Insurance Times' story of CGU cancelling County Durham-based intermediary, Telford-Reede's agency on the grounds of unprofitability is horrifying, and raises some fundamental questions about the relationships between insurers, intermediaries and their clients.
As I understand it, some three years ago General Accident (pre-merger) approached Telford-Reede with a deal involving special terms and generous discounts on motor business. It was a good deal for Telford-Reede and its clients, and the account grew. But, surprise surprise, the insurer lost money, so it cancelled the agency.
The way that it did that, however, is reprehensible, in that it wrote to policyholders, telling them that they should in future deal direct with CGU (post-merger), without telling Telford-Reede of the decision or the way in which it was going to be implemented. The points that this saga raises are:
Firstly, if the account was losing money, who was doing the underwriting? If CGU was underwriting the business properly case by case, it should have been able to remedy the situation over time, working with Telford-Reede.
Secondly, if CGU felt that cancellation was the only way out of an impossible situation that it had got itself into, it should at least have respected the intermediary/client relationship. The situation certainly does not give CGU the right to try to hang on to business direct. What CGU should have done is say to Telford-Reede:
“We cannot see a way of making this business profitable. We shall not therefore be inviting renewal of any of your cases. Please arrange to place the business elsewhere, as each renewal approaches, and we will provide the appropriate evidence of NCD at that time.” Only at the end of a full renewal cycle should it have cancelled that agency, after a run-down of the account.
Although CGU eventually apologised to Telford-Reede, it only did so for the “administrative error” of writing to the clients before notifying them. The disturbing aspect about this is that CGU does not seem to consider that it had done anything wrong. It clearly thinks that it does not need to respect the client/intermediary relationship, and that it is entitled to try to retain the business on a direct basis, conveniently forgetting who originally placed the business with it.
I doubt if it would have acted in this way if it had been an AA, AON, or building society account that was unprofitable. Insurance companies really should get out of the habit of thinking that it can tread on small brokers/intermediaries with impunity. Is it too much to hope that there might be a change of attitude for the 21st century.
Graham S Huntrods
Director for Northern England
Brokers have doubts on GISC
Further to Andrew Paddick's open letter to Chris Woodburn, (above) it is true that many brokers/intermediaries have severe doubts about the independence of the GISC.
Firstly, I refer to the HM Treasury report dated July 28, 1988, in which Helen Liddell MP (now Minister for Energy) stated the Treasury will look to voluntary self-regulation rather than statute, and that this should be through a body having support across the insurance industry, which as yet, the GISC clearly does
Secondly, this should be independent of insurers and intermediaries but taking their interests into account. Can Chris Woodburn please explain to us lesser mortals how they can claim to be independent when it was widely reported in the trade press that Charles McKee of Direct Line, and Bob Newton of CGU are to have a seat on the board.
It would appear to me, and most of my broking colleagues, that there is a hidden agenda to get rid of High Street brokers by forcing them to join a non-statutory body, which can then put them out of business by imposing half-cocked rules and regulations along with unjustifiable costs which have no material advantage to the insuring public.
Finally, the question which I think is on every broker's lips: “How much are you being paid?” a question dodged at every roadshow up to now.
Topaz Insurance Services
Actually, a statement was given at the London roadshow in which Chris Woodburn said that details of GISC members' remuneration will be given in the annual report later this year. All bar the two public interest representatives on the board are not being paid.
£500 per issue or complaint?
If there is to be a potential £500 complaint fee I wonder whether this would apply per incident or for every separate complainant.
As we all begin to trade on the internet, imagine 10,000 internet users all complaining to the Ombudsman because our site crashed and important information was not available for an hour or two. That's a lot of £500 fines for a single brokerage to pay.
I'm sure someone has thought of this but it does make me wonder.
Eversham Insurance Centre
Casual dress, casual standards
I received my copy of Insurance Times this morning and while opening the post read the headline “RSA moves to a more casual approach to work” which made me smile.
Looking at the situation that most insurance companies find themselves in at the present time you would think that the RSA would try to raise standards rather than lower them. I may be old fashioned but if we start allowing employees to come to work in casual dress, then their attitude to work will follow.
Is it a coincidence that the two companies mentioned which have introduced this form of dress are the ones currently suffering the most administrative headaches?
A Manning UK