I have just read your article on the GISC and its reception. Having started in insurance in 1963 and worked for various companies, a Lloyd's syndicate, and brokers I have a broad experience of the insurance market. Having been made redundant for a second time, I started my own brokerage three years ago from scratch and it has been a struggle, I have to say this:
I have long felt that for the protection of the insuring public all intermediaries should be registered as brokers, and duly registered by own business with the IBRC when it was formed three years ago. It has been a pity that registration was not compulsory; and with the changes I saw that the IBRC should be strengthened to perform its original intended function rather than disbanded.
Then comes the GISC and I thought that this would be to the good of the insurance market and the protection of the insuring public if all of those in insurance were registered and duly monitored. However, as such an organisation must, by its very nature, be largely influenced by insurers, I still see the need of a separate broking organisation - rather like NATO members belonging to the UN – they both have important roles to play albeit from a different perspective.
I was somewhat aghast to read that membership of the GISC may not be compulsory. How else can you stop someone from running a retail shop or being a labourer one day and setting up as an intermediary the next? Where is the protection for the public?
Also, it is right that a fee should be paid and the rate proposed does not seem unreasonable. However, having started my business from scratch three years ago, my gross commission is still only £18,000. I would pay £18 a year. This I appreciate is too low and that there must be a minimum subscription, but surely £50 is more than adequate. A minimum sum of £300 is outrageous. If not, what on earth do they intend to do to make the initial setting up costs so high? At £300 you see for yourself what percentage I and other new ventures would be paying. Surely that would be a restraint to trade?
Then there is the question of professional indemnity. As a registered broker I have to have this. But as a small broker no large clients are going to come to me at present and my current limit of £250,000 is more than adequate for the business than I am doing and was certainly more than times gross premium in the first year. To make the minimum £1 million would again be a further restraint to trade. All pushing up the costs disproportionately for the new and small brokers. Perhaps a compromise at £500,000 as a minimum?
Who appointed the GISC panel? I would hazard a guess to say it was the "large boys" and those personally known to those who had dealings with it. Have they got any "one man bands" on it?
Alpha Insurance Brokers
Brokers must take the blame
Regarding your letters page (October 21 issue, Bolam is Right! Insurers are ignoring the truth), I would question who is really ignoring the facts.
We are specialist insurers offering a first class service with prompt quotations, quick documentation issue, a fast and fair claims service and competitive rates which, are not always the cheapest but, certainly not the most expensive. Why then are we not receiving more of the business that is placed in the market. Could the answer be it is the broker who is normally searching for bottom line premium.
Frankly, it annoys us greatly to lose or not gain business, simply for a few pounds, to competitors who cannot handle the business as demanded in the article. Again we say who is responsible. Certain insurance companies were named throughout your magazine so why are brokers still giving them their business?
It is the broker who decides where priorities lie and where business is placed. If a broker insists on the cheapest premium and places business with companies who cannot provide the service he has only himself to blame.
You cannot have your cake and eat it.
We must explain to the insured
There was much that was good in Gary Strong's article on subsidence. While agreeing that we all have to work within set parameters and uphold service standards, there is another vital ingredient – winning the hearts and minds of the insured. Not least because the 80/20 rule is alive and well in subsidence claims.
Whilst the majority respond quickly to established cures, in a minority of cases a series of measures have to be tried.
It is crucial to the adjuster's role that time is taken out to explain to the insured what you and your engineer are doing and why. I have found that I have often spent more time explaining to the insured what we are doing and why, than working out how to solve the problem. But it is always time well spent.
Carmichael and Company
The internet will cost jobs
We have just lost our first case to the internet! The client called in for his bonus proof and the conversation was as follows:
Us: Who was your quote from?
Them: Royal & SunAlliance.
Us: But we are the main agents for them!
Them: Well, it's £1 cheaper.
Us: What happens if you have any problems?
Them: I won't.
Us: What will you do if you need to contact them?
Them: I have an information pack.
Us: So you may spend more than £1?
Us: We have been your broker for 25 years.
Us: And you can always speak to us face to face.
At that point I gave up.
The internet is the way ahead for those who swallow the hype. It is a source of great concern for many businesses and it will be the cause of huge job losses. The next generation will "talk" to black boxes. Insurance brokers with their personal service will be sorely missed.
Details with editor
Only a problem in Lancashire?
I was interested to note that the letters page of three weeks ago consisted entirely of responses to the articles which had appeared the previous week regarding poor service from insurers.
Understandable you might think in the circumstances. However, what caught my eye as a Yorkshireman was that all the correspondents whose addresses appeared were from Lancashire. Now I'm not suggesting that all Lancastrians are inherent complainers – perish the thought, but as long as they don't consider the inadequate service issue is a Yorkshire conspiracy.
The Broker Network
Nothing to fear from Direct Line
I would like to refute the claims made by the AiiB in Insurance Times 4/11/99, claiming "the Green Flag purchase was a classic example of a direct operator purchasing a customer base in order to expand its own business".
When the acquisition is completed the existing corporate arrangements will remain unchanged, with third parties such as Zurich offering customers Green Flag motor breakdown services. We can reassure Green Flag's clients that Direct Line will not have access to its intermediary customers, whose data is protected, confidential and ringfenced.
Direct Line's acquisition of Green Flag will provide the combined operation with the efficiencies and underwriting skills for which both organisations are well known and will make a very strong cost efficient competitor for the AA and RAC. As a result we expect Green Flag to not only maintain its position as the largest third party breakdown provider, but to grow this area of the business.
Group Chief Executive,
Waking up to MPPI
It is good to see the broker market finally waking up to the idea of MPPI after years of virtually ignoring it. What I determined is a jealously that the banks and building societies had managed to make substantial income from commissions in this market without brokers being fully aware of just how lucrative the market was.
Well before brokers become too indignant about the current situation they should bare in mind that in a developing MPPI market:
Products are becoming ever more flexible as the market matures, and
Commission levels will be lowered when and if broker competition is strong enough to bring them down.
But most notably , it is the banks and building societies who have outsold the brokers in the MPPI market by a factor of nearly 3:1.
Brokers cannot take a pride in doing what is best for their home-buying customers at a time when employment in particular, is so unstable for so many people.
Brokers have a duty of care to sell it to the half of their customers who need it.
Elm Point Financial
This has been the worst summer (and now autumn) for the last 20 years or so in terms of insurers' quality of service. It always deteriorates during the period of the school summer holidays but this year it started on a low and continued downwards.
One of our main accounts made the silly move of moving their personal lines department from the highly-efficient Southampton branch to a site in Bristol. Documentation that used to be correctly issued within ten days now seems to take three or four months and is often incorrect.
David J Morris
J L Morris Insurance