Road Runner chairman Mike Slack and his right-hand man general manager Paul Inskip talk transparency and capacity. Elliot Lane reveals the motor trade insurer's plans for the future
Mike Slack, by his own admission, is straight-talking and always has an opinion. So it was fortuitous that Insurance Times should meet the chairman of motor trade insurer Road Runner, who is also the chairman of the Association of Insurance Intermediaries and Brokers (AIIB), shortly after the Treasury's announcement on the future of the industry's regulatory regime.
Speaking with his AIIB hat on, in an obvious reference to Institute of Insurance Brokers director general Andrew Paddick, he reveals his evident frustration. "We are disappointed that a small minority led by one person has been able to completely sabotage the whole event. We now have statutory regulation which no one wanted. And we have also managed to get everyone who hoped to be regulated by their own trade associations dragged in - the whole thing is a complete disaster."
As a founder member of the General Insurance Standards Council (GISC), Road Runner is not averse to the principles behind effective regulation and, like AIIB members, wants to see more transparency in the market.
Slack says: "We want the industry to have business practices which are good and sound, but it's about keeping control of your company. In the motor trade, leasing companies, warranty people and hire firms are now involved and I can understand their anger. I wouldn't want to be regulated if I could run my business efficiently and under my own control."
Ironically, Slack is renowned for leading by example and it is his reputation for exploiting commercial opportunities that has driven the company forward. Since 1994 when the company was founded, Road Runner has set out to fill the gaps in the motor market. Over the past five years it has cornered the `no premises' sector of the trade, the "Arthur Daleys of this world" as Slack calls them, that are regarded as too risky or uninsurable.
The policyholder base has grown to more than 10,000 with most being motor traders, one-man bands, garages and workshops, MOT stations and valet services. Due to this success and in part to the collapse of Independent Insurance last year, the company has a capacity shortage. Road Runner's traditional insurance carriers Royal and SunAlliance and MMA have been virtually exhausted so it is now planning to launch its own insurance carrier.
Slack's right-hand man, general manager Paul Inskip, explains the thinking behind the new venture. "After Independent Insurance collapsed we were left without our main source of capacity. It shook us hard and Mike immediately said we must never be placed in this situation again. So we decided to set up our own carrier, as a buffer in case it should happen again."
He says the new company will not compete with its existing carriers and is looking to write global capacity of £10m to £15m. However, Inskip says the venture will not just write motor insurance, while Slack admits Road Runner is not against writing "liability and other lines of business" in the future. Bob Preston, who wrote liability business for Independent, has joined Road Runner and has been given a wide brief to assess other avenues of business in the coming months.
"But only if it is going to be profitable," adds Slack.
When asked whether he would like to see old friend Andy Homer, ex-chief of AXA Insurance, join the company, he smiles: "I would be flattered if Andy wanted to join us, but to be honest we can't afford him."
It is understood that up to three big brokers are interested in investing in the company.
"We are more than happy to talk to anyone looking for capacity. The investors who have come forward are very keen to expand the distribution channels we have to offer," says Slack.
The location for the start-up is still in the process of negotiation. Inskip says it is most likely the new insurer will be based in Europe, because its core business is predominantly in the EU zone. He would not rule out either Dublin or Gibraltar, though he did say the former would "probably be better".
"One principle this venture will be based on is caution. The capacity will be proportionate to the business we write. One thing Mike has is a good reputation for making money and so investors know we have a fair chance of making it."
An action plan for 2002 has been drawn up, with the insurance carrier as the centrepiece. From January, the company will launch a number of initiatives. About £150,000 will be invested in a new computer system which logs all policies and speeds up the back office duties. The company has about 50 staff, but this will double in the next six months.
In February, Road Runner will open its doors to yet more policyholders. The acceptance criteria will be broadened, Inskip says, to include drivers with criminal records, or those regarded as too young by other insurers or who drive high performance cars and cannot afford high premiums.
"We will sell, as we always have, at a fixed price which is non-negotiable, to make profit," says Inskip. In the spring, Road Runner's clients and customers will also be able to claim compensation if the company's service standards fail. Inskip says: "We will pay brokers if we get something wrong. If they get it wrong, they will have to pay us. But if the error has been made by us - for example, if a policy has not been paid in time after all the paperwork and receipts have been sent and accepted - we will compensate the policyholder."
Slack has the last word: "We are about helping the little guy carry on working. The insurance industry does offer people a good service and it's about time we started bloody shouting about it."
£150K investment in computer system. Double staff in six months. Upgrade telephone system. Invest in training
Widen acceptance criteria to broaden customer base
Major restructure and re-branding of wholesale operation. Introduce service standards with penalties
Launch new insurance carrier. Exceed £20m premium income