HBOS is set to crash into the top ten insurers list next year because its broker, Halifax General Insurance, turns into an insurer on 1 January. Andy Cook talks to managing director Simon Stevens about what the change will mean.

Man on a missionStevens joined Halifax nearly six years ago. He was lured from Churchill by the prospect of Halifax becoming an underwriter one day. "These past six years have been in preparation for 2004," he says. Stevens reckons that launching in 2004 has been fortuitous. "I think Churchill and Direct Line will spend a lot of 2004 sorting things out. Some of the marketing activities might be held back while internal politics are sorted out," he adds. Earlier this year, Halifax General Insurance announced that on 1 January 2004 it would switch from being one of Britain's biggest intermediaries for household cover to becoming one of Britain's largest underwriters of household cover.Halifax's underwriter, Royal & SunAlliance, shrugged off the decision that would trim a cool £400m of premium income from its accounts. The move from broking to underwriting means that the HBOS group will have a premium income of around £1.4bn next year. And while the group just scrapes into the top ten UK insurers list, Halifax will be a top five force in the domestic property market.And the company will not be satisfied with just servicing its existing customers, of which only half come through the bank branch route. Halifax is looking to increase the number of household policies it sells from around 150,000-160,000 this year to a figure as high as 200,000.While chief executive Howard Posner is the man with the vision, managing director Simon Stevens is the man charged with turning the vision into results.And there are already a few neat ideas emerging that will see Halifax employ all the marketing nous expected of the company that gave us Xtra.

Discounted loansStevens is developing an idea that could see the insurer use the leverage of its relationship with its bank to provide discounted loans that could help homeowners in flood prone areas buy counter-flood measures (as revealed by Insurance Times last week).Halifax as an insurer will, in all probability, provide wider flood cover than when it was a broker. Stevens explains: "We had an initial set of postcodes that R&SA was basically the sponsor of. And this is what we went with last January. Because R&SA was the underwriter we had very little option to move away.""From 1 January, we can run on data we hold for our book, plus the flood models we purchased and come up with a flood approach on underwriting risk that is typical to Halifax."What we had with R&SA was a black area of the country, which was outright decline, and a grey area that was 'refer back to R&SA'. The problem we had was that the grey area was too big."The way we approach flood is that we see it as a time-honoured way of insurance, which is the many subsidise the few. And there will be a general subsidised flood rating across all of our pricing to make sure there isn't any room for discrimination against people who are unfortunate enough to live in these areas."Of course, it is ironic that Halifax will be able to stamp its authority on the way it handles flood risk in a year when flooding has ebbed in the face of subsidence (see page 18). Jim Pittman, head of Halifax Claims at Home (the company's in-house loss adjuster) reckons that there have been four times as many subsidence claims this year compared with a normal year. "It has been the driest summer and autumn since 1963," he adds.

Broadening horizonsStevens is excited about development of the company's direct business. "I see the Halifax brand as a direct insurance brand just as much as it is a bank brand," he says.Direct sales will be driven in two ways. The company has a call centre in Leeds that concentrates on sales. The other area that Stevens is excited about is developing an improved web presence.Part of the plan is to drive Halifax's own site to the top of search engines like Google. Stevens admits this will be an uphill struggle because Lloyds TSB has already bagged the top ranking slots on search engines in multi-year deals. And it has already scooped domain names like "I reckon that Lloyds TSB must be getting up to 30% of its business through e-commerce now while we are just over 20%. I think we're slightly off the pace. I look at Lloyds TSB and admire what it has achieved."A further development is to extend affinity relationships. "We've been working with Sainsbury's Bank now for a year and a half." The Sainsbury's experience has been tough but it has brought realism to Stevens' plans. "For us it was a huge learning curve to work with someone so protective about its brand and before we jump into a really big relationship with someone else we need to make sure we can work closely as partners."If Halifax is weary of large sole supplier deals, would it look to join the panels of the telebrokers. Stevens doesn't see why not. "I don't think we're ready to do that, but at some stage in the future it will be something to look to because there is a group of customers who want to go through a broker like the AA. Why shouldn't we be one of the retailers on there?"