In response to your leading article on the Misys Screentrade initiative, I feel compelled to say what I am sure many brokers are thinking. Today, all we read about is that unless we are trading via the internet, we are dead in the water. Five years ago, all we read about was how the direct writers would kill off the broker. The fact is, brokers and intermediaries are still a major force in the insurance market and will continue to be so – because they understand insurance and the marketplace.
The cost of involvement in the Misys Screentrade system is high, as is setting up any web site. A £3,000 signing on fee plus 25% commission on sales. An insurance company can afford this but can the small broker? Brokers will need deep pockets before investment in on-line trading pays off. As the number of insurers on the Screentrade panel swells, so the "honey" is diluted. The only winner is Screentrade. However it will be at the expense of the broker. Screentrade is a vehicle for insurers to sell through the internet and it will result in lost business for brokers and intermediaries.
I have operated a web site for four years now and it has increased enquiries. What frustrates me is the insistence that unless I spend more money on my web site, I will lose out. I have e-mailed all the people who had requested a quote from my on-line quote facility asking questions about their expectations of my web site. Nine out ten said they valued access to a web site for information gathering purposes but that they still needed to talk to someone prior to their final purchase decision. On-line trading does not give advice, answer questions, give reassurance or speed up the transaction.
The author of the letter headed "The internet will cost jobs" in the last issue should not lose heart. Today's personal lines marketplace is extremely mobile. Brokers and intermediaries must make sure they "add value" to the service given to their clients. If they lose business one year to the likes of Screentrade, they must make sure they communicate with that lost client next year to reinforce the service they are able to provide. I am convinced oversimplification over the internet will ultimately result in customer dissatisfaction. The amount of money being invested in Screentrade is impressive and I do not doubt success will follow. However, as the next few years unfold, brokers and intermediaries, in the same way they have won business back from the direct writers, will combine their insurance and market knowledge with cheaper technology and use the internet as an integral part of their business activities.
At the moment, the only winners from the internet and e-commerce hype we are suffering are those in the computer technology industry. There is value in the internet and an early presence is necessary but walk before you run, the costs are still high for a relatively small return. We are still a few years away from on-line trading becoming the norm.
Russell Dadson ACII
The GISC is representative
The letter from Colin Sutton on November 11 was a refreshingly positive comment from a small broker on the GISC. However a few matters were raised for debate to which I can respond.
Our own brokerage was started as a one man band in 1960 and the then principal Michael McGuire, faced all the difficulties referred to in the letter plus personal guarantees to the insurers.
The two questions raised are the professional indemnity level and membership of GISC panels. I was invited on to the GISC working group examining the issues of intermediary capital adequacy, solvency and PI cover. My role was as a representative of the smaller independent broker and I sat alongside Mike Slack, representing the smaller intermediary. The "majors", along with Lloyd's, ABI and banks made up a representative group.
Our primary objective was to set reasonable standards for intermediaries to provide protection for the customer. The standards we arrived at are in the latest consultation document. Even a smaller broker could incur a big PI claim by not issuing a motor cover note. If the PI level of cover was set too low, then consumer interest groups would complain. The minimum level of £1 million is not a restraint to trade, it is a "cost" to trade.
Maguire Insurance Brokers
Paying for cutting out the broker
I refer to the letters of November 11 from Mike McFarlane Cargo Underwriter for GJW in Liverpool.
He asked: "Why are we not receiving more of the business that is placed in the market?" The answer is simple. He works for a company whose aim in life appears to be to cut out the broker, so perhaps he ought to go and talk to his yacht underwriter and/or managing director and they will explain the facts of life. GJW Direct's current advertisement clearly states that it is a dedicated pleasure craft insurer and deals direct with the boat owner. They pay no commissions to brokers and pass savings of up to 30% or more straight back. I think this answers his question.
St Margarets Insurances