SME clients chasing the cheapest insurance are attracted by direct and internet deals, but many still value brokers who can save them time, secure the right products and smooth the claims process. A brokered deal can even be cheaper
Felixstowe-based yachting and chandlery firm Seamark Nunn suffered a damaging break-in nearly two years ago. The company’s subsequent experience with its insurance company showed to managing director Andrew Nunn the value of having a broker.
“The burglars got in through a window and pinched a load of outboard engines, which were worth quite a lot of money,” Nunn explains.
When Nunn claimed for the loss on his insurance, a complication arose. While the site had been fully alarmed, the system had not activated.
“Even though the alarm was armed, it failed to go off and initially, as a result, the insurance company tried to wriggle a bit. But our broker, Ryan Insurance Group, got the claim paid and so, for that alone, using them has been well worth it,” he adds.
The small and medium-sized enterprise (SME) market, particularly at the ‘S’ end of the range, increasingly mirrors personal lines, with more direct and internet-based transactions, concedes Heath Lambert’s managing director of commercial affinity and small business, Mike Owen.
“The push towards quotation by technology will continue to gather pace,” he says. But he adds the caveat that the range and scale of firms’ insurance needs will always require someone to say: ‘Guess what, have you got this covered?’ “I think there is still a very clear role for brokers,” he says.
Even in these straitened times, when chasing the lowest premium is so often perceived to be the chief motivator, many SMEs don’t select their broker on price grounds alone.
Of course, like any other clients, they want their brokers to secure a good deal. But brokers will be comforted by feedback that small firms want their brokers to source the right sort of insurance for their business and the right level of cover. Crucially, an insurer that will pay out in the event of a claim, even if it sometimes means a bit of arm-twisting, is just as important.
For Nunn, whose firm employs 13 people, a combination of peace of mind and the desire to “get it off my desk” have been key reasons behind his decision to go down the broker route.
“If I had time to go trawling through a lot of different websites, I suppose I might well find a better deal, but time is money,” he says.
“With a broker you can simply leave it with them. They earn their commission from the insurance companies and I’m not having to deal with it myself, or with loads of different call centres.”
“Having a broker also helps if you need to get something changed on a policy quickly, such as needing to add another driver or something like that,” he adds.
Broker advanced partial payment
Mayfair-based corporate finance adviser and fund manager Argo St George had a similar experience to Seamark Nunn back in July last year when it suffered the theft of a laptop from its office premises.
The claim was initially rejected by the company’s insurer, which argued that the policy excluded theft by “persons lawfully on the premises”.
But, with the help of its broker Jeffery Associates and, eventually, the Financial Services Ombudsman, the claim was resolved with a full payment for a replacement laptop (£1,800).
“[Jeffery Associates] are cost-effective and have more than paid for themselves. They understand what we need and are not a big, faceless conglomerate,” Argo St George partner Daniel Geoghegan explains.
In the case of the laptop theft, the broker’s Mike Jeffery even advanced Argo St George a partial payment, he points out.
“Using Jeffery Associates has definitely been cheaper for us than buying our insurance direct. It’s hard to quantify overall, but when we first started using them the saving was at least 20%. But it’s not just about price, it’s about quality of service,” Geoghegan adds.
And the expertise brokers can bring in terms of managing and resolving claims has become even more important for SMEs during the downturn.
Research from Biba last month suggested that brokers are having to work harder to get claims paid, with 93% saying they regularly have to negotiate up to a 20% uplift in claims’ settlements and more than two-thirds having to “get tough” with insurers on behalf of clients.
The association added that it had seen an increase of almost 10% in the number of brokers who said they had to fight for customers’ payouts as insurers were enforcing stricter interpretations of policy wordings.
“Post-recession, cost has, of course, become a more important factor. But we are also getting clients saying they cannot now afford any gaps in their insurance because they cannot afford a loss through a claim as they no longer have the same reserves,” Marshall Wooldridge director Andy May agrees.
This has also meant small firms are tending to review their insurance needs more often. There, again, having a broker to hand can be an asset.
“If you are a sole tradesman wanting, say, single liability insurance then, yes, you can probably do that pretty straightforwardly by going to someone like Direct Line,” May concedes.
“Where the broker makes a difference is when you have a non-standard construction or stock and being able to work around that. The other big advantage is that we can hold someone’s hand when something goes wrong.
“Far too often we are seeing situations where the computer just says ‘no’, even when claims are quite legitimate, so it is about dealing with claims and getting them through and paid. Yes, it is possible to look around for a cheaper option, but there will often be a reason for it being cheaper,” he adds.
Does the package tie everything up?
Many small businesses want packaged policies that give the widest range of cover for the best value, particularly in the current climate, says Ryan commercial lines manager Andrew Glen.
“Every SME is different, however small their turnover, but often it will be packaged policies, so normally including things such as material damage, property, machinery, plant and contents, business interruption, cash on premises, product and public liability and so on.
“While you may well be able to go online and get a mark-down on the price, there may be things that you need to be covering that you might not have thought about. A good broker can ensure everything is packaged together and all the boxes have been ticked,” he adds. (See box, ‘The right products’.)
A good independent brokerage can also, of course, source deals not listed on comparison sites and often secure special rates, not to mention having the advantage of only needing to take your details once, points out health package specialist Health Care Partners sales manager Marc Chatfield. (See box ‘Using a broker to help secure staff benefits’.)
“Truly independent brokers can deal with all the insurers in the market; that is your ultimate goal,” Chatfield says.
“SMEs tend to only appreciate the value of their broker when they have a claim or a loss.
If you apply online or just speak to someone in an insurance company, there is a chance that you will end up with cover that is not always suitable,” Lark Insurance managing director Stephen Lark advises.
The fact that small, independent brokerages will be small businesses themselves can give them an extra understanding of the pressures facing SMEs, as well as their requirements, Marshall Wooldridge’s May points out.
“A large insurance house, almost by definition, is going to be less bothered about looking after you. A large brokerage, similarly, may well have a small business unit, but it will still have larger costs, rents and so on,” he says.
How to find a broker
Word of mouth and personal recommendation are two of the most common ways small businesses find brokers. But a good brokerage need not be local, emphasises Argo St George’s Geoghegan. While Argo is in London, its broker Jeffery Associates is based in Edinburgh.
“It is really just a case of asking around and finding out who has had good experiences and then going with the recommendation that you think will work for you. But the main thing we’ve learnt is not to assume it has to be a brokerage in your own town,” he advises.
“We have seen queries about how to find a broker increasing quite dramatically each year,” adds Graeme Trudgill, technical and corporate affairs executive at Biba, which offers a ‘Find a Broker’ resource on its website.
As well as Biba, SMEs will often turn to organisations such as BusinessLink and the Chartered Insurance Institute for advice. Another common route to deals can be through membership of a small business organisation, such as the Federation of Small Businesses (which partners with Towergate to provide insurance services to its members) or the Forum of Private Business.
“SMEs like dealing with brokers because they often feel they are more on their side, they are there to help the client get the most appropriate deal they can,” Trudgill says.
And, as Nunn discovered, it is when a claim needs to be made that brokers can often prove their worth to their SME clients. “It is really important because there will be someone fighting the client’s corner to ensure the claim is paid or there is a higher return on the claim. The claim is the shop window for the broker.” IT
The right products
Camberley-based G&H Plant Hire Services sources a combined insurance package through its broker Marshall Wooldridge, says the company's finance director Richard Eynon.
The company, which is also known as Airtek and employs 14 staff and two sub-contractors, manufactures and supplies safety equipment for the construction industry.
"We have a commercial, combined package, covering things like product and employer liability, motor fleet and plant, directors' and officers' liability insurance and so on," says Eynon.
"We tend to get a lot of small claims for motor vehicle damage and things getting crushed or broken. This year, we also suffered a number of thefts from our site. [Marshall Wooldridge] sorted it all out very quickly.
"Probably the most important advantage for us is around the relationships we have. They understand us and what we do and we understand them. Touch wood, we have never had a problem with a claim, but I suspect that's because the insurance products have been the right ones. Whenever we've had a claim, the insurers have always paid out."