Edgar Hamilton rises to meet the millennium challenge
Over the forthcoming months a lot will be written and even more will be talked about the change in regulations within the Lloyd's market. For those who do not know, the mandatory guarantee provided by the Lloyd's broker becomes voluntary from June 1, 2000.
Whilst this represents a fundamental change in trading, realistically it will take time for the changes to filter through.
The Lloyd's market has come through a turbulent time and it's natural that the Lloyd's broker should come under scrutiny. Edgar Hamilton has paid a six-figure sum to underwriters following the failures of provincial intermediaries over the past few years. However, certain players have struggled to meet their obligations, forcing underwriters, quite rightly, to review their trading strategies.
The guarantee system was designed to ensure the payment of premiums to Lloyd's, a form of credit guarantee. However, in practice a small Lloyd's broker could be guaranteeing premiums to underwriters for a multi-national broker a hundred times larger than themselves. This obviously began to highlight some of the anomalies of the system.
At Edgar Hamilton we have long been of the opinion that the doors should be open and the choices of natural commerce be made available to the underwriters. And in response to this, have spent the past three years developing various initiatives that provide tangible support to the intermediary and add to the insurer's all round service.
We held our first conference earlier this year at the Museum of Film, Photography and Television attended by almost 250 intermediaries and 30 exhibitors. The idea of this was to show how we can help the intermediary and hopefully present them with a more lateral view of their business. With the UK intermediary market still operating under considerable pressure, it is important that we put our cards on the table.
Within Edgar Hamilton we have established an underwriting agency, marketing company and provide commercial placing facilities to the intermediary. The millennium trading platform that we have designed is the catalyst for the various channels of back-up support. It was very important that we designed a system that analysed the intermediaries' business and provided an accurate and quick transfer of the relevant data to other parties that could provide all the additional services promised.
It is obvious that in order to solve any problem, you must first identify it. We have now started to probe and delve deep into the broker's business, the belief being that once problems are isolated we can then set to and help solve them.
Our very sophisticated agency platform extracts all the requisite data from the intermediary and sends selected information on to the insurer in an easy format. We are in a position to tell insurers why the account is not working or notifying new agency potential. They in turn give an undertaking to respond to queries from the intermediary within two weeks. With the use of the state-of-the-art trading platform the process should ensure considerable increase in business to all parties.
Throughout the past three years of research, a common theme that kept recurring was one of cross selling. Dependant on what you read, intermediaries have on their books 1.2 policies per client. It is reported that most people have at least seven insurance policies.
With the millennium concept we are in a position to advise insurers of the intermediary's potential, and the intermediary exactly what the insurer wants and how they trade.
During the development stages, whilst negotiating with an agency at Lloyd's, the question was asked how much aviation business do we see through our intermediary channel. At the moment it is negligible. Our research showed the reason behind this is that generally, brokers do not know where to go for this type of business. If we can provide a very sophisticated system that allows full back-up to the intermediary and effectively ‘spoon feeds' their enquiries into the right direction, the system immediately increases the throughput of business. The client gets the local service from the broker he wants to use, the intermediary earns on other areas previously missed, and the underwriter opens new areas of distribution.
If we can increase the client's policy count from 1.2 policies to 2.4, in theory the broker's income doubles.
As already mentioned, we have devised a system that allows intermediaries to benchmark various elements of their business to see how they are performing. It was always our intention to provide this service and help in areas that have been flagged by the system as deficient. We have therefore designed a massive package of back-up support to our clients.
Some Lloyd's brokers who provide the guaranteeing facility have decided to turn themselves into marketing companies, this is not our intention. We have a separate division within the group that provides full marketing support including the production of a bi-monthly manual that builds into a definitive marketing part work, also allowing access to marketing experts. It is important through this time of change that we see the wood for the trees.
With the increase in activity of insurers merging, acquiring, and pulling out of the market, there is a real danger that annual premium targets are not realistic for many of our brokers. We aim to use the bulk buying power of Edgar Hamilton to ensure brokers can compete on an even playing field.
Hamilton Wellard Underwriting Agency has been established to give brokers an alternative for placing business, paying a good level of commission. The growth of this company in a short space of time has proved that there is a massive demand for this facility, and we will be adding additional facilities to the motor and household we already write. The logistics of this facility mean that once the broker has sent the initial fax inquiry form the work is then concluded by HWUA. In time we intend for HWUA to become a “virtual insurer”, accommodating business without imposed support criteria and with client ownership firmly with the introducer.
The facultative departments within the group provide open market placing and have arranged numerous binding authorities for fire, liability, commercial motor and professional indemnity.
Traditionally Lloyd's has always been thought of as the last resort market – brokers will try their local markets first and then make contact with London if the risk cannot be placed. History has shown us that Lloyd's brokers have always done better in a hard environment. It is, however, important that we emphasise the fact that we are keen to look at the more run-of-the-mill inquiries.
Whilst we are conscious of the fact that we never want to lose the human factor, technology is the way forward, and hardware is becoming cheaper by the day. The millennium concept is now at phase three of an eight-phased development. We plan to be at the final phase within one year and feel sure that the broker and insurer will benefit from this very advanced method of trading.
This is now the culmination of very considerable effort by the company, not only to enhance EH revenue but also to bring the insurance world into another dimension, away from the concept of EDI.
So what is the prognosis for the Lloyd's broker and particularly Edgar HamiltonNULL In all honesty we can put our plans and aspirations on the table and our insurer partners can choose how they want to proceed.
However, there are probably no other organisations that specialise in the broker fraternity interests in the way that we do.
We totally endorse the changes to move from a heavily regulated market to a commercial environment.
There will, without doubt, be a lot of jostling and realignment over the next couple of years but we are confident that Edgar Hamilton can become the catalyst in agency distribution.