Danny Walkinshaw travels to the East coast to put the East of England insurance market under the spotlight
The East of England is a sleepy place. Without a major centre to act as a capital of the region, it lacks the hustle and bustle of the North West or South East. But its insurance market is widespread and diverse, with an emphasis on local service from established provincial brokers.
The market is mostly composed of small local and regional brokers, and there is only one major insurer headquartered there.
Until recently, the brokers had resisted the consolidation craze sweeping the rest of the country. In the words of Paul Chubbuck, managing director of Bury St Edmunds broker Insurance Risk Solutions (IRS): “East Anglians are quite parochial. They say that the people of Norfolk declared UDI (unilateral declaration of independence) many years ago.”
But even Norfolk could not hold out forever, and the consolidators are now as active across East Anglia as in any other region. The next step, say locals, is for a new generation of entrepreneurs to seize the opportunity this has created, and set up a new wave of local brokers.
Norwich is the closest thing the region has to a capital and is, of course, home to Norwich Union. Financial services is a growing industry for the city, which also houses broker Marsh. Both firms are key members of the city’s Financial Industry Group, which is working to drive forward growth in the region.
It achieved a coup last year, when Chancellor Alistair Darling opened one of the country’s first financial skills academies in Norwich, with the support of the local industry. The sleepy East was waking up to the future, it seemed.
“We are all chasing our tails trying to find good quality people to work for our businesses.
Tim Ryan, Ryan Insurance Group
The CII is also very active in the city, with 1,700 members signed up to the Insurance Institute of Norwich. Its president, Allen Sweeney, and deputy, Sue Donmall, hope the new academy will give the city a new strength: a pool of skilled and qualified staff for financial services. This cannot come too soon, according to Tim Ryan, managing director of the Ryan Insurance Group, which has offices in Ipswich, Norwich and Colchester. He says the ability to recruit good staff has worsened over time. “We used to have a fabulous recruitment field which was because of the insurance companies. They would forever be making redundancies in the region – 70% or 80% of our staff have come from insurance companies. Now we are all chasing our tails trying to find good quality people to work for our businesses,” he says.
There has been another significant development in Norwich recently. Marsh has transferred 650 of its staff to Capita as part of an outsourcing agreement. According to one broker, this has created an opportunity for eager employers. The broker says: “[Marsh] is quite a good source of staff for us because it is going through quite a big change at the moment with its outsourcing. We have just taken on an additional claims handler from Marsh.”
Staff shortages are not the only challenges brokers in the region face. The minimal presence of insurers can create difficulties, because it limits the opportunity for all important face-to-face trading.
IRS’s Chubbuck says: “It is potentially a huge problem and is already a huge issue for small brokers. Coverage on the whole comes out of London and the Midlands.”
Mike Smith, director of trading for the East region at Norwich Union, agrees that local relationships are vital. “We have still got a big emphasis on dealing local, and trading local,” he says. “Most of the time we continue a good strong relationship and that comes whether a broker is independent or a consolidator. We find that they still want to have local service.”
Derek Potton, regional manager of Hiscox, which has a large operation in Colchester, adds: “I would say the East has always been characterised as a place with a lot of old fashioned brokers.”
“There is a tradition about the region. Everything is about trust and localism.
John McLaren-Stewart, Alliance Management
But times are changing. Independent local brokers in the East of England held out against the consolidators for a long time, but they could not last forever. The market was described as flat by brokers that eventually decided the best way to grow their businesses was to sell to major consolidators. The large number of small brokers has now been reduced to a few with a regional presence that dominates the area.
Leigh Smart, group chairman of the the Davis Group, based in Newmarket, says that once one consolidator came in, the rest followed. “None of the big players were here until Towergate bought Country Mutual [in May 2006],” he says. “And there is no doubt that would have spurred some of the others to purchase, and some to sell.”
Towergate followed up its purchase of Country Mutual by acquiring Alliance Management to boost its presence in Bury St Edmunds. In June last year, CCV took a minority stake in Norwich broker Smith & Pinching, and in September AXA broking subsidiary Venture Preference (VP) acquired the Davis Group. In January this year, Oval made two buys in the East, picking up Ipswich-based Cook Sheppard Pinhey and Essex broker FMW to form a new regional division. Another Essex broker, South Essex Insurance Brokers, was sold to insurer Ecclesiastical in February.
Smart admits that becoming part of VP escalated the broker from a regional to a national presence, and advises other brokers in the East to follow his example if they have similar ambitions. “We don’t see ourselves as an East Anglia broker,” he says. “We have always seen ourselves as a broker with a national outlook, but without the presence – and VP has given us that. We are able to carry on with a local presence, but we have a national presence as well. We want to focus on going forward and we sold to continue growing.”
Some independent brokers remain, and they too are keen to carry on expanding. Alan Boswell, an established broker based in Norwich, is one of the largest with offices around the region. It recently began operating in Bury St Edmunds. The Ryan Insurance Group has offices in Ipswich, Norwich and Colchester, and Waveney Insurance, part of the Brokerbility alliance, is also well represented.
“I would have thought someone would have had a serious go at Norwich
John Knowlden, Knowlden Titlow
John McLaren-Stewart, chief executive of Alliance Management, says although the region may be lacklustre compared to others, the established brokers have a very firm grip. “There is a tradition about the region,” he says. “Everything is about trust and localism. Brokers manage to survive because they play a local game and they play it very well.” Chubbuck would even argue that consolidation has been positive for independent brokers in the region. “For IRS, I believe that makes a real opportunity. The clients have a real choice; do they want to be looked after by a company where the distinction between being a broker and an MGA [managing general agent] is very blurred?” he asks.
Any advantage is precious, as competition for business is fierce. Tim Ryan says: “Prices here are very low, and it is a safe, rural community. There is more countryside, and we are limited by the eastern coast. It is a low risk region, premiums are low, and the volume of business is not as it is in other regions. To insure your factory here would not cost as much as if you were in the middle of Manchester, so we have to work very hard to earn any money around here.”
Perhaps that explains why, compared to other regions, the East has not seen many new brokers formed in recent years.
Norwich broker Knowlden Titlow, which was created 16 years ago, is one of most recent. Partner John Knowlden says: “There are probably only really three or four brokers left in Norwich and hardly any left in the market towns, where they all used to be.
“It is not often local competition we compete with, it now comes from outside and that has changed from when we started up and the competition was in the region. I would have thought someone would have had a serious go at Norwich. It is very slow to change people up here. We are technically the new kids on the block in Norwich.”
Consolidators have only recently begun their acquisitions in the region, but this new trend will only accelerate, now that it has begun. As the region strives to build its economy, particularly in financial services, there will be opportunities for entrepreneurs and new entrants alike.
So, in the famous words of Norwich City director Delia Smith: “Where are you? Lets be ‘avin you?”
With its close links to London, the Midlands and the South East, the East of England has a wide offering. Its economy has evolved in recent years and it sits among the strongest in the UK. According to information provided by the East of England Development Association (EEDA), the East of England is the fourth-largest regional economy in the UK after London, the South East and the North West with an output of 105bn pounds recorded in 2005.
The region also has one of the highest long-term growth rates in the UK relating to the output of people working in the region, second only to the South East.
According to the Government Office for the East of England, there has been a structural shift in the economy in the region with productivity and employment growth being increasingly attributed to the service sector. The most important service sectors in the region include financial services, particularly in Norwich, and wholesale and retail.
Although producing a smaller proportion of the whole economic output of the region, the
agriculture industry has remained important to the economy. Over 71% of the total land area of the region is used for agriculture; a higher proportion than any other region except the East Midlands
In 2005, the East of England had a population of 5.5 million which has grown at twice the UK rate in the last 20 years. The region has an employment rate of 77.3%, compared to the UK average of 74.3%, but this is expected to fall.
Transport in the region remains a problem, with road and railway links often criticised. However, the EEDA is considering an innovative regional infrastructure fund, which could be worth 1bn pounds, to pay for the faster delivery of transport and other infrastructure projects in the East of England.