Insurance Times and our partner, Norwich Union, held a roundtable discussion where a panel of experts gave their views on the state of the Northern Irish market and the issues it faces.
Northern Ireland’s brokers were a feisty bunch, offering strong opinions on all the major issues facing the market. But what stood out was the sense that Northern Ireland is a unique, and sometimes fairly isolated, part of the UK. George Berrie of Norwich Union summed up the mood in the room with the words: “Everywhere I go in the UK, every region says it is different, and really they are not. However, Northern Ireland is genuinely different.”
Marsh’s Peter Kelly claimed that the Belfast market hardens first and softens last. “I think whenever people start to withdraw capacity, it is from the likes of Northern Ireland,” he said. “Rather like the risks, it is the bigger risks where there is maybe less exposure than the smaller risks there are here. Money comes out of the regional insurance business and into the more central insurance business.”
Lockton’s Gary Ennis agreed. “Geographically we are a nice little bundled area,” he said. “It is easy for insurers to say
‘We are withdrawing from Northern Ireland.’ It is very difficult to say ‘We are withdrawing from Manchester’, or Leeds.
“We sit there and we are vulnerable to that. They come over the hill when times are good and they enter the market and probably disrupt the local insurers. Then when things get tough and they can use their capacity elsewhere, they will make a decision: ‘That little bit over there – let’s pull out of Northern Ireland,’ because it is concise, it is bound by the borders we have, and they are gone.
“The impact that leaves behind sometimes can be a bit of carnage, and it is never good to see, because obviously as brokers – as Hugh [McKinty] already said – we want stability.”
NU’s Berrie asked the assembled brokers if they believed any carriers would withdraw from Northern Ireland in the near future. The consensus was that they would. Hugh McKinty of Dawson Whyte said: “It is not a very big market. I did some figures yesterday – you’re talking about £900m. It is not huge: it is the size of Leeds, 1.7 million people. Whenever times are good and they want to get turnover, they chase and they think Northern Ireland is a good region to go into.”
Gareth Brady, chief executive of Hughes & Co, added that consumers were different in Northern Ireland, particularly in personal lines. “Customers here deal in different ways in terms of distribution, and it is certainly a challenge for our businesses to meet that. If we employed the strategies that some of our competitors across the water did, we just would not succeed,” he warned.
Marsh’s Kelly agreed, pointing out that adverts for aggregators, for example, often contained a disclaimer excluding Northern Ireland. But why is the market so different? Michael Blaney of Autoline Insurance Group answered: “I think there is a different buying pattern here among the clients, certainly in personal lines but on the commercial side as well. The main difference is that people here like to know who they are buying from. I think that is a key difference in the Northern Ireland marketplace.
“Even with the aggregators and the various direct websites that have come in, there is still reluctance from clients to go right through to the completion stage with that. They will use it to set their position and then come along and say, ‘Well, can you get me somewhere close to that?’, with the intention in most cases of continuing to do their business in Northern Ireland.”
“There is a different buying pattern here among the clients, certainly in personal lines but on the commercial side as well. People here like to know who they are buying from.
Michael Blaney, Autoline
There was a sense that life as a broker in Northern Ireland had got tougher in recent years. Ennis said the amount of competition out there forced brokers to take too little remuneration. “You have far too many brokers in the Northern Ireland market, and we all accept that. There are too many of us for us all to make a good living, because the clients are bombarded, as they probably would be in the UK, with letters, approaches and calls. I would say that as we enter year five of the soft market, there are those who are very anxious about their revenues.
“I think every broker has an idea of being active on new business, but sustainability of new business is a different issue, because some of us are committed to it year on year, but others have to do it. There is frenzy out there, and you have people making those offers to the clients.”
Yet despite the large number of brokers, Northern Ireland is probably the UK region that has experienced the least consolidation. According to Paul Hatty of J Hatty & Co: “The thing about Northern Irish brokers is that you can get a one-man band that is still driving a very nice car and lives in a nice house because in the past the profitability was there. Maybe not at the moment, but in the past the prices were over-inflated, even on the personal lines side. You could make a heck of a living even as a very small broker.
“I think quite a lot of those guys are still clinging on to it, but also with wholesaling and HSBC, Towergate … we are not a huge broker, but we are coming up against smaller brokers who can get prices that we cannot get. They can get to AIG through five different markets, get five different prices from five different branches. It is a whole big muddy puddle and you cannot go through a muddy puddle without getting dirty.”
So Hatty admitted he had taken a stand that might surprise his colleagues round the table. “We are actually walking away,” he said. “We are saying we are not going to get involved. You have got a client and he is going to renew with whoever he is with, and you maybe know he is a motor trader who has not been told how to do his Motor Insurance Database or whatever. You know his insurance broker has not told him how to do it, but he knows that if he sticks with them he is going to get the price, whatever you come up with. It is soul-destroying at the moment, to be honest.”
This brought the conversation round to the perennial debate of professionalism. Brady said: “If you are a client and your broker is saying your renewal premium is 10 grand and you get an attacking broker coming in saying ‘We will do it for eight,’ then they come back to you as their long-standing broker and you say ‘OK, we will beat that. We will do it for seven five’. It is no wonder we are not regarded as professional. Where is the quality of service, the advice and the professionalism if, when it comes to it, it is a horse trade?”
Ennis agreed: “There are those clients that value the advice and the service, but the big rump of our SME market does not see any added value. It is all about price. I was boring you with a story: we did a review last week and I would say five things we identified could have had huge repercussions for the company we were talking to, by way of their exposures, both to contractual issues, their subcontractors, the structure of their business interruption cover. I took all these different notes down and there was not one hint of depression or anger about his existing brokers, that he had had bad advice. The summary of this meeting was: ‘That is fantastic – really enjoyed that discussion. When are you coming back with your price?’
One of my colleagues had worked in south-east England and an awful lot more things are run on conceptuals, on service, on your programme – and then the broker goes to the market – because they trust all the things you are going to do for them, how you are going to do it and how you are going to do their covers, management and claims. Over here you spend an hour and a half, have a good conversation and the last words are, ‘I really enjoyed that, now come back in two weeks with the price’.”
At which comment Marsh’s Kelly laid down a challenge to his peers, saying: “What other professional will actually do the work and then hope they might get the business? Accountants all say, ‘We have to tender these things as well’, yes, they do have to tender, but they do not have to do the work as part of the tender as we do. I think as long as we continue to do the work for free and compete on price against each other, it is going to stay this way.”
Any trepidation I was feeling as the new kid on the block quickly faded as a warm welcome was extended by the Northern Ireland brokers sitting around the table. While the mood of the morning was upbeat, everyone expressed concerns about the difficult conditions in the global financial markets and the deteriorating economic environment, and quite justifiably too, as this was the week in which Lehman Brothers collapsed and AIG had to rely on the US Federal Reserve to shore up its balance sheet. Naturally, questions were raised regarding Norwich Union and its parent company Aviva and brokers were keen to seek reassurance.
George Berrie, director of trading at Norwich Union, and I confirmed that Avivas risk management procedures continue to ensure the group has a strong balance sheet and sound capital position.
This topic was followed by lively debate on the current market conditions in Northern Ireland. Could the financial crisis experienced by one of the worlds largest insurance companies be the catalyst we all need to harden the market? After five years of rate decline, the challenge still remains of how we can work together to increase rates during an economic downturn. The Northern Ireland brokers confirmed that this was one of their key challenges and was, inevitably, testing their close relationships with clients.
Theres a uniqueness about the Northern Ireland market that makes it a fascinating place to trade. There has been little or no consolidation and only one regional broker network has emerged, Provincewide.
In addition, more than 90% of Northern Ireland businesses have fewer than 10 employees. This therefore, is a market in which small to medium-sized independent brokers thrive by giving their clients quality advice and choice underpinned with excellent levels of personal service, irrespective of their insurance spend.
Attending this discussion during my first week as head of trading for the North West and Northern Ireland gave me invaluable insight into a successful broker community, as well as the opportunity to see where Norwich Union could add real value in the current challenging economic climate.
I was also reassured by the views around the table that the skills and knowledge already offered by the locally based Norwich Union trading teams are highly valued by the broking community.
Finally, I wouldd like to say a sincere thank you for your warm welcome and for the insight and knowledge that you gave me into your unique marketplace. I look forward to working with you to build more profitable business in this ever-changing trading environment.
Alan Drury is head of trading for the North West and
Northern Ireland at Norwich Union.