The sixth force

The news that Cox is in acquisition talks with Highway was greeted with groans by the broking community. It's not that brokers dislike Cox. On the contrary, Equity Red Star is often voted as brokers' favourite Lloyd's syndicate. No, the problem is that the acquisition further reduces choice for brokers.In the 1990s, merger after merger reduced choice for UK brokers from dozens of insurers to a handful. And despite the recent emergence of Gibraltar-based insurance companies and niche professional risks insurers, brokers are often restricted in choice to the big five composites for the majority of risks.The time, it seems, is ripe for a new, broad-based insurer to emerge. And this is precisely the ambition of Dane Douetil, chief executive of Brit Insurance. "We want to be the sixth force for UK brokers," he says proudly.And this is no idle boast. Brit, including its £500m-capacity Lloyd's syndicate, has the potential to write £1.3bn in premium income this year. By comparison, Allianz Cornhill Insurance wrote gross premiums of £1.6bn in 2002, according to FSA returns. This includes over £500m in motor and about the same again in pecuniary and miscellaneous classes.

Consistent returnsIn the late 1990s Brit was a major investor in Lloyd's (it still maintains one of the largest syndicates in Lloyd's). It was involved in over 80 syndicates and had shareholdings of between 5% and 30% in most of the managing agents, says Douetil. "The Lloyd's market was undervalued in 1996, but by 1998 the value had been realised," says Douetil. Brit was looking for different ways of using its capital and underwriting would give "control over our own destiny". The FTSE 250 company was also looking for consistent returns compared to the volatility of Lloyd's. And so the UK regional market beckoned. The plan, hatched as long as five years ago, was to create a major UK regional, commercial lines insurance company. And while Brit has gained ground with larger brokers through its liability and property underwriting, its profile among smaller brokers is low.While undoubtedly there will be interest in any new insurer, Douetil has some cute marketing messages that aim to exploit the positions of the composites. For instance, where some insurers are restricting their product base and targeting defined sectors of the UK business map, Brit's approach is catholic. Douetil explains that Brit Insurance is interested in writing fleet, property, employers' liability, public liability, and basic professional indemnity and directors' & officers'. He also has a team working on the production of a commercial combined policy.But the product lines don't stop there, insists Douetil. He explains that Brit's underwriters are licensed to work across the group either in the insurance company market or in Lloyd's. And so, he says, brokers coming up with larger or more unusual risks will find that they can take advantage of this flexibility.

Underwriters empoweredAnother key message from Douetil is that Brit places underwriters with decision-making powers in regional offices. Brit recently opened an office in Leeds. This complements its offices in Ilford, Bristol, Darlington and Glasgow. Another office will open to service the South East region, but a location has yet to be finalised, says Douetil."We don't employ salesmen or inspectors. Our underwriters are our salesmen and we empower them to make decisions. And there is a quick and clear escalation procedure for anything they can't make a decision on," says Douetil. Douetil is also promising consistent pricing not only across regions [so a quote from Ilford should be the same price, all things being equal, as one from Glasgow], but also year-on-year. He says that brokers do not want to present and explain a large increase one year, and then a big drop the year after which makes the previous arguments look flawed. "Part of our job is to make brokers look good in front of their clients," says Douetil.Before reaching for the phone, brokers should be aware that this is being rolled out over this year, climaxing with the introduction of BUKS - an online quote-and-buy system for commercial lines. The system, which will run through a web browser, should enable brokers to fill in proposal forms, receive approval and print off the policy online, without speaking to an underwriter. For more complex risks, explains Douetil, brokers will be able fill in the proposal form and then have a discussion with an underwriter who will be looking at the same information as the broker. The system is being developed by ebix, which produced a system that Brit uses to sell cover through US surplus lines brokers.

Motivated staffSo what kind of brokers would Brit be interested in working with? Douetil indicates that 80-100 brokers in each region would be a reasonable figure and as for size, he's not that bothered. "We're looking for financially secure companies with highly motivated staff who understand technology and business processes," he says. And the kind of business Brit is interested in? Again Douetil is quite relaxed: "As long as it is profitable." He is keen to add that this will not be at the expense of commission rates. "We want our partners to make a reasonable return, it's part of our philosophy," he says.As for personal lines, it is not something that Douetil is keen to push. But, he adds, there is capacity for motor and household, especially in the mid to high net worth areas.

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