the magazine of the British Insurance Brokers’ Association ... · convenience and cost-ef fectiveness of online shopping. But they also like choice and independent advice. With

the magazine of the British Insurance Brokers’ AssociationAutumn 2006 Issue 26

thebroker

BIBA – Leading the way in UK insurance

One voiceStrength in numbers

Climate change:why smaller businessesmust take note

Major losses:insurers prove their mettle

The SME sector:the battle is on

IT’S OUR POLICY TO SEE THINGS DIFFERENTLY

Whether it’s top sports stars or plastics manufacturing – or just

about anything in between – QBE can provide the cover.

That’s because our innovative approach and healthy appetite for

risk enable us to find solutions to problems in all kinds of areas.

Even the ones that leave other insurers a little flat. No wonder

we’re one of the UK’s leading insurers. Share the success,

visit www.QBE.com/uk or email [email protected]

FROM JOCKEYSTO BEACH BALLS,WE’LL SEE A WAYTO INSURE THEM.

CONTENTS

competitive but brokers aremaintaining a dominantposition, says Marcus Alcock

Management

22 Your businessCross selling, the MotorInsurance Database andScottish anti-smoking laws

24 Training BIBA’s head of complianceand training, Steve White, onwhy soft business skills matteras much as technical ones

27 Schemes focusOnline excess cover fromCNA and a personal linesoutsourcing facility fromEquity are featured plus a PIupdate from Alexander Forbes

30 Technical briefingGuidance on TOBAs bysolicitor Hywel Evans ofHugh James

33 ComplianceBIBA’s top tips on how tocomply with regulatoryrequirements on client money

34 Question timeIn-house specialists answermembers’ technical queries

Regulars

04 ViewpointBriefing from Eric Galbraith

05 News and viewsUpdates from head office andRight to Reply fromGroupama’s Cathie Bruce

06 BIBA regionsLatest on the BIBA Scotland2006 Conference

08 Media watchColumn from Financial Times’Andrea Felsted and an insightinto public affairs

Features

10 MembershipMore brokers are joining BIBA.Stephanie Spicer finds out why

13 Major lossesHigh profile claims forceinsurers to prove their worth –but do they succeed in this?asks Scott Vincent

16 SME spotlight: climatechangeJane Pendlenton on whysmaller businesses cannotignore this crucial issue

18 SME spotlight: market The SME sector is hugely

We get thousands of calls from members ofthe public every year which reach us via adedicated consumer number. Often, they’ll have

a complex insurance query. In many cases, we are able to pass on numbers of local members who

are specialists in a particular area.Referring business to brokers – and this is what happens – is something

BIBA is delighted to be involved with. It is also just one of the benefits of membership and this year we are confident of attracting around 200

new members. We read a lot about the shrinking broker market and in

the past, some brokers have felt that membership was anunnecessary cost. These attitudes are changing fast andas our feature on page 10 shows, joining BIBA isincreasingly being viewed as a business necessity.

But announcing new members is not enough. We mustprovide them with a business advantage, and in the mediaand through public affairs, ensure that the value of using abroker is made loud and clear. Of course, we always wantto know if our members feel we are meeting this challenge!

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BIBA contactsEric GalbraithChief Executive020 7397 [email protected]

Peter StaddonHead of Technical Services020 7397 [email protected]

Graeme TrudgillTechnical Services Manager020 7397 [email protected]

Paul GarlandMembership Manager07808 [email protected]

Steve WhiteHead of Compliance and Training020 7397 [email protected]

Doreen CampbellOffice Manager020 7397 [email protected]

Lindsay CampbellExecutive Assistant020 7397 [email protected]

Leighann BurtrandCommunications Co-ordinator020 7397 [email protected]

Kirsty GordonMembership and Broker ASSESS020 7397 [email protected]

This magazine is about you andfor you – so we do rely on yourcontributions. Please contactLeighann Burtrand with yournews and views. Her details arein the contact list above.

BIBA House, 14 Bevis Marks,London EC3A 7NT

Design: Beetroot PublishingPrint: SMPAdvertising: Mainline Media

Whilst every care has been taken in thecompilation of this magazine, errors orommissions are not the responsibility ofthe publishers or editorial staff. ©Allrights reserved. Products and servicesadvertised within the broker do not carryendorsement or recommendation byBIBA. The BIBA logo is added free byrequest to members’ advertisements. Itwarrants or signifies nothing more thanthe advertiser is a member.

COVER IMAGE: NICOLA ANTAKI

thebroker

INSIDE AUTUMN 2006

‘‘’’

Leighann BurtrandEditor of the broker

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the broker autumn 2006 03

VIEWPOINT

Market solutions – a way forwardWe’ve received excellent feedback onour recommended terms of businessagreement (TOBA) wording, which is amarket solution to assist with increasingtransparency around remuneration inrespect of commercial customers and themanagement of potential conflicts.

However, TOBAs are not just there tobe inserted into literature and thenforgotten about. Brokers need to reviewthis area regularly and see them as partof overall conflict managementprocedures.

Solicitor Hywel Evans of Hugh Jamesprovides more information on the use ofTOBAs in his article on pages 30-31.

The other market challenge is torespond to what the FSA calls “contractcertainty”. BIBA needs to have robustdata from members to demonstrate thatthis is being treated seriously and Iwould like to thank all those who havetaken the time to respond to date. I amaware of the issues associated withcompiling this information, but it is vitalall members respond.

decision makers of the value of brokers.In the previous issue of the broker, we gave

details of our improved regional trainingcourses and a growing number of membersare taking advantage of these. It’s easy forsmaller firms to club together and have abespoke course run for them at a convenientlocation – and it’s extremely cost-effective.

Coping with changeCompetition, the soft market, offshoringand greater automation all create pressureon jobs in the UK and few will have beensurprised to see insurers announce someredundancies.

These redundancies may not impact onservice. Our major market survey ofinsurer service will examine the positionlater this year.

In the broker market, we’re still seeing agreat deal of consolidation and this cancreate pressure on smaller firms whichwant to remain independent. We have beencontacted by a few firms which have felttheir agencies were threatened byinsurers’ changing strategies and I’mpleased to say, we’re able to intervene ontheir behalf. I would urge insurers to look atthe bigger picture.

TCF – part of what we already doThere have been reports some brokers arenot clear on what the FSA’s TreatingCustomers Fairly really means in terms oftheir procedures. For our members, I believeTCF is in their DNA – it’s incorporated intoevery aspect of their business – the challengeis to be able to demonstrate this to the FSA.

We have produced a self-assessment toolto assist members, which can be found onour website.

My experience is that many issues on TCFarise not in the primary broker/intermediarymarket but are more likely to arise where thecompany does not handle insurance as itsprimary business.

Don’t make brokers bear the brunt ofgold platingIt’s been announced that in some areas,there are plans to reduce the regulatoryburden. The Davidson Review, for example,is looking at the way EU legislation has beenimplemented. BIBA is already concerneddirect writers have lesser disclosurerequirements than intermediaries. There isa risk that other areas could be affected in asimilar way, for example, claims handling.We will be keeping a watchful eye ondevelopments.

Local heroesIn this issue, we preview the forthcomingBIBA Scotland one day conference and Ihope to catch up with many of you there.I would also like to emphasise activities inall BIBA regions are a major focus for us.

As you’ll be aware, we have taken on ateam of regional executives and alreadythey’ve proved to be a huge asset.

Another development has been thesetting up of several regional complianceforums. These involve individuals withregulatory responsibilities getting togetheron a regular basis to share best practice.

A further development has been toencourage our regional members to havegreater engagement with the media – and inpolitics – so they can inform the press and

Email Eric Galbraith [email protected]

It is vital allmembers respond‘‘’’

04 autumn 2006 the broker

Eric Galbraith, BIBA’s chief executive,talks about the key matters on his agenda

NEWS AND VIEWS

To be onlineor not to be?‘Internet… or out of business?’ – that istoday’s big question.

The internet is a prime distribution channel.It outstrips direct telesales in some personallines. Now the guns are being trained on thebroker heartland of small commercialinsurance.

Fail to change and the exit beckons.Think it won’t happen? Just look at thetravel industry.

The retail market is changing sofundamentally that everythingis up for grabs. Yet althoughthe competition is poised tomake its move, forward-thinking brokers andsupporting insurers still haveevery chance to flourish.

Crack the online challengeand there is no limit to whatwe can achieve. Four millionpolicies are already sold via the internet and a third of all quotes are deliveredelectronically – that’s

15 per cent of the market.Insurance is no longer the preserve of

insurance brands. With 1.5 million policies onits books, Tesco is eyeing a move intocommercial vehicle insurance. Sainsbury’salready sells 30 per cent of its policies online.

But this can be good for brokers. The big-brand promotions have created a pool ofhungry customers attracted to theconvenience and cost-effectiveness of onlineshopping. But they also like choice andindependent advice. With a slick webpresence a broker can attack this e-marketwith gusto.

The battle lines are being drawn in smallcommercial business.

Remember, a client running a smallbusiness is the same one who buys personalinsurance on their personal computer athome. Research suggests they want to repeatthe experience for their business.

Brokers have plenty to keep them busy –regulation, market conditions andconsolidation for starters. So they need toland the first punch, with strategies tocapitalise on the web. Help is here in theshape of technological solutions, one examplebeing i-market, and this will help brokers fighttheir corner. We must grasp the nettle now. Cathie Bruce is distribution and customerservice director for Groupama Insurances

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James scoops BIBA’stop journo awardJames Daley, businesscorrespondent for TheIndependent, is overallwinner of BIBA’s annualJournalist of the Year awards.

The presentation held inLondon is arguably the mostimportant event for a journalistwriting on insurance matters towin. This year, it attracted itshighest ever number of entriesand a record number of attendees.

His piece which particularlyimpressed the judges was titledWhy there’s no such thing asuninsurable and looked at a widerange of barriers to obtainingtraditional cover – andrecommended solutions, ofteninvolving a broker. Theseincluded pre-existing healthproblems, subsidence and otherproperty related hazards, thosewith convictions and riskyprofessions.

Trophies and cash prizes werepresented by chief executive EricGalbraith. He commented: “Icommend all those shortlisted forproviding a valuable service to theBritish consumer and theinsurance sector, and would liketo congratulate the winners ontheir fantastic and well deservedachievement.”


Roll of honourOverall winner of the BIBA Journalist of the Year James Daley, The IndependentConsumer Broadsheet Christopher Browne,The Observer Consumer Tabloid Helen Loveless, Financial Mail on Sunday Best Consumer Advice Kirstie Redford, Freelance Trade Research Marcus Alcock, Freelance Trade Feature Michael Faulkner, Insurance Times Trade News Stephanie Denton, Post Magazine Regional Adrienne McGill, The News Letter Gary Hyndman MostPromising Newcomer Peter Madigan, Cover Magazine

BIBA’s Journalistof the Year,James Daley

This year’s BIBA ScotlandConference takes place on15 November at Airth Castle,near Stirling.

It is an idyllic setting for a topclass event, which has securedsponsorship from major insurersincluding Norwich Union, NIG,Zurich and AXA.

For the second year, the event istitled the BIBA Backing ScotlandConference, with much of theplanning and organisation beinghandled by regional executive,Clive Hurn, who comments: “Wewere delighted with the responseto last year’s conference and thisone promises to be even better. Thecontent will be topical andrelevant and of course, there willbe plenty of opportunity fornetworking.”

He is being supported in theevent management by leadingScottish conference organisers,Meeting Makers.

Last year, there were 160delegates at the conference, whichtook place in November at theStirling Management Centre. Theevent was oversubscribed, but

Event highlights

The programme will cover: • compliance and

regulation• the Financial Services

Authority, who will havea stand and are sendingAndrew Honey, head ofinsurance, small firmsdivision to present

• claims panel – a forumon current issues

• business case studyfrom a local broker

• inspirational speakers• trade stands• BIBA schemes and

facilities exhibitors.

BIBA REGIONS


BIBA’s Scottish Region gearsup for 2006 conference

There will also be plenty ofnetworking opportunitiesthroughout the day and lunch, teaand coffee breaks will be included inthe delegate fee. Delegates whoattend this one day conference willalso be eligible for CPD points.

Delegate packs will be issued inearly September and these willprovide full details on registration.

While the event takes place on asingle day, it is expected manybrokers will choose to arrive thenight before so that they can enjoythe historic setting and beautifulsurroundings of Airth Castle, whichis now a luxurious hotel and spa.

The glorious building dates backto the 14th century and was onceowned by the family of Robert theBruce. Members – or their partners –who feel they would benefit fromsome pampering, will also enjoy thefacilities of the hotel’s Cloud NineLeisure and Beauty Spa. BIBA will benegotiating a special rate formembers, with details to be suppliednearer the time.

Further details of theconference will be

provided to members shortly.Meanwhile, to register interestor if you have queries, pleasecontact the organisers MeetingMakers on 0141 4341500 or email [email protected] can also contact Clive Hurn,the BIBA Scotland regionalexecutive, on 07836 609960 oremail [email protected]

Mr Hurn believes this year, it willdo even better and that the numberof delegates will exceed 200.

Many of Scotland’s leadingbrokers will be present, includingLorraine Dillett, chairman of BIBAScotland and chief executive, EricGalbraith.

BIBA Scotland has also

continued to work closely with theScottish Parliament and once again,there will be a member of thisattending to give a brief presentation.The event will be compered byChester Studzinski of GAB Robins, awell-known figure on the circuit,who is an exceptionally able masterof ceremonies.

Airth Castle will host BIBA BackingScotland 2006

A large number of activities aretaking place across the BIBAregions this autumn.

Apart from being the idealopportunity to catch up withfellow members and industrycolleagues, BIBA annual dinnersoften involve a fundraisingelement.

Barry Blakley, regionalexecutive for the West of England,explains: “We’re working right nowon this year’s annual dinner withcurrent chairman Ian Dickinsonand will be announcing the charityinvolved shortly.”

He says the West of Englandregion traditionally organises a

raffle, with the proceeds going to alocal charity. This is selected bythe regional chairman and raffleprizes are funded by sponsorshipfrom insurers.

At last year’s event, held inOctober, an initial £1,495 was raisedand this was then increased to£1,895 following contributionsfrom BIBA members The Jelf Groupand John Ekes & Partners. Theamount was subsequentlyincreased to £2,000 by way of thedinner account, which went to theChildren’s Hospice South West (seephoto above of hospice fundraiserCaroline Clarke with regionalexecutive Barry Blakley).

Regional executives – contactsYorkshire and NorthernIan Raper01274 [email protected]

Merseyside, WestCheshire, North Wales,Isle of Man and Greater Manchester Bob Nicholls 07831 [email protected]

Scotland Clive Hurn 07836 [email protected]

West of EnglandBarry Blakley07766 235037 [email protected]

West MidlandsBob Darwin0121 [email protected]

AngliaJo Morgan01638 [email protected]

South East and CentralDiane Smyllie01959 [email protected]


Charity champions

Key dates for your diaryWest MidlandsTuesday 26 September 2006BIBA Golf Day at Bromsgrove Golf Centre – £35 for the day,including a meal. All are welcome. Details available from SueDimmock at Millennium Insurance Brokers. Tel: 01952 282630or email: [email protected]

Friday 20 October 2006Annual Dinner – with comic after dinner speaker, Adger Brown –at the Burlington Hotel, Birmingham. Details available from PatsySweeney at Willis UK. Tel: 0121 214 1653 or email:[email protected]

West of EnglandFriday 13 October 2006Annual Dinner – a special event which includes a collection via araffle to go to a local charity chosen by the regional chairman. Theraffle prizes are funded by sponsorship money obtained frominsurers.

Yorkshire and Northern Thursday 7 September 2006BIBA Golf Day at Moor Allerton Golf Club, north Leeds. Begins at2.30pm with usual shotgun start and a buffet meal served at7.30pm to allow competitors to leave by 8.30pm. There is also theopportunity to win a car in the Hole-in-One competition, as well asindividual and team prizes. Details are available from Mark Elvin on0113 232 0011 or email [email protected]

Friday 20 October 2006Annual Dinner, sponsored by Hiscox, to be held at the QueensHotel, Leeds. More information to be supplied. For further detailscontact Wendy Hardman at Aon on 0113 244 3234.

Training updateThe Yorkshire and Northern Region has a strong local regionaltraining programme with a wide variety of courses aimed at brokingstaff of all levels. For staff with regulatory responsibilities, there is aCompliance Forum on 4 October to be held in Garforth. BIBA’s headof compliance and training, Steve White, will also be in attendance.For more details contact Ian Raper (see contact details below).

Cambridge cocktailsBIBA’s Anglia region annual dinner took place recently in the beautifulsetting of King’s College, Cambridge University.

Regional executive Jo Morgan reports that the evening startedwith cocktails on the college lawns followed by a superb dinner, finewine and entertainment. An audience of 200 was regaled by speakerDavid Shaw who has plenty of insights into the quirkier side of theinsurance world. Following dinner, music was provided by theGentlemen of St John and there was the opportunity for a moonlightpunt along the Cam or a nightcap at the bar. During the evening£1,467.98 was raised in aid of The Prince’s Trust charity.

Insurance is oftenmisunderstood by those inpositions of influence, so thereis real need to educate thosewho can make a difference.

This year, BIBA has increasedits public affairs work, and willbe raising awareness of thisthroughout the membership. Italso wants to encourage morebrokers to get involved.

BIBA is using agencyFleishman-Hillard Public Affairsfor this work and Gavin Megaw,associate director, says: “Just likethe insurance industry, publicaffairs is often misunderstood andmisrepresented. Yet like insurance,public affairs is something everybusiness should invest in.”

He argues a public affairscampaign does not have to belarge-scale and resource sappingand instead can involve a simplecommunications programme withlocal political stakeholders.

Mr Megaw asks: “How manybrokers have written to their local Member of Parliament (MP)and Member of EuropeanParliament (MEP) making cleartheir views on key issues such asuninsured drivers, or continuity

MEDIA WATCH

Making a difference through public affairs

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planning for local businesses?”He adds that many brokers may

not be aware that their letters andbriefings on key issues couldprovide their MPs/MEPs with theammunition they require to standup and make locally specific pointsin their respective Parliaments onthe issues of the day.

“As a former politicalspokesperson, I can tell you that


The World Cup has faded into ever moredistant memory, but the insurance marketremains a game of two halves.

The price of cover in the commercial marketfor risks that are exposed to hurricanescontinues to escalate. This is true of bothreinsurance and insurance, as the crucial 1 Julyrenewals, which largely involve US windstorm-

related risks, have shown.After the up to $80 billion of

losses inflicted by last year’shurricane season, capacity islimited, and where it is available,it is expensive.

But in other areas of theworld, and classes of businessthat are not exposed to naturalcatastrophes, there is morecapacity and price competition.

As the North Atlantichurricane season gets into full

Andrea Felsted

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Gswing once more, the direction of the markets from here willbe dictated by which way, and how strongly, the wind blows.

The severity of the storm season will not only determinewhether the price of cover for risks exposed to natural perilscontinues to rise, but also whether price rises spread to non-catastrophe classes of business.

In the event of another severe hurricane season, pressinterest is likely to focus on whether the price of reinsuranceand insurance will rise further. This will, of course, centre onareas of the world and segments of the market exposed tonatural perils. But last year, in the wake of losses inflicted byHurricane Katrina, there was also interest in whether theripples would reach as far as UK personal lines business.

Another damaging storm season could re-ignite debateabout what this means for the price of home and motor cover.

Conversely, with expectations of an above average stormseason, if conditions in the North Atlantic prove calmer thanexpected, questions are likely to focus on whether in thecyclical insurance and reinsurance business, prices will startto come under pressure. Andrea Felsted is Financial Times insurance correspondent

How local action can bring industry issues into the wider public domain

there is nothing so valuable as fora politician to receive opinionfrom a local business that they canuse to promote their views. It is, toa politician, like manna fromheaven.”

He advises that brokers shouldoffer political stakeholders theopportunity to visit offices, and,more importantly, provide themwith a sounding board should they

get any questions relating toinsurance.

“This, if connected to the workalready being done by BIBA, is asimple but highly effectiveapproach, because you can helpthem as much as they can help you.By developing such a relationshipyou will be ensuring that yourlocal MP/MEP sees you as avaluable resource.”

In commerce as in nature, we find two distinct approaches to raising new life. Some play the

numbers game and rely upon sheer volume to ensure a few successes. Others have the

care and nurture of offspring at the very centre of their purpose.

At St. Paul Travelers, we do not subscribe to the idea of “expendability”. We consider

that every client and broker relationship should be encouraged, cultivated and allowed

to flourish.

St. Paul Travelers – your natural selection.

St. Paul Travelers Insurance Company Limited St. Paul Travelers Syndicate Management Limited

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Within a few hours of the female laying an egg,the male positions it on top of his feet andcovers it with a warm fold of abdominal skin.

New life has to beencouraged andprotected.

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STP7100 St Pauls Adverts FINAL x5 6/1/06 9:56 am Page 4

BIBA MEMBERSHIP


By early summer 2006, BIBA hadalready attracted 170 new members –a marked increase on last year, when140 new firms joined in total. But,there is no room for complacencyand it is constantly working to buildon the benefits.

The larger firms of brokers are alreadyBIBA members and the organisationadmits the challenge now is to encouragethe remaining smaller firms to see thevalue in membership. Any decent tradeassociation is there to fight for itsmembers, but can only really be successfulwith its members behind it. “Joining BIBAis a way of showing you back the industry,”says Paul Garland, BIBA’s membershipmanager. “The more members we have, themore effective we are. The regulator hasstated it wants market-led solutions – andoften a trade body is the best source.”

Mr Garland says there is no singlereason why a broker should join BIBA,because all firms are different. But as thenew member firms below explain,solidarity with peers and help withmeeting the industry’s regulatorychallenges are common drivers.

“A key reason brokers join is ourinfluence with the regulator and the fact wecan offer our members so much compliancesupport,” says Mr Garland. “Then there isour lobbying and media power. We alsoencourage our members to interact with thepress and local political decision-makers toensure their voices are heard.”

BIBA training sessions help members tofulfil their regulatory requirements, aswell as to develop their employees. Theyare offered at cost price. The BIBA team isalso on hand to help with technicalinsurance queries and those linked torunning a firm.

And finally, the range of schemesand facilities for members can providealternative markets for brokers. Somemembers have said that access to theseschemes is worth the subscription alone.

BIBA’s membershipfigures are up, but whatare the reasons thatmotivate brokers to join?Stephanie Spicerfinds out

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Steve Davies, operations director, Morgans General Insurance Services (MGIS), LondonHaving dealt with BIBA in the past, with previous employers, Mr Davies was keenfor MGIS to join as well.

“I knew our membership of BIBA could help us reach a wider audience ofclients,” says Mr Davies. “When people look for an insurance broker, many look foran accreditation. BIBA is well-known, and an association with it gave us morecredibility. People feel BIBA membership means they are dealing with atrustworthy company that will do the job.”

This has been borne out, Mr Davies says, by the number of telephone callsMGIS has received since registering the company in the BIBA directory. “We get,on average, 250 calls a month from BIBA referrals. We have been very pleased.”

BIBA’s own insurance schemes also come in for praise. “Its schemes are widerthan the general market,” comments Mr Davies. “A lot of our clients have generalsubsidence risks which BIBA schemes cater for, and we do a lot of directors’ andofficers’ policies. Many of these schemes allow you to receive a quote online, getthe documents turned round and back out again. That’s very important to us.”

But a common goal with other brokers is also important. “The more of you thatget together in one place the more you are heard, especially with FSA issues.Alone, you can’t do a lot, but together you can influence things,” adds Mr Davies.

Denis Pinnegar, director of group development, BiB Insurance Brokers, DarlingtonWhen BiB joined BIBA a year ago, it was in the belief that, in Mr Pinnegar’s words:“As a whole, we had a better chance of being influential in this complicatedindustry than we had as individuals. Although we are a fiercely independentcompany, we do still need to have a collective voice.”

Mr Pinnegar had looked at other insurance industry organisations, but saysBIBA was the most attractive. “It was one in which we could participate the most– although you also get out of it what you put into it.”

He lists legislative and governmental lobbying, engaging with the FinancialServices Authority on issues, and obtaining answers to complicated questionsas useful services. “They run across the whole gamut of the industry that weoperate in,” he says.

Mr Pinnegar has also joined his regional committee. “It is important to networkwith peer groups and have that exchange of ideas and experiences. Sure as hell,nothing is going to happen to us that hasn’t happened to someone else in theirbusiness lives!”

James Truscott, managing director of WML Insurance Brokers, Bognor Regis“Representing a bigger broker, I think BIBA is something you should be seen to bea member of,” comments Mr Truscott. “It says you are one of the maturecompanies specialising in the insurance field and that your interest is in the widerissues of insurance in the UK, rather that just doing your day-to-day business.”

Mr Truscott explains that as a broker and an underwriting agency, WML has aninterest in talking to both intermediaries and insurers, something BIBAmembership obviously enables.

While networking is important, so too are the technical and educational benefitsBIBA can offer. “Being seen to be involved in the wider issues and being alert tothose is key,” he says. “But early advice on any compliance and regulatory issues issomething we will be using.” He adds his firm will also be using the BIBA trainingseminars, which are highly competitively priced.

Mr Truscott concedes some may feel subscription costs are high, but points outit means members have to make full use of what the association has to offer. “Justusing the training courses, for example, because they are right up-to-date and ofgood quality – that sort of thing adds value to your company.”

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MAJOR LOSSES


Telling it like it isFollowing a disaster, the work ofinsurers is under intense scrutiny butthey are meeting this with increasedopenness. Scott Vincent examinesthese changing attitudes

When the eyes of the world fall onany major disaster, the response ofthe insurance industry is critical.Often, the environment is now farmore litigious and insurers also faceworking in the media spotlight.

But, whereas once most looked toreveal as little as possible, attitudesare changing.

Stephen Haddrill, director general ofthe Association of British Insurers, says:“When a flood occurs insurers are on theground within 24 hours. But we need tomake sure that the public knows this. Thatis why the insurance industry has beenlooking at ways in which we can developconsistent messages to reassurehouseholders and businesses thatinsurance is there to help when majorevents, such as flooding or an incident likeBuncefield, occur. Often in suchcircumstances, insurance companies willproactively contact policyholders whomay be affected, rather than wait for them to make a claim, thereby helping toease the burden.”

He adds that the coming months willsee increased efforts to ensure there isgreater understanding. “The industryalready does a significant amount tocommunicate to its customers, and themedia, relevant information when majorevents occur. However, this work will bestrengthened by developing collectivemessages that focus on the human side ofthese events and the part that insuranceplays in getting things back to normal. Welook forward to starting work with ourindustry partners in the autumn.”

Partnership matters in the event of alarge claim. According to Andrew Dear,director of technical services at lossadjuster Ashworth Mairs Group,communication is a vital element in thedisaster recovery process.

He points out this needs to be strongbetween the insurer, broker and lossadjuster to provide support to theindividual or business affected by thedisaster.

In January 2004, this process was put tothe test when severe storms brought

Insurers are onthe ground within24 hours‘‘’’The Buncefield oil

depot fire causeddevastating damageto nearby businesses

MAJOR LOSSES


flooding to northern England. Thetown of Carlisle – 12 miles south of theborder with Scotland with no otherconurbations nearby – was worst hit,with more than 8,000 residentsevacuated and severe damage toproperties.

Mr Dear says the Carlisle floodsprovided an opportunity to see theinsurance industry working at its best.“As soon as a major incident occurs, we, asa loss adjuster, proactively contact ourinsurer and broker clients to establishwhether they have policyholders in theaffected postcodes. In the case of Carlisle,we had contacted all policyholderswithin 24 hours to establish whetherthey needed support. This creates theright reputation – we are there in a crisis.”

DevastatingOne major disaster of recent years was theexplosion at the Buncefield oil depot lastDecember. It was the largest explosionand fire in Europe for more than 60 yearsand caused devastating damage tobusinesses at an adjacent industrial park.Mr Dear explains communication wasvital in helping these businesses recover.

“On a daily basis, AMG was talking tothe insured (Fuji Film), the broker(Marsh) and the insurer (Tokio MarineEurope), acting as a pivotal point andensuring everybody in the chain wasfully informed on developments. Thisapproach is essential to provide thereassurance and support needed during acrisis situation and this level of contactshould be maintained for one to twoweeks. At an industry level we could and

Picking up the pieces

In 2004, a major explosion in theGlasgow-based Stockline plasticsfactory resulted in nine deaths andinjuries to 46 people. More than twoyears later, it has been announced thatthe companies that operated thebusiness are to be prosecuted foralleged health and safety breaches.

But, while all the investigations havebeen taking place, insurer Allianz hasfocused on helping those injured.Divisional claims manager RoyHebburn says: “It helped that we werethe sole insurer as we could startorchestrating activities at once. We puttogether a senior claims team thatwould be dedicated and importantly,on the scene to make decisions. Wesoon had GAB Robins on board asadjusters and the forensic scientists,Burgoynes. We quickly appointedlawyers in Scotland and London, too.”

He says that while legalrepresentation is essential, Allianz wasalso determined not to hold upmatters. “Early on, there was a hugeamount of adverse publicity, with ex-employees saying there was littleregard for safety. As insurers we knewwe could also expect negative press.We started engaging with claimantlawyers straightaway.”

Mr Hebburn stressescommunication had to be honest. “Weassembled a media team that wouldsay what we were doing. We provideda counselling team for the many whowere suffering. We organisedrehabilitation for those injured andprovided hardship payments and weare settling claims. In one case, avisiting director lost both his legs in thedisaster and we’ve put in adaptationsto his house. He has since been able toreturn to work.”

should be doing more collectively tocommunicate the value we bring to themajor loss scenario.”

PreparationAfter the Buncefield explosion, Marsh sentin a security firm to ensure its clients’assets were safe, and took steps to makesure its clients suffered as little disruptionto business as possible. Caroline Woolley,claims consultant at Marsh’s forensicaccounting and claims services practice,explains: “In the event of a disaster, weconcentrate on getting the business backup and running. We represent theinsurers and take that burden away fromthe client.”

She says as part of the claims process,her unit determines what clients need forinterim payments to help with their cashflow. “This early payment means they havecash flow to continue operating theirbusiness. The business continuitymanagement team also visits the companyin advance and advises the business onhow to prepare for a disaster. This pre-lossservice looks at property cover in a policyand provides a business interruptionexposure review, to make sure they haveappropriate cover in the event of aserious incident.”

All of which is far less publicised thanany disputes that arise in the aftermath ofdisasters. While, by nature, newspaperswill often report bad news rather thangood, the work done by brokers, lossadjusters and insurers in the aftermath of adisaster provides the stability that canhelp individuals and firms begin the longprocess of recovery.

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Such was the ferocity ofthe Buncefield fire, thelosses could only beassessed some days later

the broker’s partner

Towergate Underwriting and Towergate Partnership are trading names of Towergate Underwriting Group Limited. Registered in England No 4043759.Authorised and regulated by the Financial Services Authority

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Business Continuity PlanningBroker Continuity PlanningTel: 0870 411 1890 [email protected]

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Towergate is dedicated to providing insurance solutionsfor intermediaries. Our product range continues to growgiving you access to standard and specialist products,many of which are not readily available elsewhere. Wework with you to meet your clients’ needs and provideeasy access to expert underwriters, and quick decision-making, backed by top UK Insurers.

If you have a specific requirement or want advice, please call or email.Telephone our Broker Support Deskfor details of the full product range

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Towergate BIBA Schemes

TowergateAd 11/8/06 15:46 Page 1


It is not just big business thatis affected by climate change– smaller firms need advice too.Jane Pendlenton providesguidance on how brokers can informclients about a potential crisis

… the reliability of thesemodels is tested by runningthem backwards over recentand long-term climate history

‘‘’’

SME SPOTLIGHT: CLIMATE CHANGE

Stormyweather

Brokers’ clients, large and small, willhave to adapt to climatic conditionschanging at a rate human civilisationhas never previously experienced.Significant changes are alreadyoccurring here in the UK and areprojected to continue.

But what are these changes? And, howcan the small business sector, vital to thewellbeing of the UK economy, act toincrease its resilience and reduce itsvulnerability to the changing climate?

Emissions from human use of fossilfuels are thought to be the predominantcause of climate change, and throughoutthis century, we expect the changes we arealready observing to intensify.

Rising sea levels, changing precipitationpatterns, an increased intensity andnumber of extreme events and dramaticeffects on biodiversity will cause severeimpacts for human civilisation – unless weact now to curb our emissions.

Even so, the urgent efforts we must makenow will not allow us to escape climatechange altogether. Due to the inherentinertia of the climate system, our pastgreenhouse gas (GHG) emissions will be themain influence on our climate over the next30 to 40 years (see diagram one).

ImpactsSuccessful assessment of the risks smallbusinesses face requires an understandingof the expected impacts and confidence inthe likelihood of their occurrence. We canstart to achieve this by examining the keymessages of the UKCIP02 climate changescenarios, produced for the UK by theHadley Centre for Climate Prediction andResearch.

The UKCIP02 scenarios are derivedusing modelling techniques basedupon our best understanding of theEarth’s climate system, and show howkey climate variables may changegiven different assumptions aboutfuture growth of GHG emissions.

We expect increases in the UK annual

average temperature of around 1° C by the2020s – the period from 2011 to 2040 – andup to 4°C by the 2080s. This increase willdrive changes in all climate phenomena,including changes to seasonal patterns ofprecipitation and the number andintensity of extreme events.

It is important to note the 0.8°C rise wehave experienced to date (relative to a1861-2004 baseline) has already led tosignificant impacts, including a rise in sealevel of 10 to 20cm, and reduction of arcticsea ice by some 15 to 20 per cent. It isbelieved a rise of 2°C may be enough topush us into dangerous climate change.

To estimate confidence in their abilityto describe our future climate, thereliability of these models is tested byrunning them backwards over both recentand long term climate history.

ConvincingThese ‘back casts’ show the models canreliably describe the past and that the rapidincrease in GHG emissions over the past150 years provides the most convincingexplanation for the observed rise in globaltemperature to date.

Projected changes for the UK up to the2040s can be summarised in the followingkey climate change messages:• hotter, drier summers

reduced summer rainfall and increased


UKCIP’s adaptation wizard, a web-basedtool suitable for proceeding from an initialscoping of climate risks to a full assessmentof adaptation options, provides acomprehensive guide to assessing climaterisk both for businesses, and theirproviders of insurance products.

Fundamental to the risk managementprocess is the assessment of currentvulnerability to weather.

Overlaying the key climate changemessages and if appropriate, examiningthe scenarios in more depth for a particularregion or climate variable, then allows theidentification of areas of greatest concern –or opportunity.

Small businesses will face similar risksto larger business, but are likely to havefewer resources to manage them. It will be

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 21000

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IPCC A1F1 emissionsA2 emissionsB2 emissionsB1 emissions

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Start to divergefrom mid-century

Diagram one: The Hadley Centre climate model outputs show anexpected temperature rise around 1°C by the 2040s relative to 1990,largely independent of our emissions path. The scenarios are thoseused by the Intergovernmental Panel on Climate Change and rangefrom a high emissions path shown in white (A1F1) to a loweremissions path represented in green (B1). The range for global risein temperature by 2100 is between 1.5 and 6 degrees althoughsome models predict greater warming

Climate change is a reality… wemust face its unavoidable impacts‘‘’’

temperatures, increasing drought andsubsidence

• milder, wetter winterscontinued decline in snowfall and verycold spells, and greater proportion ofUK precipitation falling in the winter

• increasing intensity and possiblyfrequency of extreme events increases in torrential downpours,making flash flooding and landslidesmore likely. Increases in very hot daysand heatwave conditions (in summer2003, 30,000 people died across Europe).

Extreme eventsThese changes will drive an increase in thenumber and severity of claims made by UKbusinesses, particularly from flooding,subsidence and extreme events. Withoutaction to manage these risks, this mayresult in the reduced availability,restriction, or withdrawal of cover.

In general, businesses most at risk fromthese impacts will be those currentlysignificantly affected by the weather, orthose investing in assets with paybacksover a long time period – particularlypremises or infrastructure. Impacts willoccur across all business areas, and a fullscoping exercise can bring to lightunexpected vulnerabilities in logistics,markets and business operations, but alsoreveal opportunities for new growth.

important therefore for smaller businessesto work with their brokers to addressbusiness continuity planning and riskmanagement issues due to climate changeimpacts, and to ensure that an appropriatelevel of insurance is held.

Involvement with regional climatechange partnerships may provide a usefuladditional resource and access to existingexpertise.

Climate change is a reality, and as westrengthen efforts to reduce its causes, wemust face its unavoidable impacts. We arewell equipped, however, to do this.

Brokers and small businesses will beprepared for the impacts of climate changeif they fully integrate emerging climate riskinto existing risk management processes,and will in this way play an important rolein ensuring a resilient and well-adaptedeconomy for the UK. Jane Pendlenton is project officer withUKCIP’s business engagement team

To find out more, contact SteveFoulsham of BIBA’s Property

Committee at [email protected] is a member of the associateParliamentary group on flood prevention.To contact UKCIP for further informationon climate impacts and resources phone01865 285 717or email: [email protected] or www.ukcip.org.uk

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SME SPOTLIGHT: MARKET FOCUS


There’s no getting away from it, andwe’re not talking about the timing ofTony Blair’s departure or what SvenGoran Eriksson will do next. No, forthe majority of the UK insuranceindustry, it seems that the onlyarea worth mentioning at themoment is the small to mediumenterprise (SME) sector.

Now that the personal lines market hasbecome almost exclusively commoditisedand much of the volume business has beentaken away from the hands of theintermediaries and smaller underwritersinto the hands of the big brands, the newbattleground is very much the SME sector.And for insurance brokers this transition isespecially true. Whereas once much oftheir bread and butter business may havecome from the personal lines sector, this isno longer the case for many brokers,despite the pockets of good practice thatexist and the few out and out personal linesspecialists who have managed to maintaina loyal customer base.

The reality is that the main area ofcompetition in UK insurance, and one thathas been getting progressively morecrowded for some years now, is the mid-market commercial sector. For the fact of

the matter, no matter what some punditsmay tell you, is that this too has becomean area that has become increasinglycommoditised in recent years andtherefore one that is seen as an easy wayto capture a relatively quantifiablepolicyholder base with a decent claimsrecord. Who wouldn’t want to getinvolved?

Battle is onTherein lies the rub. For while brokershave had some 20 years or so to get used tothe invasion of the direct writers and otherbrands into what was once their exclusivepreserve in the motor and home market,the commercial sector has always beenseen as something quite different,positively sacrosanct. Surely a small officepolicy isn’t just an off-the- shelf product inthe same way that a standard motor policyis? Surely the SME sector is one where therelationship with the broker is key?

Yet it seems that, in the current market,the SME sector really has become the newpersonal lines. Not only are more and morebrokers trying to get in on the act, directwriters have also entered the fray. Thebattle is on.

Ian Richens, chief executive of

Holdingon tight

There are few sectors more cut-throat thanSME, but brokers are determined to keep thelion’s share of the market, says Marcus Alcock

SME is becomingthe main huntingground for a lotof companiesbecause it’s easyto sell online

‘‘’’


Oxfordshire-based broker FM Green,agrees that the SME sector is now the mainarea of competition for UK brokers. “It’sbecoming the main hunting ground for alot of companies because it’s easy to sellonline,” he says. “It’s easy to rate, so astandard insured’s first £20,000 is two percent and then it’s a sliding scale after that.Then the expertise comes in, where youhave situations such as a guy with a 75 percent flat roof or someone whose premisesare on a flood plain. That’s when you haveto start putting in excesses for certaintypes of risk.”

According to Mr Richens, there is nogetting way from the fact that price is the

key component in terms of what acustomer is looking for, and theconsideration that will really matter atthe smaller end of the scale. “Certainlyyou differentiate on price because this sortof sector is cheap as chips and it’s aquestion of being competitive whichusually gets the business.” However, headds, understanding your client’s needs isalso important.

Added value practitioner“Take the licensed trade, which has achange of tenant and needs a new quote byone o’clock,” he explains. “You need to runa quote off the screen or give them an

Mystery shopperBACKGROUNDBusiness: Tomato Design Ltd, adesign and marketing company that has been going for just over ayear. Its business is designingpromotional materials for the financialservices sector.Annual gross turnover:Estimated at £216,000.Staff: One director and twoemployees. Location: Shoreditch, London. Partof an office block with alarm system,main key for the building and own keyfor the office. Brick building, usedonly for offices, with no unusualfeatures and in good condition.Monthly rent paid to the freeholder.Contents for insurance purposes:£26,000 of IT equipment and £2,000of other office equipment. No itemsthat would be taken off-site, suchas laptops.Insurance required: Standardsmall office insurance sought,covering buildings and contents andemployer’s liability.

EVALUATIONMarsh: Service: 7/10Quote: £568.36Overall: 7/10Comments:Straight throughto someone onthe phone. Verystraightforwardand very quick tocome back with aquote.

HSBC InsuranceBrokers:Service: 5/10Quote: £531.63Overall: 6/10Comments:Slowest in gettingback to me,though the quotewas reasonablycompetitive inthe end.

NU Direct: Service: 3/10Quote: n/aOverall: 0/10Comments:When I informedthe person that we were a designcompany, theysaid they couldnot insure us.Perfunctoryservice.

RowettInsuranceBroking Group,St AustellService: 8/10Quote: £513.64Overall: 8/10Comments:Excellent service,and although notas quick as I wouldhave liked, thebroker was firstback with a fullwritten quotation,which was alsothe cheapest.

SME SPOTLIGHT: MARKET FOCUS


become like personal motor, with peopleshowing little imagination and all you’redoing is saying ‘we’ll do it cheaper’ thenbrokers will have a rude awakening.”Instead, he insists, brokers need to marketthemselves as professionals who can offerproper advice to match a policyholder’sneeds and make sure that they have thecorrect cover.

Risk managementYet the picture is not necessarily asdifficult as it seems at first glance,however. As Alec Finch, chairman ofbroker Alec Finch Group, points out, thereis a need to examine what is meant by themid-market anyway. “My personal view isthat you have to decide what SME is,” hesays. “We tend to say SME when what wereally mean is small commercial business,but SME can actually entail some quitelarge businesses.”

Another cause for optimism, at least in

who’ll prefer the direct option,” hecomments. “That’s the problem whenthese things get commoditised – it’s aquestion of distribution, rather thanof broking.”

So does all this come down to a battleover price versus added-value? Perhaps,but that does not mean that the savvyinsurance broker needs to be undulyconcerned, if it wants to remain asignificant force in the small commercialarena. History, for one, is on their side,and the feeling is that many will havelearnt the lessons of what happened to thepersonal lines market and are betterprepared to fight this particular battle.As Mr Finch says: “I don’t think thatbrokers are complacent. They have seenwhat’s happened in the personal linesmarket, and inevitably in this one therewill be changes in buying habits. Butbrokers will make sure that they retain ashare of the market.”

… if you are a broker in theSME market you have toposition yourself as an added-value practitioner

‘‘’’

the short term, is the possibility that theowners of small business are becomingmore aware of the importance of risk – afact that could work in brokers’ favour ifthey market their risk managementexpertise. According to a recent survey ofUK SMEs by the Institute of CharteredAccountants in England & Wales(ICAEW), expenditure on riskmanagement, including the costs ofinsurance, management and staff time,security and internal and external audits,was found to be an average of £44,000 ayear at the small end of the spectrum in2005. According to Clive Lewis, head ofSME issues at the ICAEW, spending onrisk management is expected to rise overthe next two years, with businesses nowmore aware than ever of the potentialrisks that can affect them, with the“anticipation of risk increasing”.

CommoditisedDespite this, even Mr Finch is pessimisticabout the chances of brokers maintainingtheir current market share if things persistas they are in the small commercialmarket. “If the broker doesn’t add value,then the same thing will happen as in thepersonal lines market, where aconstituency of firms will come along

instantaneous quote from an underwriterin the office, otherwise they’ll goelsewhere.”

Some people are a little concerned bythe over concentration on price thatthreatens to subsume the SME sector,however. Kevin Pallett, managing directorof underwriting agency Fusion, is onesuch voice. “The danger is it’s going tobecome the new personal lines,” hecomments. “Where the only criterion theclient takes into account when choosinginsurance is price. If that happens thenbrokers’ days are numbered, becausedirect writers can beat them at that. So ifyou are a broker in the SME market youhave to position yourself as an added-value practitioner, where the insurancemay cost you a little bit more but in theend it’s better value.”

In Mr Pallet’s opinion, there will be realdifficulties ahead for brokers if they do tryand go head to head on price: “It will

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TheBroker_BibasuppA4.indd 1 27/7/06 12:14:43

YOUR BUSINESS

How brokers should deal with the MID, making the most of cross-sellingopportunities and more on anti-smoking legislation are this issue’s topics

In the last issue of the broker, we explained how, by the end of 2007, allworkplaces in the UK mustbe smoke-free. Laws havealready been passed inScotland for this, but manymay also not be aware thatthe rules also apply to certaincategories of vehicle – and sobrokers may want to adviseclients of these changes,where appropriate.

The vehicles affected arecommercial vehicles of all typesplus vans, buses and coaches,private hire vehicles and taxis.Company cars and vehicles usedsolely for private purposes areexempt. The new law applies toany relevant vehicle, irrespectiveof its country of origin, while it is inScotland. So, anyone driving overthe border on business, forexample, must comply.

The operator must take ‘allreasonable precautions’ toensure no one smokes in the

Cross-selling is more important nowthan ever before, since we’re in one ofthe softest markets the industry hasexperienced for a long time.

After two years of preparation andimplementation of regulation, brokers andinsurers alike entered 2006 with a view toincreasing their top line, grabbing marketshare and driving business growth. This,inevitably, has resulted in soft rates.

The question is how do brokers grow in amarketplace that is arguably overpopulatedand under threat from emerging markets?

It’s not easy. Direct mailing activity isexperiencing falling response rates, whiledatabases can be expensive, unreliable andmay be out of date. In addition, the number ofregistrations is increasing with the TelephonePreference Service – the service that prohibitsunsolicited marketing activity. And, even forthose who can afford it, TV advertising ishaving less impact. At the same time, there is

an upward trend to buyproducts and services onlineand insurers are courtingcorporate partners in orderto target their brand-loyalcustomers.

In order to compete,brokers need to seriouslyconsider cross-selling as anessential tool – if they are notalready doing so – to combatpressures. Brokers are in aunique position to sell

alternative products as they have existing relationships. Theability to assess what products your clients have with you inorder to identify gaps is vital. When Spain’s largest bank,Banco Santander, purchased Abbey National it wasconvinced savings and business growth could be achievedthrough technology. Its Parthenon system enables staff tosee all the products a customer has on a single screen. Staffidentify the gaps in customer portfolios and suggest loans,mortgages and savings accounts.

High net worth (HNW) household is a crucial product toconsider for cross-selling opportunities. Directors ofcommercial clients will probably need a HNW householdpolicy. High performance or high value cars generally gohand-in-hand with a HNW lifestyle.

Frequent travellers and purchasers of travel insurancemay also be worth targeting. The important thing is to usethe information you already have at your fingertips, beforesomeone else beats you to it. Fay Rolland is Sterling Insurance Company’s director. The company is BIBA’s high net worth scheme provider

Fay Rolland

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Anti-smoking laws inScotland and vehicles

vehicle while in Scotland.‘No Smoking’ signs must be

displayed so they can be seenand read by persons either in orapproaching the vehicle. Thesign – showing the internationalno smoking symbol – must statethat the vehicle constitutes a nosmoking area and that it is anoffence to smoke or knowinglypermit smoking in it and give aname of someone to whom acomplaint may be made if thelaw is contravened.

Individuals who smoke insuch vehicles will be liable to afine of £50.Those in control ofrelevant vehicles could be liableto a fine of £200 if they do nottake reasonable action toprevent someone smoking, orprovide signage. Failure to paythe penalty amount may resultin substantial fines.

Example signs can befound at www.clearing

theairscotland.com

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understand and meet theirMID2 legal obligations

• maintain regular contact withclients who provide vehicledata directly to MID2 to helpensure their continuingcompliance and if necessary,assist clients and insurers toimprove the position.

If you have specific MID questions, you

should first contact the insurerconcerned. But, if it is unable toanswer the query, email theMotor Insurers’ InformationCentre at [email protected] MIIC, a division of theMotor Insurers’ Bureau, isresponsible for all aspects ofthe MID and welcomes any tipsthat brokers may care to share

Submit your presentations today by faxing 01785 785 375 or call 08706 01 01 27

LIGHTENING THE LOAD ONFLEET INSURANCE

Through MBP you can offer yourcustomers leading cover at a competitiveprice, backed by our prompt and efficientcustomer service.

Our dedicated fleet team is geared up tolighten your load with fast quotes on a broad base of policies customised for the small fleet operator.

[email protected]

REF: TB-F2 MBP is part of QBE European Operations, a division of QBE Insurance Group. Authorised and regulated by the Financial Services Authority.


The Motor Insurance Database(MID) was developed in orderto combat the costly problemof uninsured driving. But forbrokers and the public alike(those who have even heard ofit) there is a perception that itsimply means more red tape.This may be because of theFourth EU Motor InsuranceDirective, which makesupdating MID a legalrequirement.

Brokers can play a key part ininforming clients of the database’spurpose and, in particular, why it iscrucial that the UK cracks down onuninsured driving. It makes senseto have a formal procedure in placeso that you can help your clientsand insurers meet their MIDobligations. Indeed, MID updatesshould be built into your processesand procedures.

The following top tips shouldmake handling MID requirementsmore effective.

For MID in general:• pass data to insurers as quickly

as possible and, if necessary,focus on the data that is neededfor MID – don’t let delays withnon-MID data prevent you fromsending MID data

• make sure electronic datainterchange transmissions arenot delayed in any way and thatthey are made daily

• confirm all renewals by therenewal date – insurers areincreasingly lapsing policiesautomatically if confirmation

has not been received• all staff handling motor

insurance need to be aware ofthe importance of submittingMID data quickly and accurately

• for manual business, try to meetinsurer requests for immediatenotification of cover

• process vehicle changes assoon as you have been notified.

For commercial policies(MID2) in particular:• encourage fleet and motor trade

policyholders to report vehiclechanges immediately – to you,their insurer, or directly to theMID, depending upon theagreed process

• raise your clients’ awareness ofMID, its objectives and the newtargets and help them

MakingMID workbetter

What data isneeded to makeMID effective?Timeliness and accuracy ofall policy and vehicle data isimportant to brokers,clients and insurers andyour support in providingdata quickly and accuratelyis appreciated. Thefollowing data is key tomaking MID more effective:MID1:k policy number – if

assigned by youk effective date/expiry date

– for new policies orchanges to existing onesk policyholder name and

addressk named or excluded

drivers – where requiredk permitted driver and

class of userequirementsk vehicle registration

mark.MID2 policy details:k effective date/expiry date

– for new policies, orchanges to existing onesk policyholder name and

address.MID2 vehicle details:k vehicle registration markk vehicle “on-dates” and

“off-dates” – the date(s)the vehicle starts to becovered under the policyand the date(s) it stoppedbeing covered.

Further information is available in a

document on the brokerpage of the MIIC websitewww.miic.org.uk/brokers/best_practice.htm

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The Motor Insurance Databasehelps police forces to crackdown on uninsured drivers

TRAINING


I liked the fact thatthe course requiresinteraction bythe delegates

‘‘’’

Many brokers fail to take business– or soft – skills training seriously, butit can be crucial to ensure employeesare competent.

At BIBA, our working definition ofcompetence is “the appropriatecombination of knowledge and skills toperform the required role,” and thisincorporates both technical and soft skills.

As a sector, brokers are traditionallyused to providing technical training forstaff and encouraging participation inthe formal qualification process, such asthe Chartered Insurance Institute

examinations. This addresses the‘knowledge’ element of the competencedefinition, but what about the ‘skills’element?

It is clear that soft skills training isunderutilised, which is why BIBA hascreated, piloted and now launched asolution for members, specificallyaimed at junior employees, or those newto the industry.

The BIBA Business Skills Model is a oneday course at introductory level and hasmodules in:• communication skills• interpersonal skills• negotiation skills• teamworking.

This was ‘road tested’ recently (see box)by a number of senior broking staff to findout if the content was relevant for itsintended audience.

Full details are included in BIBA’sAutumn 2006 London training programmeand it can be delivered to groups of localbrokers in-house if preferred. Steve White is BIBA’s head ofcompliance and training

Many junior staff would benefit from learningsoft skills. The new BIBA Business Skills Modelis an ideal solution, as Steve White explains

Softly does it Case study: Testing theBusiness Skills Model A group of experienced brokers in theBristol area recently agreed to pilot theBIBA Business Skills Model to find outif it would suit their junior employees.They included Val Page, commercialteam manager of the Jelf Group, andRichard Hooper, group compliancemanager of Linaker-Western.

Ms Page says that Jelf would findthe course useful as her companyalready offers a range of technicaltraining and so soft skills would becomplementary.

“I liked the fact that the courserequires interaction by the delegatesto reinforce learning – and theicebreaker was very entertaining withregard to the first piece of musicpurchased – I hope that the outcomewould not be quite as embarrassing foryounger delegates!”

She adds that in the communicationskills module, the sessions on bodylanguage, listening and feedback wereall very useful and, on the interpersonalskills module comments: “I think thatthis is a helpful session for delegates inmore junior roles as it raises awarenessof differing types of behaviour and willhopefully encourage a more positiveand assertive approach.”

Meanwhile, Mr Hooper says whilethe course was intensive, the one dayformat would suit the many firms whichare pressed for time. He comments: “Ifound the teamworking moduleespecially worthwhile and aiming thisat younger staff will give them thefoundation to appreciate theimportance of working as a team. All inall, I think that the one day course willbe valuable and in my view it does giveenough insight into the various topicsfor its intended audience.”

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Broker-Branded QuoteMac (BBQ) will allow you to link a bespoke version of QuoteMacto your own website, which will accordingly display your company logo and produceinstant quotations for new SME clients 24/7.You will be able to monitor all newquotes received by way of the existing Message Manager or by QuoteMac’s quotesearch tool. BBQ will also request the client’s contact details, thus supplyingyou with the relevant information that you require to make first contactwith your prospective clients. BBQ aims to further streamline the SMEprocess for you and reduce the amount of “lost enquiries” that youmay suffer from outside of normal business hours.

The advantages• Contract Certainty • Brand Awareness - The look and feel of your own website • Instantly links your clients to a wide range of products • Quotations offered instantly 24/7 • Email notification of each new public quote • Online administration including policy production, mid-term adjustments,

renewals, claims submissions and statements of account via QuoteMac • No more lost enquiries

Broker Branded QuoteMac (BBQ)

For more details contactDerek Russell Tel: 020-8597-5656 Fax: 020-8597-5678 Email: [email protected]

Authorised and regulated by the Financial Services Authority

APC BIBA-halfad v4 8/8/06 11:16 Page 1

Tel: 08706 01 01 27 Fax: 08706 01 01 28 E-mail: [email protected] Web: www.mbp.uk.comMBP is part of QBE European Operations, a division of QBE Insurance Group. Authorised and regulated by the Financial Services Authority.

minibus

As the UK’s leading minibus insurance provider, MBP knowexactly what brokers and minibus operators need in the way ofcover. By offering the kind of flexibility that only comes throughdetailed knowledge and understanding of all sectors, we are ableto provide policies precisely customised for private andcommercial minibuses.

Our next generation minibus insurance cover includes:

• Consistent, competitive pricing throughout the UK, withnew improved rates and discounts across all uses

• Claims procedures and UK based Helpline designedspecifically for MBP minibus customers

• Prompt documentation turnaround.

Benefits include:

• Accident and Breakdown Recovery provided by the AA

• Legal expenses cover provided by DAS

• Optional PL cover for Private and Public Hire Operators.

From March 2006 all minibus business, both new and renewalsdue, will be underwritten by QBE Insurance (Europe) Limited.

For enquiries or further information call 08706 01 01 27, orvisit www.mbp.uk.com to find out more about our NextGeneration of motor products.

REF: TB-M1

Next Generation Minibus Insurance

SCHEMES FOCUS


Whatever business the client undertakes,there is an increasing need for higher levelsof public and product liability insurance‘‘’’

Excess cover made easyFollowing recent significantenhancements, cnaexcess.co.uk now givesonline access to excess public and productsliability insurance for small to mediumsized UK businesses.

The initial cnaexcess.co.uk site wasbuilt with the construction industry inmind to provide a system that gave brokersthe control, speed and conveniencerequired when insuring constructionbusinesses. They often need to provideproof of insurance prior to lettingcontractors on site – particularly within thepublic sector and cover could be arrangedfrom the comfort of the broker’s own office.

CNA subsequently received feedbackfrom users who felt the product wasequally well suited to providing instantcover for all businesses, not justconstruction. Whatever business the clientundertakes, there is an increasing need forhigher levels of public and product liabilityinsurance. Reasons for this include: • demands of local authorities, who

increasingly require all contractors andsuppliers to carry a minimum£10 million of cover

• demands from customers, for example,FTSE companies, that requireminimuminsurance limits of £10million and greater

• defence costs, awards and the frequency

Better than everCNA has expanded its excess liability online offering,while Equity has enhanced its personal linesadministration facility, reports Graeme Trudgill

BIBA’s schemes: the full range

1 Accident, Sickness andUnemployment

2 BIBAlet3 Business Travel4 Commercial Combined5 Credit Insurance and Bonds6 Cyber-Liability7 Electronic Marine Cargo8 Excess Liability9 Haulage and LGV Insurance10 High Net Worth11 Home12 Loss Recovery Insurance13 Marine Cargo14 Motor15 Non Standard Property16 Personal Accident17 Holiday Travel18 Unoccupied Properties19 Web Based Directors and

Officers

BIBA facilities

20 Broker Continuity Planning21 Contract Law Services22 Data Protection23 Financial Compliance Support24 Healthcheck25 Insurer Security Services26 Members’ Own PI Insurance27 Personal Lines Administration28 Premium Finance29 Risk Management30 Telecoms31 Conflict Investigation Service

of large losses are all increasing andfailure to adequately insure could leadto bankruptcy

• the primary insurer may not be able toprovide full limit of insurance requiredby the client and this is wherecnaexcess.co.uk can help.The site enables brokers to obtain this

additional cover at competitive premiumsand issues full policy documentationonline within a few minutes.

Key features include:• covers more than 1,600 businesses• up to £10 million additional cover

available above the underlying limit• quote, bind and issue documentation

online• ability to cover USA/Canada exports• available for UK-based companies with

a turnover up to £50 million. Higherturnovers can also be bound onlinefollowing approval from a CNAunderwriter

• all major insurers’ wordings accepted• bind mid-term endorsements

SCHEMES FOCUS


of effort forminimal

commission. ThePersonal Lines

Facility offers the bestof both worlds – the

ability to accommodatesuch business, without doing

any of the administrative work.And a higher commission is

earned, not just for theintroduction, but for the whole life of

the business. It’s like having your veryown personal lines department with noneof the overheads,” explains Mr Young.

BIBA members gain additional benefitthrough enhanced commission terms. Headds: “In effect, brokers become partners.They benefit from working directly withthe affinity partner team and can offermotor insurance schemes to their largerclients. Again, everything from quotationto claim is handled, as the facilityprovides focused sales teams, workingseven days a week, to cope with the highvolume of enquiries and responsestraditionally generated.”

Contact Steve Young on01277 206276 or email

[email protected]

Graeme Trudgill is BIBA’s technicalservices manager

A broker’s professional indemnityinsurance policy imposes a duty on it toreport all circumstances which may lead to a future claim.

If a broker does not report a particularcircumstance and it later leads to a claim, theinsurers may not be liable.

It is vitally important to comply with this dutyas policies are renewable annually, operate on a claims-made basis and have notificationconditions which can be onerous.

If renewal takes placebetween the circumstanceoccurring and notification tothe insurers, there is likely to be a breach of notificationconditions. If a broker changesinsurer, the situation becomesmore difficult. The claim may be repudiated by the previousinsurers for being outside theperiod of insurance and by thenew insurers as a circumstanceknown at inception.

Neville Miles

PIM

ATTE

RS

Brokers may be nervous about notifying debatablecircumstances because they are concerned that this maymake them appear a poor risk to their insurer purely becauseof the volume of circumstances that have been reported. Theconcern is this could affect their future PI rates and terms –especially as they will have to declare this information.

It’s always advisable to adopt a cautious approach and toalert your insurer to any complaints which could have thepotential to become a claim.

So when does a complaint become notifiable? It can beconsidered as any complaint which could lead to the brokermaking a claim on their PI insurance. A complaint about poorservice standards, for example, would not normally be anotifiable. However, if this also questions the suitability of apolicy the broker has recommended, then it maysubsequently turn into a claim. In this case, the complaintshould be notified.

The best test is to ask yourself: “In the same set ofcircumstances, would other, similarly qualified, individualsmake the same decision?” If in doubt, it is generally wise tomake a precautionary notification and, if you’re uncertain, askyour broker for guidance.Neville Miles is managing director at Alexander ForbesProfessions, a BIBA-accredited PI broker

When to notify a claim

and manage renewals online• ability to cater for short period

contracts.Key benefits include:

• available 24 hours a day, 365 days a year• access to experienced underwriters• flexibility of coverage – ability to tailor

heat wording to match primaryinsurers’ wording

• no additional bona fide subcontractorswarranty

• available exclusively to BIBA members• policy documentation issued prior to

receipt of primary wording• low minimum premiums.

Brokers can register to usecnaexcess.co.uk by visiting the site.

Contact: 0800 028 2501 or [email protected]

Keeping it personalMany brokers are concerned that ever-increasing administration costs, or indeedtheir lack of administrative back-up, iseroding motor insurance profits.

The Personal Lines Facility offered byEquity enables brokers to transfer part orall of their personal lines business to aspecialist who handles the entire process.“The results are immediate – freeing-upvaluable resources, allowing them tofocus on core activities and reducing costsat the same time,” explains broker

development manager, Steve Young. Asimilar service was previously offered byBoncaster, but this company has been re-branded and now trades as EquityInsurance Brokers. The service has beenenhanced and upgraded to cater for today’sstreamlined market arena.

“No matter how obliged brokers mayfeel about accommodating their clients,personal lines business, and in particularmotor insurance, still requires a great deal

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TECHNICAL BRIEFING


While the general insurance markethas to provide certain compulsoryinformation to their clients, unliketheir mortgage and packagedproducts counterparts, brokers arenot bound by regulation to providethis in an Initial Disclosure Document(IDD). Whereas brokers may see anIDD as one-off requirement forFinancial Services Authority (FSA)compliance, Terms of BusinessAgreements (TOBAs) should beviewed in a broader sense.

TOBAs are useful tools that provideconsistent information to clients beforethey enter into an insurance contract. TheTOBA can comply with a number of ICOBrules, including the obligation to providestatus disclosure information to clients.But, the need to meet some of the CASS –the regulator’s rules surrounding clientmoney – requirements was seen as apotential problem. The FSA now acceptsthat a TOBA is an acceptable way to adviseclients of the CASS requirements inrespect of holding client money and theduty to notify, obtain informed consentand the written agreement of the client.

While the TOBA should deal withmany of the regulatory compliance needs,it can ensure compliance with legalobligations as well, such as moneylaundering under the Proceeds of CrimeAct 2002 as well as data protection.

Most brokers, particularly those withretail clients, collect personal data fromtheir clients and they must thereforecomply with the Data Protection Act. Thisincludes giving an explanation as to howtheir personal data will be used.

Many businesses fall foul of dataprotection legislation simply by failing toprovide this straightforwardinformation. By including thecorrect wording in the TOBA thisissue can be easily addressed.

Most businesses operatingwithin the service industryin the UK – including thosewith little or no regulation –use some form of writtenagreement to govern relationshipswith clients. They invariably set out theframework as to how transactions willbe dealt with between the parties,including the responsibilities ofthe client and the consequences ofany failure or default on the part ofthe client. This ensures clarity forboth sides.

Brokers should therefore thinkvery carefully about theresponsibilities that should beincluded for both themselvesand the client. An obvious, butsometimes overlooked,example is the fact that theinsurer or underwriter relies oninformation provided by theclient who has an ongoing dutyto disclose any material facts orchanges to the insurer.

This responsibility on thepart of the client should beclearly set out in the TOBA witha caveat explaining that anyfailure could invalidate thepolicy in the event of a claim.

As is widely known, a recent legal authority has

Protection – under one umbrella

TOBAs go wellbeyond being acompliance issue.Hywel Evansprovides guidanceon how a TOBAwith a client canprotect them andbenefit the broker


highlighted the need fora full explanation of

any warranties or exclusions

and theconsequences

of notexplaining

these.A well-drafted TOBA

clearly sets out the responsibilities ofboth parties and should result in asignificant reduction for potential disputesand with it, the inevitable breakdown ofthe relationship with the client.

To avoid future problems, brokers maywant to look at including: How long arequotations valid? Under whatcircumstances will verbal instructions beacceptable? When must instructions beconfirmed in writing? Who owns thebroker’s file of papers?

In a recent instance, we included aprovision in a broker’s TOBA withcommercial clients explaining that thebroker had the right to retain the fullpremium where a policy was cancelled bythe client.

The knock-on effect for the broker was adramatic improvement in bad debts asclients could no longer argue the point as itwas clearly provided for in the agreement.

While the TOBA is an excellent way ofensuring consistency by using the same setof terms to govern the relationship withclients, it is important for the TOBA to bothreflect the way in which the business

operates and how it transactsbusiness with clients. Often,retail and commercial clients

need to be dealt with differently. It is alsopossible that certain commercial clientswill be dealt with differently depending on the nature of their business. And, it isquite common for brokers to have several different TOBAs to reflect thedifferent needs of both their retail andcommercial clients.

No-one should overlook the fact thatboth regulatory and legal obligationschange from time to time. TOBAs should be reviewed regularly – at the very least onan annual basis – to reflect these changesand any developments with the broker’sbusiness or procedures and processes. Forexample, TOBAs should now be amendedto include BIBA’s recently-publishedrecommended wording setting out acommercial clients’ right to requestcommission details.

While TOBAs for clients are nowcommonplace, brokers’ relationships withother parties should also be set out in a TOBA.

This includes insurers, appointedrepresentatives, introducer appointedrepresentatives,introducers and sub-brokers.

Plainly, such termswill be quite different tothose in a client TOBA

der one umbrella

What should aTOBA include?

While an IDD does provide theclient with the required regulatorystatus disclosure, it falls short ofproviding all necessaryinformation in one document. Awell-drafted TOBA clearly covers:• regulatory compliance –

eg, ICOB rules, CASS • legal requirements – eg, data

protection, money laundering• your business requirements –

eg, debt recovery, validity ofquotations

• client responsibilities – eg, dutyof disclosure, verbal or writteninstructions.

and we recommend that brokers seek legal advice when drafting theseagreements.

It is clear that to ensure FSA compliance,clarity and avoiding disputes, well draftedTOBAs covering both regulatory and legalissues are a must.Hywel Evans is a solicitor at Hugh James

If members have queries about theterms of any TOBA, they can contact

Hywel Evans on 02920 391030 or by e-mailat [email protected]

Brokers should think very carefully aboutthe responsibilities that should be included‘‘’’

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BIBA PARTNERS

Toadvertise

please contact

Jayne Stewarton

T: 01536 747333e: [email protected]

COMPLIANCE

This autumn, the FSA will makesome 200 visits to brokers to checktheir compliance with the clientmoney rules and if it finds significantbreaches or failure to comply, thenthis will almost certainly lead toenforcement action.

Of all the relevant sourcebookscontained in the FSA’s Handbook of Rulesand Guidance, the Client Assets Sourcebook –and its chapter five in particular whichdetails these rules – has probablyattracted more comment than all theothers put together.

Many brokers remain unclear aboutwhere they stand. The client money rulesform a complex suite and the evidence wehave seen is that our members in themain have tried hard to comply. However,it is clear that misunderstandings stillexist, to the extent that the FSA has issueda 40-page guidance document to helpfirms make sense of it all.

The FSA considers the handling ofclient money to be its number onesupervisory priority this year and so itsimportance should not beunderestimated.

So, what can be done to ensure thatyou stay on the right side of the regulator? BIBA has put together theguidelines, see right.

• make sure that your client moneyaccounts are not in deficit and that anyexcess held in the account is limited toa prudent amount to cover anyunreconciled items at the date of thecalculation

• the bank accounts must be set upcorrectly and, where you operate anon-statutory trust account, the trustdeed needs to be correctly executed. Additionally, make sure that the title ofyour client money account includeseither the term “client” or “customer”

• make sure that you correctly performthe client money calculation on aregular and timely basis, at least every25 working days and provide evidence

• you should make sure that shortfalls –should there be any – or any excessfunds are paid/removed by the closeof business on the day of the check

• you then need to reconcile clientaccount balances with the results ofthe client money resource checkwithin 10 business days

• check that informed consent is soughtfrom your clients which will allow fortheir money being held in a non-

Keep on the rightside of the regulatorThe Financial Services Authority (FSA) is checking brokers are meetingclient money rules. BIBA’s top tips will help you pass with flying colours

statutory client money trust account.The same applies to any interest youmay wish to keep that is earned onclient money bank accounts. Bear inmind if you have a non-statutoryaccount that your systems andcontrols and management of anycredit risk must be overseen by anappointed client money manager

• ensure the status of any client moneyaccounts agrees with the TOBAs asissued by or to insurers, wholesalers,clients and other brokers you deal with

• keep a formal record, such as aspreadsheet, detailing insurer byinsurer, wholesaler by wholesaler, thestatus of monies (risk transfer or not),banking and commission withdrawalarrangements, etc

• client money calculation should reflectbalances paid on to third parties forwhich the broker is still ultimatelyliable and calculation adjusted foruncleared cheques or debit and credit cards’ cancellation periods

• if you have appointed representatives,make sure client money is properlyaccounted for.

Client money rules: BIBA’s top tips


QUESTION TIME

Demonstrate yourcompetenceQ: What does the FinancialServices Authority (FSA)actually mean by the term‘competence’ and how do I goabout demonstrating that mystaff fulfil its definition?A: The FSA’s Training andCompetence Sourcebook setsout the ‘commitments’ eachfirm has in relation to training.These are:• employees should be

competent• they should remain competent

for the work they do• they should be appropriately

supervised• they should have their

competence regularlyreviewed

• the level of competence isappropriate to the nature ofthe business.The commitments themselves

are for guidance only and do notprescribe how firms should goabout complying. The rules alsodo not define the term‘competent’.

At BIBA, we believe that theterm might best be defined as ‘theappropriate combination ofknowledge and skills to performthe required role’.

To demonstrate that staffmembers are competent, wesuggest a simple five stepprocess:• each staff member should

have a job description• from the job description, lift out

the key skills and knowledge

required to adequately do thejob described

• periodically measure the staffmember’s performanceagainst the knowledge andskills needed

• where gaps in requiredknowledge and skills arefound, provide suitable training

• keep a formal record asevidence.

Whose licence is it anyway?Q: We have a one man haulagecontractor where the vehicleand driver are on contract hireto another company. Thedriver does not have premisesand cannot keep the vehicleon the highway. Ourunderstanding is that, underthese circumstances, theoperator’s licence would beheld by the company for whomthe individual is working, and

Solutionsunlimited

Email questions to:Regulation questions:

[email protected] questions:[email protected] /[email protected] the BIBA website forfurther guidance on technicalissues – www.biba.org.uk

rating differs between AM Bestand Standard and Poor’s. Howdo I know which rating to trust?A. Rating agencies use differentscales to measure the financialsecurity of insurers. The best thingto do is to look at the definition ofthe rating. For example, with AMBest a B+ could mean very goodand secure, but with Standard andPoor’s it could mean weak.Therefore you cannot judge theinsurer by their security ratingwithout checking the full definitionof the ratings first.

where the vehicle is normallykept. Do you agree?A: An operator’s licence should beheld by whoever uses the vehicle.This may or may not be the ownerof the vehicle. In this scenario, itdepends on how the individual isbeing employed. If they are beingpaid by the company requiring thehaulage, and are effectively anemployee, then the companywould need to have space ontheir operator’s licence toaccommodate the vehicle.

If it is a subcontractorarrangement and the work isbeing contracted to an individualoperating as a haulage contractor,then the individual would requirethe operator’s licence.

Know your ratingsQ. I’ve been looking to dealwith an insurer but I’ve noticedthat its financial security

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BIBA’s technical teamis at the ready toanswer your queries...


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26130 EDI ad Broker mag 21/4/06 9:39 am Page 1

Documents

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