Independent Insurance: Picking up the pieces

When news of the collapse of Independent Insurance hit the headlines in June, many insurance companies reacted quickly to ensure brokers were able to place business with alternative providers.

Royal & SunAlliance (R&SA) had a larger part than most to play in the aftermath, with the purchase of loss adjuster PCS. It was also praised for its handling of Independent's special schemes account.

The account included 250,000 council tenants who held household contents insurance and thousands more holding scheme policies such as Buy To Let and Right To Buy.

Under the terms of the agreement, R&SA took responsibility for paying all claims under the tenants' contents portfolio and administrating all other claims.

R&SA business director Blyth Morris says: "When we heard news of the collapse, speed was of the essence. Continuity of cover was vital for all, but we felt it was more so for the special schemes customers.

"Many of the people in these schemes are council tenants with household contents insurance - because of their financial circumstances, they pay their premiums weekly, fortnightly or monthly. There was a social responsibility here not to leave these people without cover."

Within five days of the announcement from Independent, all of its special schemes business (loss adjusting firm GAB Robins agreed to continue to handle all the claims) and the existing schemes team had transferred to R&SA.

"We negotiated with the liquidator, Price-waterhouseCoopers, and solicitors all through the night," says Morris. "All concerned gave 110% and demonstrated a commitment to finding a solution."

The number of council tenants who could, potentially, be left without household contents cover was extensive - around 100 councils had placed their business through national brokers Aon and Marsh and were desperately seeking reassurance that continuity of cover would be maintained.

Chief housing officer (finance) for Glasgow City Council Colin James says: "We had 42,000 people affected by the liquidation - 20,000 were tenants with contents cover and 22,000 owners with buildings cover under a Right To Buy scheme. There were also 1,600 people holding contents cover within this Right To Buy scheme.

"Initially, there was a lot of uncertainty and we had a credibility issue, as we'd only transferred the cover to Independent in April this year. R&SA stepped in and provided continuity of cover and avoided our worst nightmare, which was leaving our tenants with no insurance," he says.

"Our tenants and those with buildings insurance didn't suffer any financial loss, contents cover was backdated and, where cases had to be picked up by the insurance industry in general, all claims have been paid to the value of 90%."

In a bid to make up the difference, Glasgow City Council recently announced it would pay out the 10% shortfall to customers.

R&SA has already paid around 400 outstanding claims, made prior to the collapse of Independent, totalling some £250,000. Since June 17, in excess of 1,400 claims have been handled, costing some £700,000.

The value of experience
The Independent staff who transferred the business over to R&SA had a crucial role to play.

Special schemes unit manager Pat Fielding says: "Eight of us moved over to R&SA and, between us, we have 90 years' experience. It was great to see that this experience was valued. We dealt with the Aon and Marsh network, plus provincial brokers and, by moving everything so quickly, the volume and magnitude of the portfolio didn't pose any problems.

"There was a incredible spirit of co-operation from all parties involved."

Loss adjuster GAB Robins could have been forgiven for feeling nervous about moving to an insurer that has one of the UK's largest in-house claims adviser service teams. But the firm's national account director George Bentley says the company had already put enormous effort and considerable resource into developing the specialist scheme units and wanted to continue to be involved.

How this will transcribe in the future remains to be seen as, two weeks after the special schemes deal was struck, R&SA announced another purchase - Property & Casualty Services, Independent's commercial loss adjusting arm.

Speculation as to who will stay within the commercial panels is rife.

R&SA's UK commercial claims and customer director Rod Kitchen adds: "There is a lot of speculation.

"As well as PCS, we use Robins, McLarens, Crawfords and Cunninghams. We're in the throes of a strategic review and our panel members are aware of this.

"Our review is looking at exactly what part PCS will play in our future claims strategy to ensure we provide a much more customer-focused claims proposition.

"There will always be a role for a panel, but until the review is finished at the end of October, I would not want to speculate on what will happen."

Kitchen says the PCS opportunity was too good to miss. "They are recognised as being a top quality adjusting house and it was the right type of purchase for the strategy we are implementing. We are looking to be more customer-centric, especially in claims.

"To this end, we had determined that greater insourcing would be a priority and had already moved on this front with solicitors. Insourcing a proportion of our commercial loss adjusting was to be our next target and PCS was an excellent opportunistic purchase."

Smoothing the changeover
More than 300 PCS staff transferred to R&SA - not just the loss adjusters, but many others, from administration to equipment and premises staff.

"Our first priority was to stabilise the company," says Kitchen. "So we arranged to continue to handle Independent run-off business, transferred all non-core adjusting operations such as risk control, motor engineers and the Pro-Care company (health) to more appropriate parts of R&SA and also gave PCS first preference for R&SA material damage adjusting.

"We were keen to fully integrate PCS into R&SA as soon as possible. This involved the financial side of things and employee services such as HR and systems.

"I am pleased to say that, in a little over three months, PCS is well on the way to being a positive, profit contributor to R&SA and has been fully integrated into our structure," Kitchen says.

"We are very pleased with our purchase which is meeting all our expectations and more."