Brokers are becoming fiercely protective of their clients, as some insurers try to poach their confidential details. So who does own the client? Verity Adams reports

Once a business relationship has come to an end it seems taken for granted that the insurer, or wholesale broker, will act responsibly and not share client information to an outside party. Yet some have been accused of getting their hands a bit too dirty when it comes to deciding how to use client information they have acquired through a broker.

This dispute was once again thrown into the limelight when Insurance Times revealed that Glasgow broker Calcluth & Sangster, and national broker Marsh are involved in a spat over client ownership.

Calcluth & Sangster claims that some of its clients' details had been retained by Marsh after its relationship with the broker had ended, and that the broking giant had passed those details onto a rival broker - a claim which Marsh fiercely denied.

This once again raises questions about who customers actually belong to and, indeed, if they belong to anyone. It has also sparked fury among brokers who already claim to have had some insurers pull the rug from under them.

David Quick, managing director of intermediary network CETA, said: "This behaviour has been going on for a while, we've accused certain insurers of doing exactly that. Most brokers with a decent sized business will have come across it in the past.

"The customer is dealing with the broker and they can place its business with the insurer who will work best for the customer."

Quick told Insurance Times that some insurers have already been caught attempting to poach brokers' clients. He advised brokers which were suspicious of being victimised to "just walk away" and take business elsewhere.

Broker sources also say that a "name and shame" system should be implemented to stop the offenders. But, say others, there could be problems with actually proving any wrongdoing.

Aside from a whistleblower outing the party, which is ultimately unlikely, there are other methods that can be employed, say sources.

Catching insurers
Andrew Paddick, director general of the Institute of Insurance Brokers (IIB), said 'sleepers' were a good way to catch insurers in the act. This could be a piece of confidential information deliberately planted in a field of client data which could be recognised if another party illegitimately uses it.

But ultimately Paddick thinks if businesses behave in a "gentlemanly" manner it should never reach this extreme.

When questioned about who owns the customer, Paddick's response is a forceful bellow: "No one owns the customer, I'm a customer and no one owns me." But he warns there should be agreements in place between brokers and insurers to prevent the client from being abused.

He says: "It's not gentlemanly [to use outside data to try to acquire the client] but you should have an agreement. If you have the agreement you can enforce it in court. I advise brokers to tell clients their information may have been passed on."Lyndon Wood, chief executive of Moorhouse Group, warns insurers that it would be "absolute suicide" for them to swindle brokers by using client information to approach them direct.

Yet he again tells brokers to use non-solicitation clauses in agreements because they could be highly useful in proving any wrong doing, especially to the smaller brokers who can rarely afford to lose clients.

While many refuse to acknowledge that client data may inadvertently find its way on to the direct insurers database, many brokers will have in place non-solicitation clauses to manage a potential risk.

But then there could be problems with a non-solicitation clause which may not be as watertight as some would expect. Depending on who you speak to you will get a different answer. There are polarised views; some insurers will recognize a non-solicitation clause, and others will not.

Tesh Patel, corporate development director at Royal & SunAlliance (R&SA), describes the implementation of non-solicitation clauses as "good management practice".

He says R&SA enforces it as good practice, but, and here is the warning, there are those firms that are not so quick to toe the line and will see a short-lived opportunity to get the vital broker information.

St Paul Travelers says its terms of business agreement (Toba) includes a clause in which it guarantees not to contact the customer directly. "Indeed the only circumstances in which we are likely to contact customers directly would be in connection with a claim or in order to provide risk management advice or guidance.

"In either case, we would only do so with the prior permission of the broker and the effect would be to strengthen the relationship not to undermine it.

"There are no circumstances under which we would pass confidential client information received from one broker to another broker. To do so would breach our professional standards and cause a breakdown in mutual trust and respect."

Charles Earle, of Arista, whose holding company is InSynergy, agrees it would be risky to contact clients direct, and casts some doubt over whether there would ever be an eventual winner.

In Earle's view the insurer would lose respect but gain business, and would need to consider which is more important - long-term reputation or short-term revenue.

He suggests that the preferred broker might fear being on the other end of the same deal next time - what price could be paid for playing in this game. The client might get a cheaper premium, but would they have selected the broker that does the best all round job for them or the one that now owes the insurer a favour, he says.

Peter Staddon, technical services manager at Biba, champions the cause of brokers caught up in this messy situation. He says he has come down heavily on insurers in the past when the relationships have broken down and insurers are known to have contacted clients directly.

According to Staddon this is a situation which is more likely to arise in the London markets.

Trust is the foundation of any sound broker/ insurer relationship and where that crumbles, regardless of what is done the client information, it is invariably the client who decides where to place business.

This suggests that, as Paddick believes, the client is owned by no business. IT