Blog: The branch network debate

The recent ‘streamlining’ activities by some of the larger Insurers, and the tentative push into the regions by others, have re-opened an old debate. This is namely the hackneyed question of whether or not it is necessary for a UK commercial insurer, which gets its business through brokers, to have a network of regional offices.

If you ask a broker the question I suspect there is a fair chance they would prefer to deal locally given the choice. However, the fact is, for the majority of regional independent brokers, the days of a personal local service are gone. Instead they face the frustration and delay of faceless remote call centers where contacts can change and there is little or no help for them to grow their businesses. Set against that alternative a regional branch office could seem the cure for all ills.

The problem is economic reality. That reality says that if you are an insurer and want to deliver acceptable service while managing your costs effectively the branch model is probably not ideal. In fact the current tide of activity suggests that the majority of insurers would prefer not to have regional branch network – if they felt they could get away with it with their brokers. This is exacerbated by the length of the current soft market cycle which is forcing insurers to look into some previously sacrosanct areas of their operations in order to find cost savings.

The trouble is that the alternative central solution – which involves a large concentration of people in one location – is not usually done very well according to brokers.

This general failure is surprising given that technology now allows information to be sent anywhere instantly. In fact modern web-based systems offer the promise of the holy grail for insurers. They therefore ought to be able to manage their costs well, deliver added value to brokers by producing high quality documentation and service quickly and manage their business with a degree of standardisation and control by concentrating their resources into larger pooled resource centers. Granted this is easier to achieve for smaller legacy-free players but every survey you read about service seems to suggest that generally these synergies are simply not being delivered.

So we are at a tipping point in the market. There seems little appetite for a return to the days of the duplication and additional cost of widespread insurer representation in the provinces. The alternative models make effective use of technology coupled with good systems of remote management. This is through a home-based sales or underwriting force, which operates in the regions and reports back to a centralised location. It may take a long time to move away from the traditional model but this I believe is the evolution required to sustainably deliver and meet regional broker’s expectations into the 21st century.

Paul Upton is chief executive of Evolution Underwriting.