I realise my recent comment, “You cannot run a commercial insurance company by piling it high and selling it cheap”, might be contentious in the light of Independent Insurance's collapse and Royal & Sun-alliance's (R&SA) decision to take on Independent business (Insurance Times, July 12). However, I stand by it and refute Gary Carroll's suggestion that R&SA is “stealing from the corpse” of Independent.

My statement was made in direct reference to a quote by Michael Bright that an insurance company can be run along the lines of a supermarket.

Events in the past few months have shown that managing commercial insurance is more complex than selling goods in a supermarket – primarily because it is difficult to predict the exact cost of the product we sell.

This is a feature of our business that means the correct recording of claims and accurate reserving are essential, because they directly affect the prices we charge our customers.

I am confident that R&SA has played a responsible role in assisting many commercial entities and their brokers at a time when they were left without cover. R&SA's stance throughout has been to provide immediate cover and then to re-underwrite the risks at our prices.

A month into this process, it is clear that the prices R&SA is charging are substantially higher than the rates being charged by Independent. That is because there is a price to be paid for security and continuity. At R&SA, the philosophy is to charge prices that fully reflect the claims patterns and prudent reserving policy that have always underpinned the company's stability.

I have paid tribute to the innovations which Independent brought to the insurance industry. Many good people worked for the company and those who have employed many of them, including R&SA, will be better for learning from them and using their ideas.

No one has won from the collapse of Independent but it is my hope that, in the long term, brokers and insurers can work together to give our customers the stability of price and cover which they need.
Colin Short
Underwriting manager, UK Commercial
Royal & Sunalliance

Business, not cynicism
The letter from Robert Hannah entitled “Hypocritical campaign” (Insurance Times, July 12) requires a response. And, as Desborough & Associates has been more than happy to accept the widespread acclaim and awards for Independent's advertising over the years, I suppose it's up to me to respond.

Unfortunately, Mr Hannah clearly doesn't understand the timescales involved in such an advertisisng campaign.

I presented creative roughs to Graeme Sutton, Independent's group marketing manager, on December 14 last year. On January 23 this year, approval was given to proceed with photography and production, and the “Dracula” advertisement first appeared in May.

Therefore I hope Mr Hannah can appreciate that no short-term cynicism was involved.in fact, if Mr Hannah knew Independent was in trouble back in May, I wish he'd told me, because we clearly would not have proceeded with advertisements involving such inappropriate headlines and we wouldn't now be owed so much money by our late client.

Finally, however, on a lighter note, if Mr Hannah would like to ring me (020 7745 3337) to let me know his address, I will be very pleased to send him a high-quality proof of the advertisement for his office wall.
David Desborough
Managing director
Desborough and Associates

How many more?
Recent events have left me wondering about the long-term financial strength of a high proportion of Association of British Insurers (ABI) members.

More than 400 UK insurance companies belong to the association, but can a limited company policyholder still really be certain that all of those 400 insurers will settle a long-tail public/products liability or a professional negligence claim?

Some ABI members are subsidiaries of other insurers, so any solvency guarantee given by the parent company is not readily known. And a limited company policyholder receives not a penny of protection via the Policyholders' Protection Act 1975, except in respect of compulsory classes of insurance such as employers' liability and road traffic act motor insurance.

The prestigious list of insurers compiled by the ABI includes Equitable Life and Independent Insurance. The disasters flowing from those association members must remove confidence in the industry. When you add Iron Trades to the list of casualties, the uncertainty grows. Incidentally, HIH,

Australia's second largest insurer, recently became substantially insolvent.

Limited company policyholders should demand that the ABI offers a guarantee that trading with its members will not result in full exposure to unpaid claims. The 90% guarantee currently given by the association to private policyholders should be extended to limited companies.
MP Ward
Cumbria Insurance Brokers

Crying wolf
Am I the only person fed up with the crocodile tears being shed by many former Independent intermediaries about the plight of their clients? Where were these people when the seeds of Independent's destruction were being sown? A cynic might say many were being helicoptered in to some flash sporting event or other.

We all appreciate these intermediaries have an interest in playing down how much they either knew, or should have known, because they do not wish to be sued for the bad advice some undoubtedly gave. But I wish they had the decency to crawl back under the same rock now inhabited by Michael Bright.
David Byrne
John F Whippy

Material misleading
After reading your lead article “The final collapse” (Insurance Times, June 21), the members of British Rigid Urethane Foam Manufacturers' Association (Brufma) wish to point out that it contains misleading information concerning its products.

The article says: “In one example, Independent moved into insuring commercial fire risks in the food industry where other insurers, notably Norwich Union and Axa, have been reducing their book due to concerns about the safety of composite panels made from chemicals such as polyurethane.”

The material in question is polystyrene, not polyurethane.

As the Loss Prevention Council's publicly available information shows, the primary cause of the well recognised unsatisfactory fire performance of interior partitions in food processing factories is the unsatisfactory polystyrene-cored panels and partition wall systems that have been used.

The council's technical expert, Terry Day, has repeated this fact publicly on many occasions.

Polyurethane-cored panels and systems have been satisfactorily used for more than 30 years. It is most important that the market perception of polyurethane panels should not be affected by what was said in your article.
Wilf Ball
Chief executive

Make policies hold water
During the floods last autumn, the ABI said its members would not withdraw insurance cover, otherwise properties in vast tracts of land would become unsaleable.

Independent Insurance, which is now in provisional liquidation, insured thousands of household buildings, many with a history of flooding.

As Independent's policyholders look for new cover, will the ABI now guarantee that flood cover will be provided, and on sensible terms?
Judith Wilkinson

Not so innocent
I read with interest the comments from Reg Brown, a former underwriter at Lloyd's, on poor standards in the market-place (Insurance Times, July 12).

I have specialised in the sports and leisure market for more than 15 years and, during that time, I have continually had to endure competition from numerous innocent markets, including Lloyd's. When short of income they look to sports and leisure to bolster their cashflow. But this is often an diffcult area and their experimentation often ends in disaster.

Thankfully, the innocent market has all gone – or so I thought. In the past few months, a Lloyd's syndicate has been quoting for Irish Nightclubs at terms less than I was getting in 1999.

Another syndicate has now entered the travelling showmen (funfairs) market, knocking around 25% off my premiums.

My own loss ratios for both these areas are not good, so I suspect yet another two underwriters will be facing the axe in a few months time when the claims have arrived.

I have spent the past eight months educating brokers to expect serious increases in terms and conditions, only to be undermined once again. So, Mr Brown, I share your frustrations.
Kim Bullimore
Managing director
The Leisure Consortium at Lloyd's

Cheap can mean nasty
Reg Brown's comments on the future of the professional indemnity (PI) market (Insurance Times, July 5) could refer to the whole insurance market-place.

Insurers can occasionally offer more competitive rates if they restrict writing business only for the best 1% of risks in their class. But then how do you evaluate that 1%?

I'm afraid I still stick to the old adage: “If it's too cheap, it's no good.”
MA Harris
Burrell Harris

Leaving Norwich
In your letters page recently (Insurance Times, June 21), an anonymous reader complains of Norwich Union's (NU) “outlandish” increases. My own experience reinforces this view.

I had been insured for household buildings and contents cover with CU/CGU/CGNU since the early 1960s, thus providing a very profitable source of revenue for the insurer.

However, when I came to renew my CU Golden Key policy in April, I was advised that it could not be continued, because all personal insurances had to be renewed through NU Direct.

For this dubious privilege, I was expected to pay this amorphous organisation an extra 54%, despite an exemplary claims history and no increase in risk. Needless to say, I bought insurance elsewhere at a substantial saving.

If any small enterprise treated its loyal customers this way, it would soon go out of business.

Another factor which might be lost on CGNU management is that many of its personal clients hold substantial investments with the group. In view of the shabby treatment meted out to me by CGNU, my own investments will now be reviewed and, where possible, placed elsewhere.
Brian Lockyer