Cooper Gay Swett & Crawford was formed last year from the merger of Lloyd’s broker Cooper Gay and US broker Swett & Crawford. Its group chief executive longs for a paper-free Lloyd’s but leaves remuneration to the market
Q. How would you describe the level of professionalism among London market brokers?
A. There are two aspects to that. One is brokers who are competing to win or simply hold on to business. We saw a decent amount of that a year or so ago, but it has levelled off a little bit. We are not seeing brokers coming in and quoting silly prices just to win the business.
The other aspect is the efficiency of the broking market. There are some signs of improvement, but we are still a long, long way from being an efficient market. Until we trade our business electronically we are not going to have the full efficiencies that we need to have. That is evidenced by the profit-and-loss accounts of the Lloyd’s brokers. There are not a lot of brokers making reasonable returns.
Q. Where do the inefficiencies lie?
A. It is mostly the processing of documentation of our business. You walk around the London market and see guys walking with a bunch of paper underneath their arms. You have business coming to London, everybody re-keys it, prints it off on pieces of paper that go into the market. The market then stamps it, copies it and sends it back to the brokers. The brokers then re-key it and send it off to the clients. It is a crazy process. We trade electronically everywhere else – we don’t have a choice.
Q. Are modernisation efforts working?
A. They are making good headway. I think [director of market operations] Sue Langley has done a good job with the Lloyd’s Exchange. Endorsements are something we really needed to do electronically.
We have been part of the piloting for using iPads at Lloyd’s, which still has a way to go but is a good in-between step. It would be nice to see brokers walking around with iPads instead of pieces of paper. It requires everybody in the marketplace to be in agreement with how the business is conducted. That’s the challenging part.
Q. Are there any pockets of resistance?
A. There are always pockets of resistance. People don’t like change full stop, and there is resistance where people think they know better and they want their solution. If everybody wants their own solution instead of a single solution, you have got to find some way of interfacing them. That is where we are now and it creates a bit of difficulty.
Q. What do you think of brokers seeking additional remuneration from underwriters?
A. My brokers are not paid by the underwriters – they are paid by the insureds. I don’t think there is a real issue with brokers getting the underwriters to pay them more. The issue is whether insurers can afford to pay them more and whether insureds can afford to pay more to the insurers. I would imagine that, in today’s economy, insureds who are asked to pay a retail broker more money are going to end up moving their business.
Insurers have a choice. All brokers, if they could, would get more brokerage. It is part of our job. It is up to the insurers to say where they think we deserve it and where we don’t. The problem is, of course, the amount of power wielded by the big three in terms of their volume, and it is a brave underwriter who says, “I’m not going to do business with you.”
Q. Is there any need for remuneration reform?
A. I think it is fine as it is. You should let market forces dictate remuneration. However, there should be a level playing field and there should be transparency: if I’m an insured, I want to know what my retail broker is earning.