in the middle fees paid by Homeserve customers as steps down can be an uncomfortable part of their insurance contract formed in the position; with the part of the premium to which IPT was summer spotlight on them, chargeable. “This revealed a loophole to as brokers are going to the Revenue that it has promptly closed planned. have to sing and, despite the fact that brokers are up for their in arms, we are satisfied that it’s not just supper. a tax grab by HMRC,” he says. For the past 16 years, every Bad feeling budget statement Terrance Clark, compliance director at would be watched RWA Group, illustrates the mood: “IPT by insurers has generated an incredible amount carefully to hear of bad feeling. ‘Mismanaged and if the Chancellor thoughtless’ are the typical phrases being would used and the personal lines brokers are the ones that can least afford it. It’s a nightmare to collect because the onus is on the insurers: they’re no help because they know as much as the brokers.” Biba remains in discussions with HMRC about the scope of the draft increase legislation required to finalise the tax insurance premium tax: and is hopeful of minimising the impact with a 5% standard rate, on its membership. Although the tax has there was certainly room been collected since 9 December 2009, for manoeuvre. In late 2009, legislation is required in the upcoming it was brokers that were choking Finance Bill to enact it. “We are also on their lunchtime sandwiches when concerned about the collection of tax and

18 www.broking.co.uk I think we all have big reservations about HMRC will look favourably on this made anticipatory measures in the IPT on broker fees being collected by the suggestion and fees for those additional event of the law being changed. An AA insurers,” adds White. services and add-ons will have IPT and Insurance spokesman explains: “We In a bid to avoid the administrative not much else.” have been reserving in anticipation of headache of having to register thousands Heath Lambert’s director of retail, eventually paying the tax. When this tax of new companies for IPT, the HMRC’s Shelley Schachter-Cahm, is similarly is payable, which we expect to happen, decision has been to order insurers as sanguine about the prospect of IPT. then we will be able to do so. We do the collectors. Notwithstanding the She expects the situation to resolve not anticipate a rise in rates as we are convoluted nature of this demand, Biba’s itself with some masterful invention: already accounting for this change.” counterargument is that broker fees “Making commission and brokerage In his dealings with members, though, and insurance contracts are separate for commercial insurance subject to White reveals that the complaint often contracts between different contracting unrecoverable IPT will simply push heard is that it is too difficult. parties. According to Biba, the insurer forward a value shift and separation of He says: “If a broker tries to tell a judge is not aware of the existence, terms or corporate entities. Customers will end up ‘it’s impossible’, the judge will reply ‘you price of this contract and to give the paying one amount for the transaction could have stopped charging fees or terms of this contract to an insurer could of placement by a broker or agent and you could have gone to a paper record’. potentially breach the Data Protection a further amount as a service charge to Indirect taxation is so prevalent in this Act (1988). There are also competition fall under a consultant or administrator country that people look at this and say issues at stake, White says: “If the by dual invoices, amounting to what ‘here we go again’ but we don’t believe insurer deals with the public directly, can only be presumed will be a roughly this is the case. We are comfortable with as indeed most do, arming them with a similar total being paid today as the reason for the tax being imposed.” suite of information about how much brokerage or a fee. Therefore, imposition Other commentators suggest that there the customer was going to pay for the of IPT on brokerage or fees will simply will be a temptation to pass on the taxes insurance and the arrangement and create new inventive structures in the to customers with a little mark-up for broker services is commercially very service provision element of insurance good measure. Mike Cranny, managing sensitive information.” and inevitable mitigation of the tax director at Create Solutions, says that Richard Asquith, managing director exposure.” this should be avoided: “If you put 5% at TMF IPT, wonders: “The broker has on a broker’s admin fee, the knee-jerk lost out in this scenario because it has to Sharpening block reaction is that they put up their charges, disclose information to the insurer and, if As Clark suggested, brokers’ knives yet there are treating customers fairly it is price-sensitive information – perhaps have been out ever since the pre-Budget implications of making a move like this: a co-insurance arrangement – then how report, though the actions of one major the broker has to show how it justifies will this be split up?” broker indicate good preparation. Only the fee.” HMRC gave no response, though a month following the judgement in Clark adds: “Brokers have to be careful Asquith, an indirect taxation specialist Homeserve, the AA revealed that it had that, when fees are increased, they are at a top-10 UK broker close to the negotiations explains further: “If it Brokers’ duty of care in review goes through as is, there is potentially a A fundamental change in the law that will drastically alter brokers’ duties of disclosure to clients and huge cohort of regulated intermediaries insurers has received some parliamentary support. having to pay IPT to insurers, which The Law Commission laid the draft Consumer Insurance (Disclosure and Representations) Bill themselves have concerns that the correct before parliament in December last year, as Ashley Prebble, partner at law firm Norton Rose, explains: amount should be paid. Insurers are keen “If this becomes law, brokers will have to be super-clear about whether or not they are acting for that brokers register and pay the IPT the insurer or the consumer. The Bill is about pre-contractual negotiation. At present, the insured is themselves but HMRC doesn’t want to do required to disclose material circumstances and the insurer can avoid the contract for a material non- that because the costs are too high and disclosure. The draft Bill proposes to change the name of these pre-contractual negotiations so that they are quite keen to reduce the number insurers are obliged to ask questions about the risk that they want to know. Consumers have a duty of firms within the scope. to take reasonable care to answer them and not to be careless or reckless in doing so; where it’s an “The industry has put forward a intermediary that is passing this information on to an insurer, it will find itself potentially liable for that number of suggestions about how duty and as such will have to read this Bill very carefully.” As with all draft legislation, its prospects rest on how much parliamentary support it garners and they should reduce the scope of this whether or not the next government is interested in pursuing it. The issue of reform was recently legislation, emphasising the difference raised in a Westminster Hall debate with Sarah McCarthy-Fry MP, Exchequer Secretary to the Treasury, between a commoditised insurance referring to the proposals: “The Law Commission’s consultation on the draft Bill received a favourable product – such as policy add-ons response. The Association of British Insurers is supportive of the proposals and, of 39 responses that require no underwriting like the from insurers, only four argued against the reform. We fully support the aims of the Law Commission Homeserve case – and one in which in reviewing pre-contract disclosure and misrepresentation in consumer insurance law.” (Also see PB, there are underwriting elements. I think Jan-Feb 2010, p.5 and www.broking.co.uk/1589624)

March 2010 19 Focus Regulation

done so for the right reasons. If the “...what’s stopping [IPT] from increasing to tax will be 50p and you estimate the administrative cost of collecting it will be 10% at some stage in the future? If it is cheap 50p then you can’t just arbitrarily charge to collect and impossible to avoid then this will a fiver. The odd broker that I know who has increased fees by a pound or so heap pressure on brokers.” Mike Cranny, Create Solutions has not received any TCF warnings yet, though they realise that they may have to take the hit themselves.” From a systems point of view, there 2005. A whole group of states were late equivalency but it hasn’t taken out all may also be challenges for brokers. in doing this – Germany, France, Spain of it. For example, there were changes Cranny asks: “Can their administration and Portugal – and were fined by the about the information required to be and accounting software differentiate European Commission as a result. The given to customers in terms of key facts between renewal fee, mid-term UK brokers have obviously then been documents and so on. Nevertheless, there adjustment or a new business fee? If subject to the FSA’s gold-plating regime is still a huge administrative burden on not then there will be a real accounting and subsequently been at a competitive brokers in the UK.” challenge because some fees are disadvantage. The European Commission will carry variable.” “The Committee of European out an evaluation of issues and problems Contrary to earlier suggestions Insurance and Occupational Pensions as identified by member states and that HMRC may be willing to limit Supervisors has identified the need to will then have to consider if the IMD the scope of IPT on fees, there is a review the IMD and it’s clear to them has worked and introduced a common sense of inevitability that this will go that it isn’t functioning in a harmonised approach. It is essential that brokers in one direction. “Once the door has manner in all the member states. and pressure groups engage as early in opened then it will be the government’s Changes went through the Insurance this process as possible, says Prebble. opportunity to increase IPT if it believes Conduct of Business Sourcebook He adds: “Most will be satisfied to go it can: what’s stopping it from increasing last year to take out some of through Biba but, for the larger ones, to 10% at some stage in the future? If this super- there’s absolutely no reason why they it is cheap to collect and impossible to cannot go direct if they have the time and avoid then this will heap pressure on resources to do that.” brokers,” says Cranny. The issues at play are of a fundamental Asquith agrees: “The tax authority’s nature with commission and fees likely intent is to close the loophole. Many of us to be the sticking points. White says feel at the moment that there is a general that examples of supervision across the assault on everyone but the insurance EU reveal polar opposites in approach: industry seems to be being hit a lot. “In Scandinavia, with the exception of Everything is fair game and any solution Sweden, they have outlawed commission that involves HMRC getting extra revenue and everything is done on net rates with is non-negotiable.” a fee. Contrast that with the Italians: they simply won’t disclose and if the IMD review customer doesn’t like it then they can Amid the gloom, some light and a go somewhere else. consensus that, with a fundamental “We are used to the law of agency review of the European here that is influenced by Anglo Commission’s Insurance Mediation Saxon law; they don’t even have Directive underway, which informs that in Scotland never our own FSA supervisory regime, mind Italy. There UK brokers could be heading for a less they have Napoleonic burdensome system. law, where there is Ashley Prebble, a partner nothing that looks like at law firm Norton our law of agency. It’s down Rose, believes that the to the policy writers to come up with review provides potential a single approach that embraces the benefits for UK brokers. differences across Europe and this will He comments: “The be quite difficult.” IMD was required to be Like a number of his peers, Clark is implemented in January convinced that rules on commission

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Referral fees “...we’re regarded as The practice of accepting referral fees from solicitors, accident management companies and other groups in return for handing over non-fault claimants’ details is under significant pressure. Lord Justice low-risk by the FSA, Jackson’s review of civil litigation costs declared the practice abhorrent, which was then reiterated by the Secretary of State for Justice, Jack Straw. which is why we Mike Cranny, managing director at Create Solutions, says that their days are numbered: “Brokers argue for right-touch that have become too reliant on referral fees from solicitors and accident management companies will not be able to rely on these for much longer. The Jackson review was an ambitious project and not all regulation.” of it will be accepted. There simply isn’t the collective will required to make all of the proposals happen but I think that referral fees will go.” Steve White, Biba Peter Staddon, head of technical services at the British Insurance Brokers’ Association, admits that his organisation may never have faced a bigger issue than this. He says: “This is a major challenge compliance regime managed by a new for us and our membership and this is why we want to have a full and frank debate about claims body, the Consumer Protection Agency. management at the conference [19 and 20 May, London]. We feel that, if you act on behalf of a client Owing to the sector’s relatively low risk in arranging motor insurance and then pass on their details to a solicitor following a motor claim that towards the financial sector in the event they caused, this is in breach of your agency with the insurer. We know that it goes on and it’s time to of a broker’s collapse, the idea appears to get it out in the open.” (For more, see PB, Jan-Feb 2010, p.8 and www.broking.co.uk/1589610) have some merit. “I can understand that thinking,” says White. “Yet to counter disclosure currently ruminating in the the white paper on financial regulation this, even with the FSA we are regarded United States will significantly influence called From Crisis to Confidence: Plan for almost as the lowest-risk sector that they the IMD review: “One broker said to me Sound Banking and favours a macro- regulate, which is why we keep arguing ‘I’m sure my clients think I’m taking at level financial supervisory role for for right-touch regulation.” least half the premium’. It has not led the Bank of Similarly, Prebble at Norton Rose says to a knee-jerk reaction from clients and England that the principal does make some sense, there’s no evidence of increased activity above a though he remains to be convinced until from customers asking for details. This the Tories add some meat to the bone. will all depend to a great degree what He says: “The implications of a broker’s happens in the US: one or two states collapse depend on its size but generally have begun mandatory disclosure and the impact would be less than that of inevitably there will be pressure on an insurer; so long as all of the trust London to fall into line.” accounts and so on have been set up New York’s Insurance Commission is correctly then the financial risk is low. currently debating this topic and is the The devil is in the detail.” largest insurance market in the US. A The UK general insurance broking decision to disclose upon request with a market remains, for the time being, one heavy emphasis on the customer’s right of the most strictly regulated in Europe, to request would be influential, agrees with all of the costs and obligations White: “If New York and the UK were associated with that position. The current doing this then the European policy proposals from the FSA on regulatory writers would have less reason to ignore fees have a populist feel about them, it.” with up to 80% of the market expecting a reduction in the amount they are likely Election 2010 to pay while smaller brokers earning up It is a matter of debate as to how to £300,000 in fees and commissions influential domestic politics can be will probably see their costs rising as over European Union dictate but the base rate moves from £425 to £1000 any consumer of the UK’s business a year. Alongside this, the very largest media will have noticed that the firms for which income exceeds £35m opposition has launched a significant are facing the removal of the tapering of charm offensive on financial services. fees and introduction of a straight-line Shadow finance minister Mark Hoban recovery policy. was quoted in PB’s sister title Post on Nevertheless, brokers today are facing 4 February, promising not to tarnish regulatory challenges with a far greater insurers with the same brush as banks degree of confidence and certainty. After and the Conservatives seem to be making all, the market has for the past five the right noises. years been at the centre of Europe’s The party’s broad aim is set out in compliance boot camp.

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*Average monthly unique visitors to broking.co.uk 1st Nov 2009 - 31st Jan 2010 The PB Interview Gary Humphreys

View from the rock Markerstudy was the ﬁrst insurer to underwrite in the UK from Gibraltar, courting inevitable controversy. Andrew Tjaardstra meets group underwriting director Gary Humphreys to discover its success in becoming a major player in the broking and underwriting niche personal motor market

24 www.broking.co.uk Photographs of Gary Humphreys by Fiona Compton ary Humphreys, who has a strong other Markerstudy brands, The Insurance “We don’t report to lots motor background, has a warning Factory and Thames City, operate of committees and are Gfor those about to try something predominantly on aggregators. innovative: “Don’t pioneer anything: let Humphreys is not daunted by the flexible. We have first- other people take the blame.” He is a cynic challenges of growing his firm’s broker because of the criticism his company took book rapidly, after all, Markerstudy has mover advantage.” by setting up an insurer in Gibraltar in recently more than doubled its insurance 2001, becoming the first insurer to passport business with the acquisition of Zenith. Gary Humphreys, Markerstudy into the UK. The island had a tarnished He comments: “With the way personal reputation from the banking sector in the lines business is bought, by increasing was completed in November 2009 for an 1990s but it has since become one of the your advertising and aggregator presence, undisclosed amount. Humphreys says: “We major players in insurance: it serves as a you can grow very rapidly. Our preferred don’t report to lots of committees and are base for Admiral, Zenith and Saga. method of growth is by acquisition. flexible. We have first-mover advantage.” Markerstudy likes risks that are different We would like to make a good-sized The Zenith brand will remain separate, and shies away from competing with the acquisition this year. We would like with actuarial and regulatory capabilities mainstream players most of the time; for to move to the next level but we want joined together in Gibraltar, although example, much of its business is written for ownership and control of the business.” a percentage of Zenith’s 200 staff in young female drivers. Gary Collins has headed the retail Haywards Heath is under threat, with At first, Markerstudy was a broker-only division after joining from Fresh Insurance a consultancy period having started. insurer but it has now diversified heavily in 2009. Boasting the marketing strapline In addition, Markerstudy has taken a into broking, with ambitions to move from ‘putting fun into insurance’, the retail team of eleven from QBE to its office controlling around £40m of gross written division comprises 12 businesses that in Chelmsford, Essex, a number that premium to £100m by the end of 2010. It Collins is trying to bring together by includes veteran Steve Stone as niche has grown its broking arm, Markerstudy working on areas such as creating underwriting manager. This follows the Retail, predominantly through acquisition, technology systems synergies. He works Sydney-based insurer’s decision to pull purchasing businesses with up to around alongside operations director Mervyn out of the UK personal motor market. £10m GWP such as the Insurance Factory, Vaughan and head of sales Russell Bence. Following the Zenith deal, some back- Thames City and Caterers Club; it has Markerstudy itself makes up about 5% office functions will be merged, such even moved into commercial by taking on of the broker’s account and Humphreys as detecting fraud and information Sandwell. is keen to stress that he doesn’t want technology. Humphreys is keen that a Humphreys believes that small, niche other underwriters to feel that they are consistent approach be taken across the brokers that do not compete with the “cherry picking”. He says: “We are a niche brands, with them holding joint meetings. likes of Kwik Fit and AA have a great underwriter and we wouldn’t supply To do so, some of the infrastructure in opportunity to keep close to clients and enough to support our brokers anyway.” Gibraltar will also be enhanced. highlights its broker The Insurance Humphreys gives an insight into the Shop, near Birmingham, as evidence of Popular rationale of the deal: “We are very niche this: it still handles a large amount of The underwriter has attracted an and focused on bottom-line profit. Zenith walk-in business. increasingly large broker base and now has was a fantastically profitable insurer Another similar broker, Stourbridge- 1,000 agencies; the acquisition of Zenith’s when it was first established in Gibraltar based Mobilers, specialises in mobile book of business means that Markerstudy but then it changed directions several hot food vendors, ice cream vans and will more than double that number. times when the initial owners sold the caterers’ liabilities. Markerstudy’s brokers Humphreys credits Markerstudy’s business. Unfortunately, the market that deal mostly with specialist areas such chief executive officer, Kevin Spencer, it tried to compete in saw it drawn into as taxis, motor homes, motor trade and with creating a board environment from competition against the Direct Lines mobile units, both over the internet, in which they can move quickly. He cites the and Esures of this world and Zenith person and by phone. Meanwhile, two Zenith deal as one such example, which never had the scale. The footprint of

March 2010 25 The PB Interview Gary Humphreys

The rock of Gibraltar by night the business was clean but the margins Markerstudy’s Gibraltar connection were too thin to make a sustainable Markerstudy was the first insurer, in October 2001, to write directly into the UK from Gibraltar, later underwriting profit.” followed by Zenith, Admiral and many more. Gibraltar, a self-governing British overseas territory, is a Humphreys continues: “These things low-tax environment for startups and its terms-of-solvency margins are not as stringent as those in the are also about timing: as some leave UK, though they still fall within EU requirements. Margins are considered on a case-by-case basis. the market, it is good to stay in. Where Since Markerstudy first set up, however, some of the solvency requirements have become capacity becomes scarce, underwriting more stringent. Humphreys comments: “The Gibraltar Financial Services Commission is far more approachable than the FSA.” According to the Gibraltar regulator’s website: “Firms that are authorised terms tighten and rates harden. We are by the Financial Services Commission have the right to passport their banking, investments and seeing opportunities to put significant insurance services throughout the European Union and European Economic Area. Gibraltar is rate increases in across the whole incorporated into the European Union by virtue of the United Kingdom’s membership.” portfolio. Some of this happened in Admiral and Saga are both based there and, according to Humphreys, it is a “small and insular the last quarter of 2009 as HSBC and place” in which the insurers often share the managers that help to regulate them. QBE pulled out of the market: our loss For more information on the FSC, go to www.fsc.gi/fsc. ratio improved 12% in 2009 over 2008.” Zurich is also introducing 20% rate increases in March, with insurer chief Determined to keep Zenith’s name for its of that: it is an unusual and quirky name executive officers continuing to bemoan 1,500 brokers, Humphreys is unconcerned that doesn’t roll off the tongue but it’s not a lack of rates movement. about branding issues, stating that inhibiting our growth by any means.” customers often relate to the broker Humphreys feels that Zenith had become Potential brand, especially when buying through an too introverted and was not interested in According to Humphreys, of Zenith’s aggregator. Of Markerstudy’s 1,000 brokers, ratings or flexible structures, losing focus £140m book of business, which was 80% of personal motor comes through on some of its market: “We are using our bought from Trinidad-based Guardian the big names, followed by the upper agency development team to rekindle some group, around £80m is “nice, profitable, middle providers such as A-Plan, Allen and of those relationships. It is dangerous to non-mainstream motor” and with some Allen and MCE. Humphreys highlights: set a broker an income target. Profit and assistance on the underwriting, he thinks “Probably 90% of those customers products are more important.” that this book can grow. Some overseas don’t know which insurer they have. A The broking sector has been and binding authority business has brand image is really only vital in direct consolidating significantly in recent already been dispensed. distribution. I think Markerstudy is proof years in both commercial and personal

26 www.broking.co.uk “A brand image is really only vital in direct premiums are higher and there is more underwriting skill required because these distribution ... [Markerstudy] is an unusual and niches are more volatile.” Markerstudy’s young female driver quirky name that doesn’t roll off the tongue but product accounts for almost half of the it’s not inhibiting our growth by any means.” insurer’s business. By contrast, its Solo product, a non-standard policy for those Gary Humphreys, Markerstudy with ‘unattractive occupations’, is for distressed business and is expensive; it lines, driving up commission rates and a greater proﬁt margin where customers tends to have low renewals because the giving customers less choice. Humphreys can visit the shop and are close to their ﬁrm does not look to reduce premiums. appears relaxed about this, though: “I broker. We are giving them marketing The company also deals with motorbike, wouldn’t say we have been hurt by this support and we also have our own taxi and schemes business. Humphreys situation. It is not damaging in the sense marketing company, Gingermonkeys.” says: “We understand that niche and of losing business [with it coming out This cheekily named company has already non-standard business is only bad news of the high street to a more centralized given Markerstudy a light feel to its if you don’t price it or underwrite it place] and there is little movement in website and advertising. properly. We are always a people-led terms of commission, although some have business and our underwriting heads decided to go down the net commission Expansion understand the risks.” route because of aggregators.” Humphreys says that he is looking at With a GWP target of £300m for 2010, Ironically, Humphreys is not a fan of Northern Ireland to establish further these are heady times for an insurance consolidation. He comments : “We want broker relationships: “Where Markerstudy group reaching its tenth anniversary next to see local brokers resurgent. We are has been successful is that it has always year. Expect further broker acquisitions, trying, through an intitiative with the stayed away from mass-market motor. We possibly even the purchase of an insurer, HSBC Intermediary marketing division, to write niche and non-standard products though don’t expect it to move from its support high street brokers because we see and so our competitors are smaller, the niches. A PARTNER YOU CAN TRUST

March 2010 27 Market Watch Legal expenses The before-the- event landscape Emmanuel Kenning ﬁnds that there are more questions than answers in the legal expenses insurance sphere

THERE IS arguably no segment of that the UK is on its own? Is the rest of the the insurance world that has had a world wrong? I suspect not.” more dramatic start to 2010 than legal Asplin accepts that the approach will expenses, a year that began with DAS take a change of mindset both from announcing a £10m loss in 2009 and the providers and the public – prices continued with the publication of the in Germany start at around €100 – but Jackson report on 14 January. With the argues that the increasing popularity full impact of the Ministry of Justice’s of aggregator services makes the reforms for low-value personal injury development necessary. He highlights: “As claims in road traffic accidents set to be aggregators grow, so fewer people take released in April, the drama is set to run legal expenses insurance as an add-on. some distance yet. How did the market How can we work with them? Standalone arrive at this point? insurance is probably the only way of Richard Candy, underwriting director selling successfully.” at Abbey Legal Protection, believes that It is not, however, a view shared by the product’s penetration has never everyone in the legal expenses community. been higher. He says: “As a class, we are Tony Buss, managing director at Arag, growing up and becoming more main- says: “Standalone is very unlikely to stream. You are much more likely to have happen.” He remarks that BTE has a a legal dispute than a fire but everyone is saturated penetration of 75% in the motor more concerned about insuring against insurance market and only approximately that DAS’ stance was incorrect. She fire.” With this in mind, he feels that the 25% in commercial lines, leaving great comments: “In our view, the add-on biggest challenge remains improving room for development. He continues: model is working fine and I don’t see people’s awareness of the product: “The “Awareness of legal expenses rose in the the need for fundamental changes.” perception is that it’s an add-on. People 2000s due to the after-the-event market Referring to the sums quoted for BTE by don’t know they have it and don’t use it.” becoming well known. BTE came up as Asplin, she adds: “There is no consumer Abbey Legal’s business has made an a reaction to it.” Buss says that, because demand for BTE at that price model: underwriting profit every year since its customers are used to the add-ons, for consumers are used to buying add-ons. launch in 1992, though at DAS that is BTE “the standalone model doesn’t work Legal providers have not historically not the case: it made a spectacular loss in in the UK. The genie is out of the bottle”. moved into the consumer market and 2009. Paul Asplin, chief executive officer at would need new retail brands.” DAS, explains: “Our top priority is to get Assured DAS has seen an 80% increase in personal before-the-event insurance back Buss’ confidence in the current system employment claims over the last two to profit.” Asplin points out that premiums prevailing is such that he is planning years. Whereas people would accept are at a historic low, so there is a lot of acquisitions and, having trebled Arag’s redundancy and a pay-off previously, scope for their increase. growth last year, aims to grow again by believing that they would soon find Yet putting up prices and explaining the 25% across 2010. Buss believes part of another job, the recession has changed process to business partners is not the only DAS’s decision is that “it needs to cover expectations. Growing awareness of the answer, according to Asplin. He cites the past losses, whereas we don’t have any coverage provided by BTE has also led to standalone sectors in Germany and South such baggage”. an increase in claims, as have regulatory Africa as examples of how the UK market Helen Withers, managing director of developments such as The Employment will have to evolve: “Does it make sense Arc Legal Assistance, backed the idea Act (2008) and greater understanding

28 www.broking.co.uk “As a class, we are growing up and becoming more mainstream. You are much more likely to have a legal dispute than a ﬁre but everyone is more concerned about insuring against ﬁre.”

Richard Candy, Abbey Legal Protection

Andy Glynne, head of product and Many weeks after publication, it appears pricing at FirstAssist Legal Protection, that the dust has cleared a little, though also believes that brokers should two key questions for brokers remain: continue to look to commercial lines: whether any of it will be implemented and “Out of home, motor and commercial, the effect on referral fees (see p.22). Nick the biggest new opportunity is Garner, managing director at MSL, says: commercial. It has taken its time and “Ultimately, the brokers would lose and now small business [buying] patterns are they would need to build revenue from starting to come via packaged products.” other areas. BTE premiums might have to rise to fund the claims process and they Broader [brokers] would have to pass that on to Another who believes that opportunities consumers or squeeze margins. exist for brokers to widen their horizons “We are confident that an outsourced is Steve Rowley, before-the-event claims function remains the most cost- business development manager at Allianz effective way for brokers to maximise Legal Protection. The company has noted their customer services.” that brokers have sometimes dealt with It is fair to say that no single irate customers who failed to phone for commentator has the definitive advice before taking action to then find answer about whether or not Jackson’s that their legal expenses policies were recommendations will be implemented. void. To help combat this, it launched Garner believes that this means brokers Allianz HR Protect. Rowley says: “We should continue to focus on having are moving away from a reactive, bolt-on communication channels open with their commercial legal expenses product to a LEI providers. He says: “It may impact service-led model that can be sold as an on our brokers and we need to work with by employees of the procedures that add-on or a standalone.” them and plan for how things may change. companies must follow when making According to Rowley, the product has It would be a big shift and there would be redundancies. the key elements of legal protection pressures on brokers and insurers. Brokers Statistics for 2008-09 from the Tribunal but takes the communication process a would need training, which we would Service show a 29% increase in cases for step forward: “We have legal helplines provide through our external teams.” unfair dismissal and 48% for redundancy but clients are also contacted regularly. Glynne comments: “The overall view pay. Withers says that Arc has also seen The cover also offers health and safety of this report is that it’s heavily weighted an increase but not in any way that would inspections.” toward cost reduction at the expense of lead to a new business model: “We’ve seen As reported in PB last month (p.8, Jan- access to justice. We have seen a number a rise of 15% in employment claims but we Feb 2010, www.broking.co.uk/1589610) of these types of reports that don’t go can accommodate it within our rates: it’s the Jackson report has stoked great anywhere and if this does then it won’t like an event in household.” controversy. Areas of legal expenses happen quickly.” Meanwhile, legal expenses insurance insurance such as liability adjusters and With changes occurring in motor lines continues to evolve into new areas: costs draughtsmen have been considered as a result of Ministry of Justice reforms looking to the future, Withers says that to be at particular risk from the proposals. and ongoing directives from the FSA, and landlords are snapping up this type Liz Garcia, head of costs at specialist little over a decade since the upheaval of of cover. She explains: “The property liability adjuster Garwyn, says: “Fixed fees the Access to Justice Act (1999), Glynne market is active for rental and it protects would impact most on cost negotiation concludes: “We need to let a new regime landlords from tenants who stopped firms in high-volume, low-value cases. run its course.” Given the start to the year paying. The book of business is growing Work that is fast-tracked. It is a quality that legal expenses insurance has had, the rapidly, rates are stable and the volume issue: you will be left with professionals sentiment captures a desire for stability, is rising.” who can deal with highly technical cases.” even if it is not expected by the market.

March 2010 29 Disaster recovery

Disaster recovery is relevant to all sizes of business. As Joe Brown, specialty commercial product manager at Hiscox UK, observes: “Disaster recovery planning is beneficial for all companies, large and small. As well as size, it is the nature Promoting of the business that determines how complex a disaster recovery plan needs to be. A company with a large, high-tech disaster information technology production line will have very different requirements from an accountant’s or solicitor’s office.” Mitchell Feldman, sales and marketing recovery director at Internet Group, explains: “Disaster recovery is often deemed Small and medium-sized more relevant to companies with time- sensitive, mission-critical or service-based businesses often do not offerings, though it should be considered have effective plans in by companies of all sizes if they wish to remain standing in the event of a place for when a business- disaster.” critical emergency strikes, Lyndon Bird, the Business Continuity Institute’s international and technical writes Jane Bernstein director, observes that business continuity management planning is a statutory requirement among parts of the public sector, as well as a regulatory requirement in some other sectors such as financial THE FIGURES ARE alarming and show Rod Ratsma, who heads the UK business services. Bird adds: “BCM is relevant to that, while many have no plans at all, it continuity team for Marsh, views this as all organisations that have customers, is likely that a high percentage of firms a fundamental part of the broker’s service suppliers, staff, IT and telecoms, sites and would not recover from a major incident. proposition: “We understand risk and part facilities, external financial needs and With an increasing array of disaster of this is how to recover when something reputations to manage.” recovery tools available – and as insurers goes wrong.” Those keen to add value by providing and brokers look to increase their share disaster recovery advice continue to face of the SME market – the question is, For the best resistance from small businesses, where could insurance professionals benefit by Yet with increased competition from awareness has historically been low. offering disaster recovery advice as part brokers and insurers, some doubt how far Paul Jackson, director at First Recovery, of an added value service? it can be viewed as a differentiator. Sean emphasises: “The UK disaster recovery Disaster recovery planning is not a new Bell, senior client risk manager at QBE, industry is characterised by very large concept and the insurance profession observes: “Everybody does it. We couldn’t companies providing service to other very has been offering assistance for some claim that, by doing this, we would be large companies.” time. There is now, though, increasing unique or that it’s a unique selling point. Independent research commissioned by consensus that the all-encompassing, We like to believe that we were adding Biba has revealed that 45% of businesses generic approach is no longer sufficient. some value and that it would be a barrier have only rough plans, or no plans, to deal Steve Foulsham, technical services to customers leaving.” with the effects of flood or storm damage. manager at the British Insurance Tony Gimple, managing director at The industry body confirms this statistic Brokers’ Association, asserts: “A template Crisis Survivor, remarks: “Rather than in the context of £3bn of flood claims or an aide memoir has a place but thinking about differentiation as such, arising from 2007 and 80% of businesses that should just be viewed as the start they should do it because it’s the best being affected by a major incident ceasing of the conversation.” He believes that thing to do for their clients.” Foulsham trading within 18 months. brokers should talk to their clients points out that this can only benefit The research has also revealed that about effective planning: “It makes good brokers in terms of competing with rivals, the number of small businesses claiming business sense for brokers to ensure that particularly in the context of intensifying that it would take more than six months this is part of the conversation they have competition from direct writers looking for their businesses to recover has nearly with their clients.” to attract SME business. trebled.

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The Business Continuity Institute says that it is active in engaging with organisations representing small businesses in the UK to promote awareness of the benefits of good business continuity planning. Bird describes that the feedback from small businesses shows that business continuity planning is important but not a priority, especially during a recession., especially during a recession. “However, the outbreak of swine flu in 2009 did make many small businesses think about the issue more closely. The UK government has already introduced an obligation on local authorities in the UK to provide advice and assistance to local businesses Free disaster recovery worth £425 around business continuity planning PB has joined forces with First Recovery to provide our readers with ‘next day’ disaster recovery for (The Civil Contingencies Act (2004)). This six people including offices, information technology, telecoms, email, internet, installation, support advice is delivered directly or through – free of charge to brokers for one year. existing networks such as Chambers of To register for this fantastic offer please call 020 7410 7499 or visit www.firstrecovery.co.uk/pb for Commerce,” explains Mr Bird. further information using the reference PBFR09. The storms and floods of recent years have also served to raise the profile of and human resources terms. Jones Despite the many barriers, the disaster recovery – but it is important observes: “The cost of implementation, message is that brokers should persist to note that headline-grabbing events the additional complexity added to an in promoting effective disaster recovery do not represent the main risks to organisation by adopting good disaster planning – particularly to SMEs. Jackson businesses. According to Phil Jones, recovery practices and business recovery emphasises: “There is a duty of care for chief technology officer of Shoden Data planning, as well as the time taken by brokers to talk to their customers about systems UK: “Recent earthquakes and key staff to develop these procedures: risk management in general and their terrorist activities grab the headlines but, all are often cited as reasons not to disaster preparedness.” fortunately, few disasters are quite so implement disaster recovery.” Ratsma adds that it can bring a financial extreme or devastating. Bad weather and benefit for premiums as well: “More industrial action are also highly visible Reassurance and more, it’s a question of insurers not in the press and media. Fire is still the Insurance professionals looking to covering you unless you can demonstrate most common disaster, particularly in promote disaster recovery planning need that you can recover from an incident, information technology terms.” to take these concerns into account. particularly in business interruption. I’ve In fact, one of the common In fact, there is much they can do to come across premium reductions [for misconceptions is that disasters can be reassure SMEs regarding potential costs. effective disaster recovery planning] but only big incidents. According to Crisis Brown points out: “While many larger I’ve also come across withdrawal of cover.” Survivor: “Industrial plants do explode organisations have a large budget to Jackson identifies significant benefits but more insidious threats exist, such as spend on disaster recovery planning – for for insurers where disaster recovery the workman who drills through a power example, maintaining hotsites – there are plans are in place. He observes that, in main, or the water tank that overflows also many low-cost steps that businesses addition to mitigating risks and reducing during a weekend. These can interrupt can take to ensure they get back on their the business interruption elements of a businesses for a week or more.” feet as quickly as possible. A business claim, it encourages customer retention. The main barriers to increased uptake continuity plan, highlighting basic things While businesses need to take disaster among SMEs remain not just a lack of such as alternative or remote working recovery seriously, it can be equally awareness but also a fear of the potential arrangements, can really make all the important for brokers to incorporate it investment required, both in financial difference.” into their service offerings.

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BROKERS AND MARKEL (UK) has made three Hartley and Andy Hulme have INTERMEDIARIES senior appointments. John also joined the company’s AFL INSURANCE BROKERS, Parkinson (pictured) has been made commercial new business and business operations manager, chaired by Alec Finch, has development underwriting having worked previously for appointed Eddy Dawson as teams as senior development Hastings Insurance Services, its aviation practice leader, where he was operations director. underwriter and senior bringing more than 17 years of Rupert Joce has been appointed underwriter respectively. aviation experience to the role. as a senior technical underwriter. Hartley joins from AIG, where Dawson has worked at Aon and Joce previously spent nine years he spent the last two years Marsh in both the UK and USA. as a development underwriter as a senior development with Ecclesiastical and before that underwriter. Hulme joins ANTUR has hired David he spent over 20 years at Aviva. from Aviva, where he was a Roberts as a managing Meanwhile, Anne Hudson has been European underwriter for its director and taken on Emma made a business development property owners’ team for Pridmore in the newly created manager after having spent five over three years. role of marketing manager. years at Ecclesiastical variously as a regional manager, national broker Roberts joins after working MISCELLANEOUS relationship manager and, latterly, with blue chip organisations CARMICHAELS has head of business marketing. across manufacturing, appointed Greg Crease as pharmaceuticals, service and a senior adjuster. He has finance. Pridmore joins after business and as its Italian He replaces Jesus Carmona, over 20 years’ loss adjusting two years as a marketing representative previously. who has been appointed experience in commercial lines officer at DesignPrint at City chief executive officer of Axa as well as direct experience of and County of Swansea. Prior INSURERS AND Assistance’s global travel domestic, clinical negligence, to this, she was marketing UNDERWRITERS business. Ewers joined Axa employers liability and and manager for Travel City Direct ACE EUROPEAN GROUP Assistance in 2008 and has public liability claims for the in Swansea for six years. has taken on Iain Ainslie as a worked in the Axa group for 10 NHS Litigation Authority. technology and cyber liability years. Prior to joining Axa, he Crease was previously a LOCKTON has promoted Peter underwriter. Based in London, was with London & Edinburgh specialist commercial lines Hall to managing director of its he will report to Trevor Ormes, as director of its commercial adjuster for Merlin Claims. cargo practice. He has 20 years’ product head of financial business operations and has experience in the global cargo lines. Ainslie has worked in over 20 years’ experience in GAB ROBINS has appointed insurance market, for the most the London market for over 24 financial services. Andrew Cavan as a major part as a broker with Lockton. years, 21 of which were within and complex loss adjuster, information technology. His STERLING has appointed based in its Manchester MILLER has appointed experience covers application Lee Venamore as a regional office. He rejoins the Brian Connolly to its energy, development, project development manager. company after four years at property and casualty business management, infrastructure, Reporting to director of Crawfords, where he was a unit. He has over 30 years’ security, consultancy and general insurance David major and complex loss team experience in insurance as information technology Sweeney, Venamore will be leader. Cavan has extensive an underwriter and a broker. management. responsible for developing experience in the major loss Meanwhile, Alessandro Noce relations with south- arena across various industry has also joined the company in AXA ASSISTANCE has east-based brokers and sectors including chemicals, its programmes and facilities promoted Bob Ewers to working with new business pharmaceuticals, hotel and business. Noce worked for chief executive officer of its underwriters to develop team leisure, manufacturing, retail Inter Hannover’s agency UK and Ireland operations. sales capabilities. Nicholas and education.

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34 www.broking.co.uk Director’s Q&A Thatchers

Tell us about your company Thatchers is a family-owned company that was founded in 1904 and is based in the heart of Somerset in a village called Sandford, which is near Weston-super- Mare. We have 70 staff, each of whom shares our passion for our premium ciders made from only English apples, many of which are sourced from our own orchards here in Somerset. We have turnover currently of around £19m and have seen signiﬁcant growth over the past ﬁve years.

What insurances does Thatchers place and with which companies? We renewed our insurance at the beginning of February. We use Aviva for all our insurance except that for products, for which we use Lockton. We take cover for commercial, motor fleet, employers’ liability and, most recently, we have taken up directors’ and officers’ insurance. We do everything on site and need to protect an orchard, packaging company, brewery and pressing machinery. We are audited Aviva. We were also given a grade A for the European Food Safety Inspection Services award. We also implement a full training regime. Our last claim was for when a tractor was stolen three years ago: Traditional values we were paid the value estimate promptly. PB interviews managing director of cider maker Describe the relationship with Thatchers, Martin Thatcher, who is the fourth your broker Our broker, Yate-based Jelf group, has generation of his family to run the company become more of a business partner than a supplier. The staff have in-depth knowledge of our business and needs supermarkets such as Sainsbury’s, Tesco on the local ITV network in early summer, and are also able to highlight quickly any and everybody between. which will centre on Thatchers Gold. In potential insurance gaps. It is especially We are always keen to keep innovating September, the firm will have an open day nice that someone in Bristol is always with cider to ensure that our success does on which people can look around, have a available at the end of a phone. not slow. We have launched products such guided tour and taste the products. We also use Jelf for our employee as Ciderberry, a rich, red medium fruit benefits. Thatchers has had a working cider of blueberries, blackcurrant and What would you like to see improved relationship with Chris Jelf, the broker’s raspberries that took six months to create in the insurance industry? founder, for over 20 years. He is also a from idea to launch. Our main issue with the insurance non-executive director of Thatchers. There is still an appetite for a drink industry is its seeming reluctance to in the recession and cider has become dispute any third-party claims however What challenges does your business increasingly popular in recent years, good the evidence to the contrary. In face in the downturn? especially following Magners’ marketing addition, the ability of the insurers to We have been very fortunate in the campaign. We have done some billboard charge an ever-increasing premium downturn that our turnover has continued and magazine advertising ourselves, a despite no-claims records is a pain, to grow significantly. Most of the mix between trade and consumer, and are although Jelf is active in minimising this business is pub trade but we also cover embarking on our first television advert financial increase.

March 2010 35 Statistics Provided by

Top 20 UK personal lines insurers Underwriting Combined Loss Rank Rank GWP AMB# Company name Rating Group name result* ratio ratio 2008 2007 (£000s) (£000s) (%) (%) 1 1 85250 Aviva A Aviva 2,673,947 –45,683 106.9 63.3

2 2 85203 Axa NR–5 Axa 1,949,779 –60,073 105.7 67.5

The British United 3 3 84804 Bupa NR–5 1,894,963 110,467 94.0 78.7 Provident Association The Royal Bank 4 4 87316 Direct Line NR–5 1,690,212 148,444 91.9 68.7 of Scotland Group 5 5 86257 RSA A RSA Insurance Group 1,519,403 10,805 97.9 60.1 The Royal Bank 6 6 87648 UK Insurance NR–5 1,188,474 –13,874 104.3 66.2 of Scotland Group The Royal Bank 7 7 87274 Churchill NR–5 1,120,696 50,103 93.4 59.7 of Scotland Group 8 8 87708 Zurich A(2) Zurich Financial Services 865,571 10,100 97.9 62.3 9 9 87601 St Andrews NR–5 Lloyds Banking Group 709,286 142,319 70.2 23.1 10 10 87233 Fortis NR–5 Fortis 679,909 –8,826 101.4 74.3 11 11 87642 LloydsTSB NR–5 Lloyds Banking Group 598,736 131,106 76.2 33.3 12 12 86373 Allianz A+ Allianz Societas Europaea 575,188 –79,709 113.5 69.8 13 13 85047 Aviva International A Aviva 566,490 –10,266 106.6 44.4 14 14 86160 Great Lakes Reins A+ Munich Reinsurance 521,573 –16,601 N/A N/A 15 16 84803 Esure NR–5 Lloyds Banking Group 518,568 –38,372 105.3 79.8 16 29 87416 Chartis(1) NR–5 American International Group 481,329 31,209 86.2 37.5 Liverpool Victoria 17 19 87864 LV= NR–5 395,585 –25,769 107.1 61.2 Friendly Society 18 17 86485 Ace European Group A+ Ace 376,151 15,966 79.5 31.7 19 20 85812 Financial Insurance NR–5 Genworth Financial 353,217 13,462 106.4 17.4 The National Farmers Union 20 22 85012 NFU Mutual NR–5 336,586 –39,985 114.1 92.7 Mutual Insurance Society

(1)GWP figure includes £51,347,000 in respect of consideration of the transfer of business from New Hampshire Insurance Company (UK Branch) (AMB# 87709) (“NH”); u/r and ratios also include amounts in respect of consideration of the transfer. 2007 ranking is based on Chartis Insurance UK Limited’s (AIG UK between 3/12/2007and 1/12/2009 and Landmark Insurance before 3/12/2007) business only. NH was ranked #28 in 2007 for total personal insurance business lines. (2)The listed AM Best rating applies to Zurich Insurance Company, Switzerland (AMB# 85096). *Underwriting result excludes investment income. Note: Some ratio figures are (N/A) not available because all of these companies’ total personal insurance business is accounted for on an underwriting year basis, for which earned premiums is not disclosed on the FSA return. Figures in above table are based on FSA returns of financial year 2008 for total personal insurance business lines (reporting categories 110, 120, 160 and 180). Ratings as of February 3, 2010.

Rating modifiers Modifier Descriptor Definition Not-rated categories u Under review Best’s Rating opinion of the company For companies not assigned a Best’s Rating the five categories are: is under review NR-1: Insufficient data NR-2: Insufficient size or operating experience s Syndicate Assigned to syndicates operating at Lloyd’s NR-3: Rating procedure inapplicable NR-4: Company request NR-5: Not formally followed

36 www.broking.co.uk Policy Market

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Expert Underwriting. Supporting Brokers Locally.

Our first new regional underwriting office is based in the North East and demonstrates a significant investment in supporting brokers locally, giving you access to an expert underwriting team who you can trade with face to face.

We are dedicated to providing brokers with the right product for their clients, we can deal with just about anything - so put us to the test and talk to someone who understands your business.

Tel: 0191 404 6835 Email: [email protected]

You can also quote and buy many of our products online: www.towergate.co.uk/quoteandbuy

Towergate Underwriting and Towergate Regional Underwriting Newcastle are trading names of Towergate Underwriting Group Limited. Registered in England No 4043759 Authorised and regulated by the Financial Services Authority

March 2010 37 Policy Market / Recruitment

How can a young offender avoid becoming an

older offender? Insurance Scheme for INTELLECTUAL PROPERTY

INSURANCE FOR PROTECTION AGAINST INFRINGEMENT OF:-

Join leaders from the insurance industry tohelpyoungpeopleovercomebarriers We welcome any enquiries and offer an efficient, and get their lives working. professional, and helpful service.

TRACY BLANEY or SIMON CARTER 020 8315 5000 [email protected]

princes-trust.org.uk/insurance

The Prince’s Trust is a registered charity, number 1079675, incorporated by Royal Charter. Authorised and Regulated by the Financial Services Authority

PROMOTIONAL ADVERTISING GIFTS

RIALTO CROSS CLIP P FOUNTAIN CROSS CENTURY II EMBLEMS PEN/BALLPEN MEDALIST CROSS CLASSIC 10 SET various shapes R Striking 2-tone metal CARAT ROLLED Your logo, your from only in up to 6 combination of GOLD BALLPEN £27.95 each colours add message on a Wide I polished chrome & OR PENCIL £2.75 each Range of Products 23 Karat gold plate. Individually (min. 25 pens) Boxed individually or boxed with Cross for Conferences, N plus (first time) as sets with Cross lifetime £95 tooling Meetings, lifetime guarantee. guarantee. Price T charge. Price includes laser includes laser Golf Days, E engraving your engraving your Fund Raising, message on the cap. message on the INDIVIDUALLY BOXED cap in area & Events, D PARKER 88 RIALTO BALLPEN Ballpen/pencil PARKER JOTTER BALLPENS from £25.95 ea. 35x5mm. Ladies Nights, Matt black or blue. Price includes ballpen or pencil Barrel in blue, black, white or red Laser Engraving on barrel with Rollball with stainless steel top. Price Award Ceremonies, from £32.95 each. from £38 each. W individual names possible if includes 1 colour print in area Give-Aways, & required. Supplied in luxury box. Fountain pen 35x22mm - from £2.30 each. I Price from £19.00 each. from £40.95 ea. 2nd colour print add 7p each. Souvenirs T NO HIDDEN EXTRAS! 2nd colour print FREE DESIGN SERVICE! H add 7p each Delivery of printed items usually within 14/21 days Just add ONE £35 charge Y and our Catalogue/Online prices fully include O To print on box and pens add £2 ea. designing printing/ U SUPPLIED IN LUXURY processing your message WATERMAN BLUE BOX as specified on your chosen R items & delivery UK for any BALMAIN REIMS WRITING SET SHEAFFER NO-NONSENSE Ballpen PARKER VECTOR ROLLBALL WATERMAN HEMISPHERE Ballpen number of different products Rollerball and ballpen set in Ballpen in white, navy blue, Blue, black, white, red or green Black ballpen with gold trim. ordered at the same time M Balmain Paris gift box. Price for black or yellow with black rubber barrels with chrome trim. Price Price includes laser engraving on - TALK TO US ABOUT laser engraving on both pens or grip. Supplied in suedette sleeve. includes print around the barrel the pen. Individual names if YOUR SPECIAL E on the silver label of box lid Price includes print in area in 1 colour in area 50x25mm required at no extra cost. REQUIREMENTS - - from £10.95 each. 40x30mm - from £1.50 each. - from £2.80 each. Price from £19.95 each. S Our catalogue of VIEW & BUY 1000s of other Gift Ideas S ONLINE will be rushed to you A EMC ADVERTISING GIFTS Tel: 0845 345 1064 on request. G Derwent House • 1064 High Road • Whetstone • London N20 0YY E Fax: 0845 345 1065 E-Mail: [email protected] Web: www.emcadgifts.co.uk RIALTO 11.07

38 www.broking.co.uk Policy Market / Recruitment

RetailersON GUARD SINCE 1989

UK Facilities is able to place a wide A well established, rapidly expanding and range including: strongly independent Insurance Broker, � Clothing opening a new oﬃce in Leeds, West Yorkshire � Fast Food & Takeaway is oﬀering opportunities to proven and � Fish & Chip Shops successful Corporate Account Executives � General Stores and Corporate Account Handlers. � Hairdressers (incl treatment treatment risk) risk) � Newsagents � If you are interested in applying then please Offices � visit www.insurance-partnership.com and Off Licences � Restaurants/Cafes download the application form or email your CV to [email protected] For a quotation contact us NOW: alternatively please call David Giblin, Tel:For a quotation 01204 contact 394080 us NOW: HR Manager on 01482 388 564 Tel: 01204 394080 f 01204 370232 e [email protected] UKf Underwriting f 01204 370232 e [email protected] UKf Underwriting UK FACILITIES PLC, BARNETT HOUSE, VIKING STREET, BOLTON BL3 2RR UK FACILITIES LTD, BARNETT HOUSE, VIKING STREET, BOLTON BL3 2RR

wasteinsure.co.uk Exclusive Property and Liability Scheme

Types of risks sought: Classes provided: For very competitive terms � Skip Hire and � Property inc. Buildings, call us today: Waste Transfer Stations Plant, BI etc. � Materials Recycling � Public and Employers Liability 01277 844 373 (Paper, Plastics, etc.) � Pollution inc. Own Site or email: � Hazardous Waste inc. � Financial Loss [email protected] Asbestos � Spoilt Melts Extension � Landfill Operators Authorised and regulated by � Incinerators the Financial Services Authority

March 2010 39 Policy Market

Alarm Companies Electrical Contractors Fire Extinguishing Gifts

Asbestos Removal Fleet To advertise call COURIER AND SUB–BROKING SPECIALISTS Exclusive Asbestos • VAN LIABILITY 020 7316 • GOODS IN TRANSIT Removers Scheme • EUROPEAN COVER AND BREAKDOWN • Exclusive Scheme • Financial Loss to 9632 • Quick Turnaround £500k inc. ALL RISKS CATERED FOR � • A Rated Security • £10m EL, PL and Motor � • Wide Wording Pollution Limits Fleet – Inc Haulage � All Commercial Haulage Insurance Speak to THE Asbestos Experts � Road Risks and Motor Trade � Buildings and Contents Inc Distressed T:01277 844 373 Events F:01277 844 399 Our Van Scheme; W: direct-ins.co.uk H asS eenB etterC hoice,

Authorised and Regulated by the Financial Services Authority and we now use When it comes to TRIDENT INSURANCE SERVICES LTD.

insuring events, you Visit us at www.trident-insurance.co.uk Immediate cover and fast response To advertise call can’t afford to do this… All sub-broking provided for Immediate facilities available 020 7316 9632 Event Assured is designed Call for details and a TOBA to be the best on the Frank Pace market, and is now the best on the web too. 0800 038 9000 Email: frank [email protected] Cleaning Contractors If you want HAULAGE INSURANCE the best cover, with quality MOTOR FLEET underwriters Ally Templeton and you want to DL 020 7816 1251 work with a team [email protected] of experienced Don’t forget insurance PROPERTY & LIABILITY professionals, the choice is clear: Richard Stiling to mention DL 020 7816 1269 [email protected] ‘Policy TRANSIT & CARGO Neil Woolner Market’ DL 020 7816 1220 Your event, our risk [email protected] ¥ +44(0)1376 330624 when For full information visit home: our website at www.rldavison.co.uk www.event-assured.com replying R.L.Davison & Co. Ltd., event insurance: Bury House, 31 Bury Street, www.event-insurance-online.com London, EC3A 5AH exhibitor insurance: to adverts Authorised and regulated by the Financial Services Authority. www.exhibitor-insurance-online.com

40 www.broking.co.uk Policy Market

Household Liablity Self Drive Hire Student Let

LIABILITY Civil Engineers, Groundworkers, Waste & Recycling Trades, Hauliers, High Risk Contractors, Employers Liability, Public & Products Liability, Excess Public & Products Liability, Excess Employers Liability Richard Stiling DL 020 7816 1269 [email protected] For full information visit our website at www.rldavison.co.uk R.L.Davison & Co. Ltd., Bury House, 31 Bury Street, London, EC3A 5AH Authorised and regulated by the Financial Services Authority. Don’t forget to Let Property Motor Fleet To advertise call mention 020 7316 9632 ‘Policy Market’ when replying Unoccupied Property to adverts

Security MOTOR FLEET HGVs, Vans, Cars, Buses & Coaches, Private Hire, Self-Drive Hire Ally Templeton DL 020 7816 1251 [email protected] Graeme Flynn DL 020 7816 1267 [email protected] UNOCCUPIED PROPERTY Schemes and facilities for Unoccupied Property, Commercial & Residential, Leisure and Entertainment Risks, For full information visit our website at www.rldavison.co.uk Nightclubs & Takeaways R.L.Davison & Co. Ltd., Martin Parker Bury House, 31 Bury Street, DL 020 7816 1311 To advertise London, EC3A 5AH [email protected] Authorised and regulated by the Financial Services Authority. Richard Stiling call DL 020 7816 1269 020 7316 [email protected]

For full information visit our website at 9632 To advertise call www.rldavison.co.uk R.L.Davison & Co. Ltd., 020 7316 9632 Bury House, 31 Bury Street, London, EC3A 5AH Authorised and regulated by the Financial Services Authority.

March 2010 41 Competition and Puzzle

WIN JOHN LEWIS VOUCHERS 87 6 5 BECAUSE FEW OF us have the fortune of a politician’s expenses, this month PB is offering its own version of the John Lewis list: £50 94 7 of vouchers. To be in with a chance of winning, go to www.broking. co.uk/competition to answer this simple question: Following the 6 21 9 Chancellor of the Exchequer’s announcement, from what date should IPT on broker fees be collected? The winner of the Jan-Feb prize is Roz Burnett of ADS Insurance, 3 52 who knew that, according to a survey by BDO, the Islamic ﬁnance industry is expected 6 1 to grow by up to 20% over the next three years. 9 8 1 Entries must reach

us no later than 22 7 693 websudoku.com by Puzzle March. For full terms and conditions of 6 47 the competition, go to www.broking. co.uk/competition. 5 4 9 8

PB Week Gossip from the industry NEXT MONTH PB explores the world of TALENT, TRAINING AND WEATHERMEN online marketing and the On 17 February, Alasdair Stewart, head loyalty and financial performance. This opportunities presented by of corporate development (general investment also has a longer-term impact the internet and other tech- insurance) at the CII, wrote: ‘It’s at this time in helping to raise professionalism with its nologies as customers’ buying of year that the invitations arrive asking me, related benefits for the sector.’ habits evolve. In our regular as a representative of the Chartered Insurance Market Watch, we look at Institute, to be a speaker at trade conferences On 3 February, Mike Crane, commercial how the high net worth sector and exhibitions. director at LV= Broker, wrote: ‘It feels like has coped with the recession; When I attend these events, the main focus my job has changed beyond recognition and in a special feature we is invariably on trading, driving income and since I arrived. I can’t quite believe that we look ahead to the annual Biba commission rates and what can be done to launched the products just two years ago and conference with its theme of increase business value. What always interests how much the business has changed. ‘professionalism in a chang- me is how little emphasis is placed on the Monday was spent doing staff updates ing world’. Remember to keep importance of attracting and retaining the in our offices in Brentwood, originally the up to date with all the latest right talent as a value driver. Highway headquarters but now one of LV= news at www.broking.co.uk. Evidence shows that, where investment Broker’s main offices. The staff updates are is made in staff personal development, designed to tell the wider LV= team about there are clear and positive results for staff what we achieved last year and our plans for 3 8 5 4 1 2 9 6 7 this year. I managed to get my team to assist, 2 7 6 3 9 8 4 1 5 so I wasn’t droning on (too much). My team SIGN UP added some humour by presenting their slides 9 1 4 5 7 6 3 8 2 in a weatherman style: lots of sun and a few 8 3 7 1 2 9 6 5 4 Read PB Week, the official weekly stormy clouds!’ PB blog in which the PB team keeps 4 9 1 7 6 5 2 3 8 • The winner of £50 of John Lewis vouchers in you in touch with the latest 5 6 2 8 3 4 7 9 1 news, parties and events from the the prize draw for participating in our reader profession. Sign up for email alerts at survey was Claire Markey of Oval James in 1 4 9 6 8 7 5 2 3 www.broking.co.uk/static/subscribe. Belfast. A big thank you to everyone who took 6 5 8 2 4 3 1 7 9 PB is also tweeting news and views at the time to participate and give their valuable www.twitter.com/probroking. 7 2 3 9 5 1 8 4 6

feedback on PB. SOLUTION – JAN-FEB 2010

42 www.broking.co.uk Legal Expenses? Together we’ve got it covered.

MSL Legal Expenses Limited is one of the UK's most experienced Industry award-winners MSL offer a range of products - for and longest established providers of legal expenses insurance. motorists, households, businesses and landlords - especially designed to add value to your business. Combine this with the Since 1988, the company has specialised in developing a suite of company's supremely efficient Accident Management Service and products and services designed to complement, enhance and add you have one seamless operation, comprising all the elements you value to those offered by today's broker. could need. That's why, for excellent support, client satisfaction and great profit opportunities, more brokers are turning to MSL as their legal expenses (and now assistance products') partner of choice.

For more details call 0800 195 9999 [email protected] www.msl-legalexpenses.co.uk

MSL Legal Expenses Limited is authorised and regulated by the Financial Services Authority and are also members of the Financial Services Compensation Scheme and the Financial Ombudsman Service.