When Lloyd's announced it was changing its guarantee arrangement from a compulsory to a voluntary one many predicted the end of the guaranteeing broker. With the agreement abolished this month, could the doom mongers have got it wrong? Alison Boyle talks to Chas Reilly marketing director of the oldest guaranteeing broker in town – the newly renamed HML Marketing.
In the late 1800s John Holman, the owner of a shipping company in Devon, was facing difficult times. As a manufacturer of vessels for narrow rivers, his market was drying up as the building of larger ships became more prevalent. As he couldn't build these bigger ships on the small rivers surrounding his business, he was rendered unable to compete in the changing marketplace.
It could have marked the end of the family firm. But, because of the difficulty in obtaining insurance then, Holman saw growing opportunities develop in the insurance industry and decided to set up as an insurance broker. It was to this he turned in the turbulent times and it steadily became his core business.
From there the business grew and in the 1960s the Holman family cashed in on the guaranteeing boom hitting Lloyd's.
"During this time Lloyd's developed direct dealing which allowed the high street broker to deal directly with underwriters, but all business had to be guaranteed by a Lloyd's broker," says marketing director Chas Reilly. "We were among the first to get involved, and were certainly one of the biggest, other people tickled it but we grabbed it. The motor market was growing and peaked at 47 motor syndicates."
Just as it was in the 1800s, the firm is again faced with a changing industry. Lloyd's decided last year to make the guarantee agreement a voluntary one as many motor syndicates felt their competitive position was compromised by the mandatory guarantee agreement.
But HML remains undeterred by the new developments. "Things don't stay the same and you have to adapt. You have to be like a feather in the wind, changing with the market just as our chairman was in 1800s," says Reilly.
One massive change for the company came early last year when it was brought by Cox Insurance for £6.7m. As the Holman name had to be dropped as part of the deal, the company has had to go through a rebranding at the same time as it faces a shifting marketbase.
But Reilly believes the acquisition by Cox will bring many advantages. "We intend to keep developing and growing in response to the market," he says. "And we have gained further strength financially by becoming part of Cox." He is quick to point out though that the insurer remains autonomous from them.
In his 25 years at HML, Reilly has witnessed many changes but he believes the thing that shook the Lloyd's motor industry up was the entry of Direct Line.
"Everyone panicked but what it did do was bring professionalism into the marketplace. A lot had to suffer but the good survived. Motor syndicates are still going through torrid times at the moment and as a result we are having to adapt.
"At times like this you have to realise what your strengths are. Like a lot of things you have to keep on being innovative and flexible. We are good at bringing products to brokers and that is what we will continue to do."
In actual fact, seven years ago HML branched out into providing non-motor products on a direct dealing basis. "We started to bang our drum about it and people started to come to our door with products. It wasn't really a decision based on the fact that we felt vulnerable in the marketplace, it had more to do with the fact we had the infrastructure in place and it would cost us virtually nothing to set it up."
Products offered by the company include motor, household, liabilities, travel, professional indemnity and personal accident. Just this year the company also added holiday car hire and premium finance with more products and ways of bringing them to the broker planned.
In a further bid to keep up with the marketplace, HML are launching the second phase of its website (www.hmlmarketing.com) in a couple of weeks where they plan to provide brokers with quotes and policy issues. "By launching the website," says Reilly, "we are not looking to cut out the broker. We can't prevent the insuring public accessing the site but they have to put in their broker's postcode before allowing business to be attached and if they haven't got one they have to pick out one from a list before they can proceed."
Reilly says that as with all their products the aim is to enable high street businesses to operate in specific markets by providing direct access to underwriters, and thereby rates normally only available to very large or specialist intermediaries. He adds that many large insurance companies don't find it worthwhile to deal with small brokers but are happy to work through large, network agencies provided by product marketers. This is so that high street customers can profit from the advice of their local supplier while benefiting from the expertise of the insurance conglomerates.
The company also provides back up to complex risks and is able to examine the viability of niche products and develop products accordingly. By also working with smaller insurance companies who are not household names and do not have access to large marketing budgets, widespread experience and systems in the marketplace, HML can help then reach the brokers for whom their products are designed.
HML gained another string to its bow recently when it acquired the guaranteeing broking business off Thompson Heath and Bond. The book has a turnover of £30m but the company is unsure whether it is going to keep all the brokers on board.
"They have 40-odd brokers on their books and they are quite big accounts. But if one of them gets into trouble, they could leave us with a big debt."
Credit control is a big area of concern and HML keep a close eye on the brokers. Reilly says: "If a company does get into financial trouble it is not always the best thing to try and slam the door on them. Sometimes it is beneficial for both parties to try and trade through it.
"When selecting brokers to work with we look at the profile of the company and turnover details to the nearest penny, whether it is a shop and the area where they work. Then we work out what is best for the underwriter and match up expectations.
"We are totally committed to the high street broker. The numbers are shrinking but the good ones are surviving. We can help them achieve their aims by giving them benefits of bulk buying and access to a market they can't usually obtain."