I could not agree more with Graham S Huntrod's letter last week, "Insurers must treat small brokers better".

We regard ourselves as bridging the gap between the major national brokers and the smaller High Street competitors. It never fails to surprise us how often underwriters seem willing to underwrite policies at rates that are guaranteed to lose them money simply on the basis that they get vast volumes from one particular source. There is no logic to this approach. Anybody blessed with a basic grasp of economics will understand that if you take on lots of small amounts of business at a likely 10% or 15% profit, you will hopefully make a 10 or 15% profit overall.

If you take on huge volumes of business at a likely 15% loss, you will make a very large 15% loss overall.

At a time when motor rates are rapidly increasing, we are trying to support underwriters in pushing through these long overdue training adjustments. It therefore grates when an underwriter "breaks ranks" and quotes a loss-making premium through a major national "on the back of their account".

This type of action undermines the rest of the market and always leaves the customer with the end impression that to reduce their premiums they simply have to involve enough brokers - hopefully one of them will have a significant enough account with an underwriter to justify taking on the business at a loss.

Isn't it time the insurance industry focused on quality of service and customer care as being the prime movers in winning business? Once they do they will realise that smaller medium-sized brokerages can offer greater value for money than simply a "cheap premium".
Peter W Blanc
FMW Corporate Risks

Special deal loses respect
I can sympathise with your correspondent, (Alan Tees, Insurance Times, January 13) over the effects of the special deal negotiated with local garages for the insurance of new and second-hand cars. This must be wrong and must be stopped by the GISC.

But he loses my respect when he refers to his own "special deal" with CGU. How he would feel if he were a smaller broker, operating near to his own office, that had to compete on such a basis with the differential rates granted to him?

I am against all of these "special schemes"and I hope that the Competitions Act, shortly to come into force, will outlaw these once and for all.
Frank Cottle
The Lansdown Brokerage Monmouth House
4, Monmouth Place
Bath, BA1 2AT

Top dogs too far from ground
Following The Zurich's decision to close four offices and cut staff, chief executive Patrick O'Sullivan is reported as saying that it must continue to : "…deliver even higher levels of service."

Similar statements have been made by the chief executives of almost every major insurer over the last year.

However, as Insurance Times has reported in recent months, service standards have not improved, they have become steadily worse.

Those insurance company employees who have not fallen victim to job-shedding exercises are becoming increasingly demoralised as the piles of outstanding alterations and claims mount each day.

I can only conclude that these highly-paid top managers either do not mean what they say, or that they are living in an ivory tower, cushioned from reality, too remote from the "shop floor" to realise that all is not well.
John Bourn
(formerly with CGU)

Sick state of health service
Re: "Flu Hits Insurers Hard" Insurance Times, January 13.

I am the claims manager for Travel and Personal Underwriters, leading underwriters of travel insurance.

The reference to BUPA hospitals co-operating with the NHS was interesting, bearing in mind the effect that this epidemic has had on the travel insurance industry. This is the second year running that we have had a NHS bed crisis and the knock-on effect is insurers' inability to bring ill and injured clients back home to the UK.

We provide travel insurance, and not a private health care plan. Cover is therefore in respect of emergency care during a specified period of travel. Once the insured is fit to return home, our liability ceases, and arrangements are made for their repatriation. But we have been prevented from doing this by our inability to procure a bed (normally an intensive treatment unit bed) and being a caring profession, it is not our practice simply to bring them back to the UK and dial 999.

This means our costs rocket, especially because our clients are occupying the most expensive beds within foreign hospitals. A bed in Spain can cost anywhere between £800 and £1,500, excluding any further medical complications that may arise. In America or Canada this rises to up to £2,500.

So you can imagine the size of the problem when we are prevented from returning our clients to the UK for anything up to three weeks. It is not only the financial aspect, but the insured having the mental stress of being kept within a hospital with possibly foreign-speaking staff.

It must be remembered, that the insurers already contribute to the NHS purse by paying for treatment and surgery abroad that would otherwise be the responsibility of the NHS.

As it is the second year that we have encountered this problem, we believed it would be better to be more pro-active, and have written to John Denham, Minister for Health to organise a meeting. I am disappointed to say that we have not received a reply. The problem is an NHS one, not an insurance one.
E Porter (Miss)
claims manager
Travel and Personal Underwriters
Brokers can trump direct
Tony Cornell made valid points about the impact of EDI on the private motor insurance market (Insurance Times, January 27) but I feel he is mistaken in some of his views.

The broker market, if managed effectively, can be more profitable than direct. All insurers operating in the private motor market made losses last year but at Highway, where we generate all of our business through brokers, our losses were lower than the market average. Furthermore, we expect to be one of the few to return back to profit this year.

The main problems facing brokers stem from the so-called commitment of certain insurers. Many insurers which claim to support the market are expanding their direct operations and often I receive reports of "suicidal" rates being offered where business is quoted direct - two-tier pricing in the extreme prevailing.

It is a grave mistake for insurers to reduce the level of focus on brokers because the benefits of using them over direct are many. They are equipped to deal with a much wider array of products and therefore policyholders are much more likely to receive the appropriate cover.

Highway is committed to the broker market and we feel there is a positive future for the professional organisation that can add rather than detract from insurers' profits by their input. Whilst I would not disagree with Mr Cornell's final sentiment that continuing business as before is not an option, I certainly don't think brokers should be the scapegoats for bad results.
Quin Lovis
active underwriter, Highway
Highway House,
Brentwood, Essex