Establishing a regional operation can take serious commitment to the local market. But many insurers see a regional presence as vital for the health and strength of their business.
Though London is the heart of the UK insurance market, it should be remembered that billions of pounds of business is still transacted in the regions. Despite considerable consolidation in the insurance sector during the past few years, many leading players still recognise the importance of having a strong local presence up and down the country.
Having underwriters that live and work in the North East or South West, for example, is vital if insurers want to grow their business and gain loyalty and trust from brokers. And, perhaps most significantly of all, a regional presence can improve insurers’ underwriting and thus improve loss ratios.
Brit market management and regional operations director Simon Cooter says having regional offices is very important if an insurer wants to build a sustainable business. “We’ve spent the last seven years building a regional presence. If you want to gain scale and develop a long-term portfolio, you need bases near your customers,” he says. “For example, a major independent broker in Manchester will have many clients in the North West and they will be more confident if the underwriter has experience in the local market.”
Cooter says Brit – which generates around 30% of its UK business in the regions – has offices in what it considers to be the four major regional centres – Glasgow, Manchester, Leeds and Birmingham. “We also have an office in Reading, though in the south it’s less obvious what the regional centre is – you’re looking at Croydon or Reading.”
“In addition, we have satellite offices in Bristol and Belfast. We think you need people on the ground in Belfast because of the nuances of the market; it’s a different country and the underwriting drivers are different. It’s also very competitive: most risks are looked at by several brokers; it’s more of an SME market.”
Cooter argues that building a successful regional operation takes considerable commitment. “It takes four or five years to really establish a regional centre. You have to recruit really good people with experience of the local market in order to demonstrate you are there for the long term.”
“The trend of opening regional offices is cyclical; it’s quite popular at the moment. Some major insurers are closing local offices, but this creates opportunities for others as the loyalty brokers feel to insurers that have closed offices is diluted and it means good underwriters become available.”
Cooter says that Brit is happy with the scale of its presence in the regions. “We feel we’ve got the footprint right. I don’t see us opening more offices. Some insurers cite cost-saving as a reason to close regional offices. But we’ve spent six or seven years building up our regional presence – we’re not about to unravel it.”
Arista Insurance’s head of broker development Jeff Chapell says that when his company started three years ago, it asked brokers in the regions what they wanted. “They answered someone who knew the market, who was locally accessible and could make decisions,” he says. “They said ‘if you’re close, you’ll have a better understanding of our business’.” Arista now has six offices outside London: Redhill (Surrey), Southampton, Bristol, Birmingham, Manchester and St Albans.
A strong regional presence offers advantages to both insurers and brokers, according to Chapell. “The benefits for the insurer are that you drive a better loss ratio, you’re better informed about the loss you’re underwriting and you have better knowledge of your competitors,” he says.
“The benefits for the broker is that you’re able to access a team that knows what you’re talking about; if you’re pinged off to a central unit, no one knows who you are, but with a regional presence you can provide a better-tailored service.”
Chapell says that Arista, which generates all of its business via its regional offices, is content with its network of branches, though it is considering further expansion. “The North East would be the next one we’d look at and, in the medium term, possibly Scotland,” he says. He adds that, while Arista places an emphasis on giving underwriting responsibility to its regional offices, other insurers have different attitudes. “We’ve put in management processes that force decisions onto the front line, so our regional offices have good underwriters that stand on their own two feet and make decisions.”
“But, in the market as a whole, it’s a mixed bag. Some insurers believe the regional model gives an advantage in that you are close to customers, but some of the main composites have retreated from their regional model as a way of cost cutting. You also have a hybrid model where some insurers try to retain a regional presence, but when you scratch beneath the surface, a lot of the decision-making has been taken away from those local offices.”
Biba technical and corporate affairs executive Graeme Trudgill says brokers look favourably on insurers with a regional presence because they are seen as having a better understanding of “local issues”. He says: “Brokers highly value regional insurers; they don’t want to be sent to a national call centre.” However, he also notes: “Some [insurers] look to reduce the expense of a chain of branches. Areas like Maidstone in Kent have lost many offices over the years.”
In general, Trudgill believes the regional broking market is in a healthy state. “Regional broking is innovative and able to offer a great personal service – it has survived the recession better than many other industries.”
Have insurers’ attitudes to regional broking changed in the last 12 months? “It ebbs and flows with different attitudes from different insurers – NIG has closed down regional offices but others are very proactive in the regions.”
Franchise director Bob Darling of Coversure, which has 96 branches in the UK, says its franchisees are flourishing. “Our branches have grown their GWP over the last five years because people are buying locally. There’s been a shift towards people wanting to support local businesses.”
Darling says that Coversure is looking to open more branches to capitalise on the “buying local” trend. “We do have some gaps [in the branch network]; there are some places where we should be. We have a target of 120 branches by the beginning of 2013 and 180 by 2015.”
Aviva director of regional brokers Brigid Murphy says it is vital that insurers have regional centres because insurance is still a “relationship business”. She adds: “Brokers like to deal with people they know; they like underwriters who are part of their community – a local underwriter will know the risk, such as the shop or building.”
Murphy believes that, in turn, having a better understanding of the risks involved means that insurers are able to do their job better. “If you know the risks, you do a better underwriting job,” she says.
But for Aviva – which has regional centres in Bristol, Manchester, Birmingham and Glasgow as well as 30 other regional offices – relationship-building is key. “Having a local footprint gives us a huge advantage,” Murphy says. “We believe in the relationship aspect. There’s still a huge human factor. People trust their broker to get them the best deal; a broker offers choice and independent advice. The regional broking market is flourishing.”