Real profits in a Virtual Market

Insurers who are inflexible in their underwriting are handing Primary Broker Services business on a plate, says managing director Jonathan Davey.

And he tells Elliot Lane that the resulting premium boost means expansion is on his agenda

One year on, Primary Broker Services (PBS) managing director Jonathan Davey is a relieved man. The former Hong Kong police inspector has watched the virtual insurer develop from theory to practice.

"In 12 months we've grown from nothing but a plan on paper to a profitable, successful business with over 150 select intermediary relationships and almost £7m of premium income."

Though no underwriting agencies or broker businesses are "firmly on the acquisition radar", Davey has begun looking to expand PBS' regional presence and poach quality underwriters. It has recently recruited NIG underwriter Robin Hinchley, who will be working from the company's Harrogate office.

He would not be drawn on whether he would benefit more from NIG's problems, but said the only issue PBS faced was the dearth of quality staff. "That is the greatest threat to our expansion. Finding good people has been difficult."

PBS writes only traditional commercial business, with a 70% commercial/30% packages mix, and cherry picks risks on merit.

This approach is paying dividends. Insurers, according to Davey, are handing the company business on a plate over their inflexible underwriting practices.

"During this renewal period we have seen major insurers turning away good business. And we have picked it up because brokers want to talk to someone that understands risk and underwriting, not someone that can read from a manual."

He cites one recent example where a leading insurer turned down a hotel risk it had covered for over ten years. "The premium on this risk was £25,000 over five years without a claim. Then this year it made a claim. An AA sign was stolen from the driveway. The claim cost £410. So when it came up for renewal, the broker found the insurer involved refused to accept it. The comment was 'we don't accept hotel risks which have made a claim'.

"Just because an actuary has told the insurer it no longer takes hotel risks that have made a claim, it has lost a great bit of business."

Davey says brokers are becoming increasingly frustrated because they want insurers to find one reason to write a risk rather than "find 20 reasons on a computer screen not to".

This attitude has allowed PBS to even underwrite composite panels. Davey stresses that does not mean PBS is targeting the composite panel market, but with the right company, and the right risk management, there should be no reason to stonewall or exclude this business.

"We have had many brokers come to us and say they have been turned down by everyone. We have rejected quite a few, but if the company is well-managed there is no reason not to write composite panels."

PBS has also re-negotiated its binding authority so from 1 September it was able to write a capacity of £10.5m. Renewal retention has been good at 85% and Davey expects the PBS business to "treble" over the 12 months.

After a few months' delay, the company's new Sirius underwriting system will go live in four weeks time. "The problem has been the complexity of the solution because it has been tailored very much for our products. But the system will bring improved efficiencies, and speedier policy issue.

"As a company we may move from 150 brokers to 300 brokers but we can't take on 3,000. Our business will continue to grow limited only by our imagination and ability to innovate." N

Personal Information
Born: 1966

Age: 37

Married: to Tessa, with two children Charlotte, 5 and Christopher 3.

Educated: South Island School, Hong Kong. University of Mid Glamorgan

Insurance career:

1990-1994 General manager, Vistec Financial Systems

1994-2001 Managing director, MasterPlan (insurance marketing)

2001-Managing director, Primary Broker Services

Interests

Football team: Leeds Utd

Hobbies: Golf, motorbike (Suzuki Bandit), watching and participating in all sports

Favourite quote: "You'll never succeed beyond your wildest expectations, unless you start with some wild expectations"