LETTERS : Biba will help minnows prepare for the future

May we please have an objective study of the numerous after-the-event products on the market and which are much cheaper than Claims Direct.
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E B Campbell
Buchanan Campbell
Glasgow

Cornell has his finger on pulse of the future

I thoroughly enjoyed the Top 50 Brokers and Intermediaries supplement (July 2000) although I find it rather disconcerting to see old names like Sedgewick still listed.

I enjoyed Tony Cornell's article “Future Watching” and agree with many of the predictions made and the reasons for them.

Cornell states that age of principals will be the most powerful driver for consolidation.

I do not disagree that this will be an important factor but feel that the impact of the General Insurance Standards' Council cannot be discounted. I deal with brokers who would fall into Cornell's “super provincials” category and the majority of these are in their early 50s or younger. It is rare to come across a single owner of a “super provincial” who is nearing retirement. There may be several director/owners nearing retirement age but the succession is usually taken care of by younger counterparts who have managed the transfer of ownership.

However, GISC and the associated solvency requirements may put pressure on some internal share transfer schemes, particularly when the younger directors are borrowing the funds from the “super provincial” to actually buy out the retiring director/ owner. This pressure from GISC and the fact that the older director/owners are being bought out by the “youngsters” may also have an effect on their ability to take advantage of the opportunity to buy the smaller independent intermediaries that Cornell quite rightly indicates will be looking to give in to the pressures identified.

I am aware that the major insurers are providing funding support to designated “super provincials” for acquisitions. At some point in time, even they will start to worry about their own profitability on the back of the funding and the ability of the funded broker to repay the support. The lesson learned by national brokers over the years is that the acquisition of retail brokers rarely adds value. On the contrary they are value destroyers. The “super provincials” may be excellent brokers but are they at the cutting edge? By making acquisitions, are they just adding new problems to existing ones?

This brings me to networks. Cornell is right when he says that they are appealing, when they address and ensure the independence of the individual members, but deliver standards and compliance across the network. The term is starting to be used to describe everything from the Willis Commercial Network to a loose buying group like the Warwickshire Insurance Network (WIN). Someone recently told me that he was going to start one in Shropshire and call it SIN.
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Hugh Warren
chief executive, commercial risks
Willis

Nasty Nick is no joke

I have just read your support campaign for Nick Bateman in the Big Brother House.

Frankly, I am flabbergasted that you would even consider supporting this man. Do you really want Nick Bateman to be the ambassador for the insurance industry? Do people working within industry want to be tarred with the same brush as Nick?

I actually feel rather embarrassed that this man is working within our industry.

I hope to God that he doesn't win because he doesn't deserve to.

He barely qualifies to be a fellow human being.
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Sue Wheatland,
Bromley

Don't so be naive

With reference to Richard Hersant's letter (Insurance Times August 17) concerning Big Brother's bad boy Nick Bateman.

It is somewhat naive of any person to draw conclusions on a person's normal characteristics when they are in artificial surroundings and are clearly after Oscar nominations.

I find it absolutely amazing that such publicity and debate arise on a person's perceived character within such a “staged” environment.

However, it is also refreshing that individuals within the insurance industry may be regarded as entertaining and not grey, lifeless, suited individuals. In the same way no Cornishman wants to be stereotyped as a Souwester-clad mackerel fisherman whose staple diet is pasties.
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Andy Moore
Underwriter
CGU Ipswich

Get a grip over Nick

Nick supporters, I am disgusted and compelled to write this letter after the recent activities on Big Brother.

Anyone with a cell of human intelligence would have grasped the concept that Nick was a complete t***** from show one.

You are all in need of medical assistance. Or perhaps serious therapy...

I don't know how you sleep at night.

He is an embarrassment to civilisation!!
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Joe Allen
JCA Insurance Services

Don't get personal

I feel that I must respond to Tony Hall's letter (Insurance Times August 10).

He must be well aware that all intermediaries that are limited companies have to file accounts, and that this information is in the public domain and readily available. It can be supplemented by further details obtained from credit reference companies. To suggest that the Insurance Brokers' Registration Council has released confidential information to me is mischievous in the extreme.

I don't think anyone disputes the average age of principals in the broking industry, and the lack of successors, and this will be the main reason for consolidation.

Unlike other business sectors there are few new businesses starting and there are virtually no individuals looking to buy small brokerages and run them themselves. The market is for larger companies to absorb the smaller ones. As, I believe, Tony sold his company to a larger one, he is well aware of the dynamics.

I am not against small brokers and spend

a great deal of my time in their company. I admire their tenacity and ability to survive against the odds. I am sure that many will continue to run their businesses, but life will get tougher and age will get the majority unless Tony has discovered the elixir of life.

I would welcome a well-presented argument for the survival of the smaller broker rather than a personal attack.
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Tony Cornell
Cornell Consulting
Reading

Void or not?

I read with interest the letter from Adrian Moore (Insurance Times August 3) seeking views on whether, following voidance of a policy due to non-disclosure, the premium should be reimbursed to the time of original inception of the policy, or merely to the time of last policy renewal.

As Moore stated, the Insurance Ombudsman has previously considered this issue and expressed the view that, while there does not appear to be any clear legal authority, standard practice within the industry favours an insurer voiding the policy from inception – the point in time when the initial duty of disclosure arose. The ombudsman suggested that in this case an insurer would have the right to recover any claims paid and, unless the non-disclosure was fraudulent, the policyholder to recover all premiums paid.

The ombudsman went on to say that, independent of the view stated, there might be cases in which it would not be reasonable in any event to treat each year's policy as a separate contract, suggesting much would depend on the nature of the renewal documentation supplied.

Moore does not say when the material fact which led to the policy cancellation occurred. If this was after inception of the policy, then it could only have been disclosed at the next renewal and consequently there would be no grounds for requesting repayment of premiums made prior to that renewal. Subject

to this, there might be grounds for asking underwriters for return of premium back to the time of policy inception. However, any such request would rely on market practice, rather than being supported by legally binding precedent.

The offices of the Insurance Ombudsmen have previously emphasised that an ombudsman is not a judge – consequently his decisions are not legally binding. Ombudsmen have stated that they operate in the area of discretion, not solely that of strict law. There is no guarantee that a principle derived from earlier cases will be applied to later ones.

The underwriters told Moore that a new contract arose at the time of each renewal and that is legally correct. However, the ombudsman's decision shows that market practice is to take a wider view, where appropriate. It was also reported that the underwriters advised that the ombudsman's decisions do not apply to commercial insurance. It is the case that the ombudsman's terms of reference only extend to policies taken out “by, or on behalf of or for an individual”. Notwithstanding this, while ombudsmen's decisions are not legally binding they may influence market practice in all areas of insurance.
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Steve Wardle,
The Richard Hartley Partnership,
Yorkshire

No hidden gems here

Re: CGNU Household policy wordings

We are supposed to be practitioners of a service industry with both moral and financial standards which should be the cornerstone of everything we do. Above all if a client insures their valuables and pays a premium based upon that value they should be entitled to obtain full recovery, in financial terms, for those items lost in a claim. That is the theory but if you are a CGU Elite Key policyholder things are quite different.

Our client had been provided with a CGU Elite Key household policy by a small broker in Beckenham Kent, which I was asked to take over mid-term. The policy was to cover the client's home buildings, contents and personal effects. The client was unfortunate to be held up in her own home by an intruder, who held a screwdriver against her throat. The ordeal ended when the intruder had extracted a quantity of jewellery from the family before fleeing.

A claim was put into CGU for the stolen items. The client had paid reinstatement cover and understood the insurer would pay the cost of replacement or have the items replaced. Due to the circumstances involved in the robbery the client did not want to replace the stolen items, indeed she has rarely worn jewellery since, even though she is in the fashion business.

Under normal circumstances the client would be prepared to accept indemnity terms, as she did not want to replace the items stolen. An offer of 85% could have been acceptable. Unfortunately the Key Elite policy has a clause “VALUE” which states: “The amount of money you would have received by selling the article or property immediately prior to the loss or damage occurring.” The adjuster explained that this typically means the value that a pawnbroker might place on an item or items if the insured had offered their property for sale. In this case the amount that CGU were prepared to pay amounted to 57% of the total claimed. This was subsequently raised to 65%.

There are a number of issues that need to be understood in this matter. The first of which is that the insured has paid a premium for reinstatement terms, the premium being based upon the value at risk according to an independent valuation being supplied. It has always been my understanding that if you pay a premium for a specified cover, insurers need to pay out according to the value insured – less only the excess and betterment.

The other issue is who decides how the loss is valued? Who picks the pawnbroker? Is it likely that someone with substantial property would go near – let alone offer her jewellery to – a pawnbroker? In this case the values were decided upon by CGU claims staff. The client had a long-standing agreement with her jeweller that he would buy back the items he sold at the original sale value, but this was not in writing and so was not accepted by the adjuster or CGU.

One has to take issue with an insurer that accepts premium for a cover where it requires a valuation, and then at the same time includes various options within the policy wording allowing it to choose to reinstate if it (the insurer) buys the items lost or damaged (at a discount), imposes standards indemnity terms or decides to discount claims still further if an insured does not want to reinstate.

I suggest that anyone using CGU as a personal lines insurer should check the wording of all household policies and ensure that there is no value clause printed in the policy. I would not want anyone else to pay for something they would be unable to claim for.
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Terry Rechnitz
RP Hodson (London)
London, E1