Analysis: Secrets of successful schemes

Running a successful insurance schemes business is no easy feat.

Not only does it require in-depth knowledge of a niche sector, it also brings with it a highly specialised customer base with its own risk profile and claims history, which is often very different to that of the wider UKGI market.

Despite the challenges, SEIB commercial director Suzy Middleton says the first stage of running a successful schemes business is understanding the market.

“A lot of brokers think placing business of a similar nature together with one carrier can be construed as a scheme, but that’s not really true,” she says.

Understanding

“The most successful schemes generally have a tie up with an affinity or an organisation.”

Middleton argues that affinity partnerships grant access to a cheap distribution network, while professional membership organisations often come with the added benefit of having a code of conduct, ensuring that members hold themselves to the highest professional standards, reducing the risk of a claim.

The sector-specific nature of schemes also means that schemes businesses can provide additional services on top of the insurance cover they provide. Middleton says that by excelling in this area, schemes can drive up loyalty and retention, and build lasting relationships that help drive growth.

“As a schemes broker you will understand your customer’s business, understand their market and can produce risk management advice that fits their criteria,” she says.

Engage at a deeper level

Ray Johnson, proprietor at Independent Insurance Services, says that it is essential that brokers engage with their clients on a level deeper than insurance, and that is especially important in the insurance schemes market, with its closer-knit network of clients.

“The key thing for growth is engaging with the customer, and that can be quite difficult,” he says. “But the more you engage the more the people in the sector will learn to understand and trust you from an insurance and risk management perspective.”

Johnson adds that the best way to engage with a schemes customer is to find out the drivers behind the values of their business: “Our particular scheme, Insure Green, specialises in the environment. That means that the environmental perspective is very important to our clients, so if we can be more credible by being a greener business then they will endeavour to buy something [from us] that compliments their ethos.”

Diversification

Middleton says that, while specialisation has its advantages, schemes businesses must also ensure they diversify to benefit from growth across a range of different sectors and level out the peaks and troughs that come from engaging with small and niche sectors within a market.

“The way we’ve kept quite tight is we’ve diversified, especially on existing portfolios,” she says. “For example, funeral directors also run their prestige vehicles for weddings and chauffeuring dignitaries around, so we extended our funeral director portfolio to also include weddings and executive hire, which fits the criteria [of what that market is looking for].

“We do a lot of cross-sell initiatives, because if you keep your horses at home you are more than likely to have an equestrian country home, so identifying and profiling our clients a lot more is a necessity these days.”

The difficulty with finding success in a particular market, however, is the attention it can bring from the more mainstream insurance providers, creating unwanted competition that can drive down prices and disrupt established sectors.

‘Me-too’ competition

“Looking at new markets and new angles is a main growth area, but there is a lot of ‘me too’ out there,” Middleton says. “If we run a really good scheme, you will find someone else will think of it as a good idea and do something similar. The problem with that is it pushes down the rates very competitively, and then the underwriting becomes more of a difficulty.

“There is that threat from people coming in, but they soon retreat. We have the expertise and specialism, and we generally have that affinity scheme as well.

“You will generally find [these new entrants] will have a carrier that has said: ‘We want a quick win’ and then they suddenly find the claims coming in and they haven’t got the volume or the experience [to deal with that properly].”

Staying on top

To remain at the top of the pile, Middleton says schemes businesses need to ensure that they have the specialists required to properly manage the needs of their clients, such as the experienced equine loss-adjusters and lawyers SEIB uses.

“Our service standards are very important for retention,” she says. “We have very open customer service, so people can speak to the same people and we get a lot of customer feedback saying they love being able to speak to the same person who set up their policy when they come to renewal or want to make changes. They feel it is friendly and, especially on the equestrian side, 99% of our guys are horse riders themselves, so they have empathy with the customers – which is very key in that area because it is consumer-led.

“[On the wholesale side], you have brokers trying to trade on policies they don’t understand and if they can’t insure their client’s horse they are going to lose their business, so they feel supported [when they can come to us for specialist advice and support].”