Consolidation has caused a drop in insurers' service standards. John Jackson takes a look at what can be done.
Many brokers have a serious lack of trust in insurers. Falling service standards have led to concern about the long-term commitment of carriers to the intermediary channel.
While insurers claim to have improved their service, there are widespread complaints of general inefficiency in their back-office administration.
There is an open admission from insurers that they operate service standards at different levels depending on the volume of business the broker provides.
While the top brokers are well supported by insurers, a second, and even third, division of brokers is receiving less than full support.
Leading broker trade body the British Insurance Brokers' Association (Biba) is so concerned about deteriorating relationships with insurers that "trust" is the central theme of their annual conference in Manchester next year.
Chief executive Mike Williams says: "We think trust is the next big issue that has to be resolved. Insurance is about utmost good faith but, unfortunately, there are too many examples where this seems to have broken down.
"Just about all of the insurers we deal with seem to have adopted a common approach and rigorously categorise their brokers into three groups. They have been fairly definitive in identifying the profiles of the sort of brokers they want to deal with. Each of the major insurers and second-tier carriers have arrived at a set of criteria that applies when looking at brokers."
The number of top-tier brokers is small - not much more than a hundred, according to Williams. Insurers want to develop further relations with second-tier brokers because they have potential.
Insurers will continue trading with brokers at the third level, but will prefer to deal with them through telephone call centres. Also insurers may not quote for new business in particular classes and there will probably be no guaranteed response time.
Williams says: "Service standards for some brokers are bad. Enquiries can take up to three weeks to be dealt with and the insurer then comes back to say it doesn't want to quote for the business.
"You have to chase for a policy document or an endorsement and when it comes through, it is usually wrong and has to be sent back to be corrected.
"If you want to quote against a competitor for a piece of business, you will find the insurer may give a better deal to one of its top brokers by offering better terms or more commission."
On the plus side, he says, the frequency and severity of complaints about dual pricing have reduced in recent months.
Institute of Insurance Brokers (IIB) director general Andrew Paddick says the answer to bad service is more competition. He says: "Most of the insurers are not very good, so there is not much to choose from. Brokers want sound, reliable service and they do not want to be discriminated against."
Paddick says the internet can help eliminate service problems, but most insurers "are not up to speed on technology and still have old, steam-driven computer systems".
Simon Bolam, a former Biba chairman and Chartered Insurance Institute (CII) president, runs EH Ranson, a mainly personal lines broker in Edinburgh. As a General Insurance Standards Council (GISC) board member, he has set up the small practitioners' committee with the GISC for brokers with less than £1m commission income.
He describes Norwich Union (NU) as "utterly arrogant, with demoralised staff who are not motivated because they do not know what is going to happen to them". He adds that while AXA is not arrogant, it is "inefficient - it hasn't got its act together".
NU intermediary business director Ken Wallace admits there have been problems. "I accept our service is not as good as it should be, but it is getting better. That has been caused by a large conversion exercise, which will be finished in December."
Critics say that Norwich Union provides different levels of claims service based on the amount of business a broker brings in. However, Wallace denies this, and says there is no preferential treatment.
He explains that Norwich Union has a top range national account of 800 brokers, of which about 300 are "very productive". Then there is a regional operation, and lastly a telephone account management (TAM) for smaller brokers. This has a staff of 30.
NU has almost 4,000 brokers outside London, and plans to retain its 45 branch offices. Wallace says: "At the hub of the broker channel are the account managers, which have been in place for a year and operate out of these offices. That should be the stability between the broker and the company."
In July, NU launched its common pricing platform for private car and in November it will launch it for household. The same data is used for the price, but by the time it gets to market, the price between NU Direct and the broker channel will be different. NU claims it will be able to explain why.
Wallace adds: "On motor, we are no longer getting wacky differentials of 40%. They are all within levels we would expect."
One of the problems, according to Mike Slack, chairman of the Association of Insurance Intermediaries and Brokers (AIIB), is that many intermediaries do not understand what the relationship with insurers should be about. He says insurers are "diabolical at giving service and dealing with it" and complaints are normally about documentation not being finished in time.
"What intermediaries want is insurers to deal intelligently with an enquiry, give the answers and issue the policy promptly when all the documentation is correct. That they still cannot do."
He says some insurers do not want to issue policies or be involved in servicing. "It is like saying `we are risk carriers and we will deal with the claims, but if you are expecting us to issue policies and deal with all that, forget it. If you can handle all that, then we will sit down and talk to you'."
A solution for Southampton-based commercial broker Stuart Alexander is to underwrite in-house. Director Ian Ritchie says it has two ex-insurance underwriters. The company would also like to handle claims.
Ritchie says insurers are "tarred with the brush of inconsistency" by pulling out of markets and changing their minds on risks or imposing different terms.
"The bigger players are getting so large now that I don't think anyone knows what's going on."
Ritchie says insurers must listen more to their brokers. "It is difficult to find people in insurance companies to reason with who speak the same language. A lot of their training is very much computer-based, rather than understanding the concept of the risk."
Another issue arises from the collapse of Independent Insurance, with a number of brokers complaining that most insurers do not have enough staff to deal with the volume of new business.
Ian Ritchens, chief executive of Oxford-based commercial broker FM Green, says since the Independent demise, his firm has seen some deterioration in its rapport with some insurers.
"For example, we have been asked to slow down on new business because insurers have had to redirect people to sort out what they have inherited from Independent. I hear, from colleagues, that things are much worse if you do not have a decent account. You won't get a service at all from some companies."
AXA head of broker development Colin Calder concedes the company had "a blip" when staff were put on to handling Independent business, but it now has a special team handling this.
He says: "The demise of Independent caused a number of insurers a period of difficulty, with brokers very anxious about their situation. We were very fast off the mark to talk to brokers and help them with solutions."
As AXA's back-office is in service centres rather than in branches, Calder says the links and lines of communication between the front and the back-office have been strengthened and made shorter, improving the turn-around and accuracy of documentation.
He says: "We have not got our service to where we want it to be, but it has improved significantly. The feedback we have is that it has significantly improved."
Ian Mantel of Hastings-based Manor Insurance Brokers, which is largely personal lines, is also on the GISC small practitioners' committee. He compares the insurance industry to the manufacturing industry.
"If we are the retailer and the client is the end-user, in a retail scenario it's important to support your retailer if you want to get to the end user. Yet in the broking market, there seems to be deliberate attempts to upset the retailer."
This is a view supported by Williams: "With very few exceptions, brokers feel that insurers regard them as a necessary evil. If they could only do without them, insurers believe life would be so much better. Everything we get from them tends to be tainted by this view and there is too much evidence of it."
What brokers want from insurers