Daily briefing: Wednesday

At last, the cat is out of the bag.

For years, speculation has swirled over a possible tie-up between Biba and the IIB, which has become more intense in recent months as behind-the-scenes negotiations between the two brokers’ associations has heated up.

Insurance Times’s Backchat column predicted several months ago that the Biba conference would be an ideal opportunity to unveil the merger. This morning Biba president Patrick Smith announced that the two associations were taking part in merger talks.

The existence of the merger discussions stems from a feeling on the part of many small brokers that they were being marginalised by Biba’s perceived bias towards its larger members. Representing such a diverse membership as Biba’s, which ranges from global brokers to high street one-man bands, is a tough task – just ask the British Retail Consortium, which must speak for Tesco and the corner shop owner, businesses whose interests are most often at odds.

The late Andrew Paddick led the great breakaway, forming the IIB in the late 1980s. But since the untimely death of its founding father and chief executive three years ago, much of the energy surrounding the IIB has seeped away. Paddick’s successor Barbara Bradshaw has admitted to Insurance Times that her association’s membership has been in decline.

A new boys’ club?

Biba would say that it has made a determined attempt to show that it is no longer a big boys’ club, pursuing a common cause with the IIB on issues like regulation. And the bigger body has turned into a much slicker lobbying organisation over the past five years.

This all means that a merger is a no-brainer. Two brokers’ associations is one too many. A single body will create a stronger and more unified voice for the broking sector in the corridors of power.

The acid test for many small brokers will be whether a new merged association turns back into the big boys’ club that many turned their backs on all those years ago.

Insurance Times already gets feedback from many brokers who are annoyed that Biba is not banging the drum loudly enough on various issues.

Chief executive Eric Galbraith’s robust tone in his presentation this morning was a nod to such concerns. He described as ‘lame’ the FSA’s excuse that a review of the vilified Financial Services Compensation Scheme must await an upcoming European directive.

Compere Andrew Neil tried to pour cold water on proceedings with his gloomy prognosis on the state of the wider economy in his speech at last night’s Biba president’s dinner, but insurance looks in robust shape, judging by the mood at this year’s event.

Tinkering with the discount rate

It is possible at an event as all-encompassing as Biba to imagine that everything else has stopped outside, but even in the insurance world life carries on. Yesterday in parliament, justice minister Jonathan Djanogoly revealed that the government was carrying out a top-down review of the discount rate (the formula used to calculate damages payments).

For personal injury lawyers, the wide-ranging nature of the review is likely to be a blow.

The Association of Personal Injury Lawyers recently launched a judicial review designed to force the Ministry of Justice (MoJ)’s hand on the review, which has been promised for some time.

But the MoJ has gone further than most thought possible. The review won’t, as expected, just look at the level of the rate, but at how it is calculated. For insurers, the review represents an opportunity to re-jig a system for calculating compensation payments that has threatened to run out of control.