Small brokers not the root cause of the problem

Small brokers not the root cause of the problem

Your front page article (Tighter payments deadlines to hit smaller brokers, February 1) has prompted me to respond as we are a small broker, in Lloyd's terms, with less than £3m income.

We place over 80% of our business in Lloyd's and underwriters seem to forget that we are responsible on behalf of Lloyd's underwriters to raise all of the premium invoices (approximately 6,000 annual in our case), create client documents, pursue payment, collect claims and process all the money transactions via segregated insurance brokers accounts which we are required to maintain at our cost.

This is done because underwriters cannot do it forthemselves and underwriters have the additional undervalued benefit of only one point of contact (dare I say client?) – us.

When clients pay, some on time, some early, some late, we pay the underwriters. If we saved all the investment income on premium at current levels for the next ten years or so I doubt we would have the £100,000 that Marsh refused to pay as a fine for late payment of premium.

If we are a representative example then small brokers are not the root cause of the premium payment problem, it is the large brokers and no amount of rhetoric will change that.

However, and rather ominously, it is now the case that every managing agency is required under regulation to asses the suitability and credit worthiness of the brokers they deal with. It will be a brave agency indeed that declines to do business with the handful of large brokers who control 80% of the market's business, irrespective of premium payment, and inevitably it is the small brokers who will lose, and are already losing, their agencies.

After all, if the large brokers cannot be regulated, the small ones must be or the regulation will be seen to be ineffective.
Neil Golder
Compliance director
John Bannerman

Clearly gone unnoticed

I refer to my letter which you published in November 2, 2000, issue, headed “Insurers provide an abysmal service” which has clearly gone unnoticed by some insurance companies.

Part of my complaint was the high cost, in time and money, that has to be borne by brokers to obtain correct documentation after receiving so much incorrect paperwork.

I have now received a letter from Axa's Mark Cliff (commercial and intermediary lines director) announcing that commission is to be reduced to 7.5% for employers' liability and road risk cover. This, in particular, was one of the companies about which I was complaining. Service and correct documentation is almost non-existent from the company. They have the audacity to state ‘on a more positive note, with inflation continuing to gradually push premium rates up, we would expect this to mitigate the effect of reduced commissions”. Does this man not realise that inflation also pushes up the overheads of running a brokerage, wages, computer running costs, postage, stationery, and every other consumable?

There is not a great deal of competition for this type of business between insurance companies and Lloyd's syndicates and it should not be difficult for them to price the risk properly without slitting the throats of supporting brokers.

Axa is certainly one company that will not be used by us for such business and I hope other brokers will boycott them and any other insurer that behave in this way too.
Piers Chalinor
Managing director
Jenner Baldock
Cheam Village, Surrey

Put your house in order

Open letter to Christopher McKee, GISC board member:

It seems hardly a month goes by when Direct Line is not in the press being investigated by the advertising standards authority for misleading advertisments aimed mainly at the broking community.

This is the same company by whom you are employed, yet you sit, all high and mighty on the board of the General Standards Insurance Council (GISC), to regulate us.

The rules make it clear that the GISC is to promote high standards in general insurance, and to take corrective and punitive action where necessary.

What, may I ask, do they intend to do about the ever continuing adverts that appear in yellow pages, under agents and brokers when you are a direct insurer ?

If you are to get any respect, how about putting your own house in order before starting on us? After all most brokers have been around longer than you.

I look forward to your reply.
Richard Mikula
Topaz Insurance Brokers
IBRC registered until the 30/04/2001

Levy realistic penalties

Mr Hasdell (Cheap cover by law, February 8) puts forward an interesting, if not new, case. The idea of a flat premium for compulsory cover is not uncommon, especially in Eastern Europe. There, however, they have a much lower claim cost with damages often capped at a low level. I'm sure if Mr Hasdell were an underwriter, or in some other way being accountable for the performance of a motor account, he would be less in favour of charging a flat premium for compulsory cover irrespective of physical or moral hazard.

In the scheme suggested by Mr Hasdell, where is the incentive for a driver to take care to avoid accidents and convictions? Why should the careful motorists subsidise the reckless ones? If a driver cannot afford the premium to insure his car, what else is there that he cannot afford – its maintenance, roadworthiness and tax? The short answer is: if a driver cannot afford to put a car on the road legally, he should not put it on the road at all.

The answer is not in reducing our premiums and throwing our rule book away. Instead, the government should heed Mr Lovis's call (Lock ‘em up and take away keys, February 8, p. 4) and levy realistic penalties for driving without insurance – and use the fines to reduce the MIB levy!!!
Roy Rodger FCII
Motor Insurance
Consultancy and Training

Everyone else's fault

Personally, I think that Oscar Hasdell should go and live in a communist country and start a government-owned and funded car insurance scheme, if he thinks that insurance should be freely available to everyone at an affordable cost (and lets see how long it lasted before declaring a huge loss). Does he live in the real world where insurers are here to make a profit, not subsidise the joy-riding youth culture of today?

Of course insurers are going to cherry pick – they want to pay less out in claims and make a profit. If this drives the youngsters off the road, then is that such a bad thing? After all, statistics tell us that they are responsible for a vast number of accidents that cost lives.

I do agree with Quin Lovis in as much as tougher penalties need to be brought in to punish uninsured drivers. If insurance isn't purchased due to cost then the perpetrators need to realise that when caught (and not if) they will face confiscation of the vehicle and a fine (and why not throw in a driving ban at the same time? After all, they won't have a car to drive and won't be able to buy another one due to the fine that they've got to pay.)

We all have a duty to drive carefully, reduce speeds and have fewer accidents, not only to save lives but also to save money on our car insurance. What does get on my nerves is the criminal element of our society that thinks it can get away with not buying insurance, bleating about the costs of running a vehicle, but expecting the rest of the law-abiding society to cover their costs.

And before any one makes assumptions about what I am – I am not a Conservative-voting, pipe-smoking elderly gentleman who thinks that National Service should be brought back “to sort out the men from the boys”.

I am just a young female intermediary who has to constantly explain why insurance goes up year after year for the majority of clients – not due to their driving history but because of everyone else's.
Louise Scaife
Personal Lines Manager
Rickman Tooze

Wonderful to get through

Re: Norwich Union and CGU merger.

I have been reading lots about difficulties brokers are having with the conversion programme, so I think brokers in Northern Ireland must be the exception. We have this morning (February 1) received details of commercial renewals due on March 27 and 31. While it is only giving the 2001 renewal premium and enclosing a letter regarding the conversion to be sent to clients, it shows how up-to-date Belfast branch is. Ken, please do not take staff away because of this letter.

However, we dread having to contact the instalment section in Norwich, as there is almost no chance of getting through. Holding on for 20 minutes and getting through would be wonderful.
J N Bailie.
Castlereagh Road

A poor performance

Have no fear of car ringers! Their poor attempt at trying to ring a Ferrari as pictured in your article on page 26 (January 25) is poor by even their standards! I could've sworn it resembles a Lamborghini. If fooled, perhaps I could interest the editorial staff in a twin turbo 32valve racing Skoda I have for sale.
Mark Grafton.