autumn 2007 issue 30 the magazine of the british insurance … · 2015-12-23 · lloyd’s under...

Lloyd’s under pressure:regional markets competefor broker business

Outfox the poachers:coping when rivals want your people

Tackling TCF:keeping customers andthe regulator on side

the magazine of the British Insurance Brokers’ AssociationAutumn 2007 Issue 30

thebroker

BIBA – Leading the way in UK insurance

Passport controlChecking out overseas insurers

Globalchampions:discover BIPAR and the WFII

Use your grey matter:opportunitiesfrom oldage policies

BIBA on parade:what we’re doing for you

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CONTENTS

18 Passport controlfor brokersAn in-depth guide to FSApassporting rules

Management

22 Your businessProviding flexible benefits for employees, businessmatch-making and financing views fromMacquarie Bank

25 Schemes focusLoss recovery insurance,insurers’ ratings and a newvaluation service

29 Professional indemnity insuranceBrokers say what they wantfrom their PI cover

32 Technical briefingGraeme Trudgill assesses thepotential impact of telematics

34 Contact certaintyMembers’ input is needed toachieve contact certainty, asPeter Staddon explains

35 Question timeAnswers to technical andregulatory questions

Regulars

4 ViewpointBriefing from chief executive,Eric Galbraith

5 News and viewsUpdates from BIBA HQ

6 BIBA regionsPreview of the BIBA ScotlandConference and other events

7 Media WatchBIBA’s Journalist of theYear awards

8 Training The enhanced brokerASSESS offering, byKirsty Gordon

Features

10 Brokers sans frontièresPromoting the intermediary’srole is a global concern,Rachel Gordon discovers

13 A golden opportunityJane Bernstein looks at theissues surrounding insuranceand getting older

16 Fighting your corner BIBA’s multi-faceted work is surveyed by Andrew Tjaardstra

What does membership mean to you? Brokers joiningBIBA may choose to become active in their local areas– our regional network of branches means there is

always activity going on. Others may take part in policy steering activities, such as through the GIBC at

head office. There are also many who, because of their work commitments, canonly keep their involvement to a minimum.

But, no matter what you do or how much time you can spare, BIBA is alwaysworking on behalf of its members in some capacity.

Andrew Tjaardstra, in his article on page 16, met with key BIBA people anddiscovered that there is enormous variety, ranging from political lobbying toassessing and running schemes to helping members with insurer disputes.

As the recent decision to regulate travel insurance shows,persistence can pay off – our lobbying work on this issue startedmore than two years ago and we are convinced that as a result ofthis, the benefits to both consumers and brokers will be substantial.

I would also like to thank broker Neil Grimshaw for supplying ourRight to Reply column on page 5. Neil was inspired to write afterreading an article we ran in the summer issue which stated that theroad to setting up a start-up brokerage was fraught with pitfalls. AsNeil says, there may be challenges, but it is certainly not impossibleto start a new business and we wish him continued success.

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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]

Becky PledgeCommunications Assistant020 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 contact:Leighann BurtrandCommunications Manager020 7397 [email protected]

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: PHOTOLIBRARY.COM

thebroker

INSIDE AUTUMN 2007

‘‘’’

Leighann BurtrandEditor of the broker

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the broker autumn 2007 03

VIEWPOINT

The creation of BIBA as an influential force was anambition that I harboured when I joined theorganisation back in 2003. My desire was to seeBIBA become more powerful at lobbying and overthe years we have never been afraid to speak up onbehalf of members. The good news is that theseefforts are paying dividends. BIBA is increasinglybecoming the first point of call when theGovernment and regulators want guidance.

Travel regulation – it cannot happenquickly enoughOne of the most recent examples of where BIBAhas worked successfully to sway opinion relates toHM Treasury’s decision to extend the scope ofstatutory regulation to include the selling of travelinsurance alongside a holiday. We put in anenormous amount of hard work on this issue,with much of it led by Graeme Trudgill, ourtechnical services manager. Consumers will see afairer deal from 2009. My only regret is that it isnot happening sooner.

Putting members and consumers firstMeanwhile, we have been fiercely critical of theFSA’s proposals to unlevel the playing fieldthrough its proposals for reforming its InsuranceConduct of Business regime. The regulator isproposing to give direct writers further rights toprovide less disclosure to customers whenmaking sales than that required fromintermediaries.

Steve White, BIBA’s head of compliance andtraining, will continue to campaign for the rightsof consumers to be treated fairly and that meanshelping the public to understand insurance andbuy products that meet their needs. We believebrokers should not be subject to a different set ofdisclosures. We know consumers are confusedabout buying insurance and the status of the firmthey are buying it from – and so does the regulator.We are determined to see common sense prevail.

The FSA’s Retail Distribution Review is afurther area of concern. BIBA recently declaredsupport for the Association of IndependentFinancial Advisers stance on this. They warnedthat the implementation of some of the review’sproposals would result in reduced access forconsumers and that independent advice wouldbecome the preserve of the wealthy. BIBA alsorecognises the importance of advice in the buyingprocess for all consumers and will battle to ensureno similar moves are suggested for the generalinsurance sector.

Have the marketingdepartments takenover the running of insurancecompanies?… One has to wonder if someone,somewhere, has lost the plot

‘‘’’

August is traditionally a quiet month, but as Eric Galbraith, BIBA’s chief executive,explains there is no let up on the campaigningfront, holiday season or no holiday season

Email Eric Galbraith [email protected]

Marketing – has someone lost the plot?Have the marketing departments taken over therunning of insurance companies? Do they reallybelieve that the commoditisation of generalinsurance will either treat customers fairly orpromote the industry’s reputation?

Recently, we have had examples of insurerspromoting the purchase of direct commercialinsurance as being better and quicker thanthrough a broker. Marketing material hasbeen sent to members urging them to buy thiscover with little regard, if any, to the fact that it isthose very intermediated channels which bringmost of this business to the insurer. One has towonder if someone, somewhere, has lost the plot.

Unfortunately, I expect to see increasingcompetition from direct insurers. I hope brokerswill recognise those insurers who support theintermediated channel and compete even harderfor this business. BIBA will be on hand to offerencouragement which is why over the summermonths we have been collecting case studies frommembers about the value of advice and theservices that they offer. This will allow BIBA tolaunch a pro-broker campaign later this year.

A real ‘market failure’I am sure we will hear more from the regulatorabout so-called ‘market failures’ in the monthsahead. For me, the real market failure is whereconsumers are not insured or inadequatelyinsured. Take, for example, the recent UK floods –how often have we heard that certain individualsor companies do not have cover? That is marketfailure. The Government and the regulator shouldask why this happened and not be blackmailedinto providing funds for uninsured parties unlessthere is a payback.

The insurance industry has responded well tothe severe weather claims. It is now theGovernment’s turn to act to protect the public andimplement those much-needed flood defences.What we cannot afford is further procrastinationabout whether such measures are necessary, andat what cost.

04 autumn 2007 the broker

portal – this allows brokers to updatetheir own membership details.

Since BIBA will be looking to addon further sections, a new website isnow essential.

Leighann says: “We haveappointed an agency and theirbrief is to allow us to have far moreon the site but in a format which isless cluttered.”

Apart from the benefits formembers, there will also be animproved Find a Broker section forconsumers, allowing them to findeither specialist or local brokersusing key words or post codes. Theaim is to have a ‘parallel’ consumer-friendly home page – although stillpart of the main BIBA site – for thepublic, which will also be packedwith useful guidance and advice.BIBA will appoint an externalcompany specialising in search engine optimisation to maximisethe number of consumers visitingthe site.

NEWS AND VIEWS

The futureis brightIn the last issue of the broker, KatyDowell’s article, An Endangered Species?talked about the pitfalls of new brokerstart-ups. This suggested it was incrediblychallenging to launch. But it is notimpossible – so here is my story.

Ravenhall Risk Solutions started tradingfrom scratch in September 2006 – that meantno agencies nor clients, from day one.

It was a big risk for a 25-year-old, coupledwith the fact that we are in a soft market and a

perception that authorisationis a huge barrier.

Receiving the FSAauthorisation form filled mewith dread, this was thelongest, most in-depth form Ihave ever had to complete,with no support, network orcompliance assistance.

But, the FSA was one ofthe easiest organisations todeal with, in their assistanceand encouragement.

Once authorised, thechallenge of obtaining agencies was next onthe agenda. The major insurers were allsceptical, but this is a relationships industry. Ifound an honest and enthusiastic approach,and a lot of travelling, gained me probationaryagencies with some of the key names – andonce you have three or four under your belt, therest become interested.

It is true aggregators and consolidators arethe biggest movers in this industry sector, butthat is why smaller brokers need todemonstrate the traditional principles ofbroking.

That means providing a service to clients(often where a website can’t) and showing yourvalue in an industry where sometimes,especially for smaller commercial and personalclients, there is no service and support,especially on a face-to-face basis.

Ravenhall Risk Solutions has nowcompleted its first financial year to a higherlevel of success than originally budgeted.

With three staff and a growing client bank,the future for new start-ups doesn’t seem asbleak to me as the article portrayed. In fact, Ifound that our industry and regulators are keento encourage compliant, entrepreneurial andprofessional enterprises. It’s been the bestmove I have ever made.Neil Grimshaw is director of RavenhallRisk Solutions

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Neil Grimshaw

New online launchBIBA is set to launch a newwebsite by the end of the yearwhich will include newinformation, have betternavigation and will also attractmore consumers who arelooking for brokers.

A working group, comprisingBIBA head office representativesand members, has been set up to testthe new features and advise onfuture development.

Communications managerLeighann Burtrand is overseeingthe project. She says: “We see this asa priority and are making aconsiderable investment increating the new site.”

She explains the current websitewas last fully redesigned in 2002.Since then, numerous new sectionshave been added, including: theregional websites, a regulation area,a PI section, far more on trainingincluding a dedicated area forbroker ASSESS and the self-service


BIBA is urging consumers touse brokers and to focus onbuying the right coverfollowing the recentdevastating floods.

Many UK counties wereaffected by the flooding.Thousands of people wereforced to evacuate their homes.

Following overwhelmingpressure on insurers, there hasbeen criticism that payouts havebeen too slow, with PrimeMinister Gordon Brown urgingthem to speed up.

BIBA, meanwhile, has beenchampioning the role of brokerswho are able to support clientswith claims – and help putpressure on insurers to handleclaims quickly. Chief executiveEric Galbraith and technicalservices manager GraemeTrudgill made many mediaappearances.

Graeme comments:“Overall we know that insurershave worked incredibly hard to

In the news: whereBIBA provided guidance

• The one show (BBC One) • Sky News• Consumer Programme

(BBC Three Counties) • Financial Times• Independent on Sunday• The Times• Press Association • Mail on Sunday• The Observer• Sunday Express• Daily Express

Watertight cover by brokers

provide a quality service fortheir policyholders. But, therehave been some cases,unavoidably, where this hasfallen short – or where coverhas not been purchased. Ourmessage is that brokers arebest placed to find the suitableinsurance and that peopleshould not be too hung up onprice – it is not everything.”

This year’s BIBA ScotlandConference takes place on 14 November at Airth Castle,near Stirling.

Airth Castle is an idyllic settingfor this top-class event, which hassecured sponsorship again frommajor insurers AXA, NIG, Zurich and Norwich Union.

This is the third year BIBAScotland has titled the event‘Backing Scotland’, with much of theplanning and organisation beinghandled by BIBA regional executiveClive Hurn, who comments: “Wewere delighted with the response tolast year’s conference and this onepromises to be even bigger andbetter. The content will be topical,relevant and, of course, there will be plenty of opportunity fornetworking.”

He is again being supported inthe event management by leadingScottish conference organisers,Meeting Makers.

Last year, there were nearly 190delegates at the conference. Clivebelieves this year the number ofdelegates will exceed 200. Many ofScotland’s leading brokers will bepresent, including Ken Whitton,chairman of BIBA Scotland, BIBAchairman Derek Thornton and BIBAchief executive, Eric Galbraith. Theevent will be compared by BruceFummy, a Scottish comedian andteacher, with previous experience inthe financial services sector.

There will also be plenty ofnetworking opportunitiesthroughout the day and the eventincludes lunch, tea and coffee breakswithin the delegate fee.

Delegate packs will be issued in

BIBA REGIONS

For details of BIBA’s regional executivecontacts, please see the BIBA website,www.biba.org.uk/broker/committeesfinal.html

Leading the wayin Scotland

The programme includes:• the FSA will have a stand.

Andrew Honey, head ofinsurance, small firmsdivision, will present oncompliance regulation

• presentations from GaryStott – AXA Insurance –head of commercial generalinsurance division andBrendan McManus – chiefexecutive officer, Willis UK& Ireland

• an update on telematics • inspirational speakers• an exhibition from BIBA’s

Schemes and Facilitiesproviders.

Event highlights


A top-notch speakerprogramme and exhibition isin place for Insuring theBroker’s Future, this year’sinaugural Yorkshire andNorthern region conference.

It will take place on 3October at the Royal ArmouriesMuseum in Leeds (picturedabove) and regional executiveIan Raper says: “We’re lookingforward to a fantastic event. Wehave some superb speakerslined up and our exhibition isfilled to capacity with 37exhibitors, including manyschemes providers. We’relooking forward to seeing asmany brokers as possible andalthough there is a lot going on,there will be plenty of time fornetworking during the breaksand after.”

Registration starts at08.30 and the programmewill include:• BIBA overview from chief

executive Eric Galbraith• The evolution of insurance

distribution over the next10 years – Mark Cliff, AXA’sdistribution manager

• Update from the FinancialServices Authority (FSA)including the move toprinciples-based regulation– Wilson Fraser, associate,

FSA’s small firms division, in a session chaired by Steve White, BIBA head of compliance and training

• To sell or not to sell yourbusiness – and otheroptions – Grant Ellis, chiefexecutive officer, the BrokerNetwork

• Poacher or gamekeeper?Reconciling beingunderwriter and broker –Andy Homer, chiefexecutive, Towergate Group

• Treating brokers fairly in asoft market – Chris Hanks,Allianz Commercial UKgeneral manager

• Insuring our future – AndyHanselman, chief executiveofficer, Andy HanselmanConsulting.

The event will be introduced byregional chairman MartinSpenceley, and Denis Pinnegar,a BIBA regional media officer, willannounce the sessions.

The cost for the day, whichconcludes at around 16.30, is£50 and includes lunch,refreshments and parking.

Brokers can register onlinevia the BIBA website and forfurther information, shouldcontact Ian Raper [email protected] ortelephone 01274 209748.

Big names line upfor Y&N conference

Scottish BIBA Conference 2007

early 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 beautiful surroundings of AirthCastle, which is now a luxurioushotel and spa. The glorious buildingdates back to the 14th century andwas once owned by the family ofRobert the Bruce. Members – andtheir partners – who feel they wouldbenefit from some pampering willalso enjoy the facilities of the hotel’sCloud Nine Leisure and Beauty Spa.

For further informationcontact Meeting Makers.

Telephone Fiona McGillivray on0141 434 1500 or email:[email protected] Or contact Clive Hurn on 07836 609960 or [email protected]

MEDIA WATCH


Living in a lighthouse or residing on a rivermay have its attractions, but findinginsurance involves a bit of homework, as Idiscovered recently when writing an articleon this subject for The Times.

As insuring unusual properties is a ‘niche’ area,I turned to several specialist brokers for assistancewith the piece. Most of these I found through

searching the internet and BIBA’sonline database. Having neverpreviously spoken to any of thebrokers I contacted for this story,I was pleasantly surprised by theresponse I got. Not only were allthe people I contacted able tocome up with sample quotes forinsuring quirky homes quickly,but they were also able toprovide useful anecdotes aboutsome of the properties they hadfound cover for previously.

Melanie Wright

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One of the brokers I talked to, for example, told me that themost difficult home he had ever had to insure was a brick-builtcottage built on a floating pontoon, which added colour to thestory. However, having spent 10 years in personal financejournalism for the national press, writing this piece did make mewonder why I still have relatively few broker contacts.

It may be not only because of the proliferation of directinsurers who are only too keen to appear in the press, but alsobecause the broker industry has a strong central ‘voice’ in theform of BIBA, which many journalists turn to.

But brokers individually have such a wealth of fascinating casestudies and tales to tell that it seems a shame that some aren’tmore proactive in contacting the press, especially given the largereader response to insurance stories.

I am well aware journalists are generally viewed withsuspicion, but, contrary to popular belief, we don’t always seekto paint a negative picture of everything, and, if there is aninteresting angle, we want to know about it.

Yes, direct insurers may dominate the personal finance pages,but I for one would like to hear the broker voice more regularly.Melanie Wright is a freelance journalist

BIBA Journalist of the Year Overall winner: Jonathan Swift,Post MagazineRunner up: Simon Gompertz,BBC, Working Lunch

Consumer Broadsheet Winner: James Daley, The Independent Highly Commended: LisaBachelor, The Observer

Consumer Tabloid Winner: John Husband, Daily Mirror Highly Commended: StephenWomack, Mail on Sunday

Best Consumer AdviceWinner: Simon Gompertz, BBC, Working Lunch Highly Commended: KirstieRedford, freelance

Trade Research Winner: Lynn Rouse, Post Magazine Highly Commended: TanyaPowley, Post Magazine

Trade Feature Winner: Lynn Rouse, PostMagazine Highly Commended: Chris Wheal, Insurance Times

Trade News Winner: Sarah Hills,Insurance Age Highly commended: MichelleWorvell, Insurance Age

Regional Winner: Conal Gregory,Yorkshire PostHighly Commended: LindseyRogerson, Scotland on Sunday

Gary Hyndman MostPromising Newcomer Award:Winner: Huma Qureshi, TheObserverHighly Commended: SarahHills, Insurance Age

“Swifty” secures theBIBA press prize

Jonathan Swift, editor ofPost Magazine, has wonBIBA’s 2007 Journalist of theYear award.

Known as “Swifty” amongcolleagues and contacts, Jonathanhas steered Post Magazine tocontinued success along with hislong-serving team. And, as hisentries showed, his sharp writingstyle and inside market knowledgeput him at the top of his game.

The awards showcasejournalists who have used theirwork to further understanding ofwhat can often be highly complexinsurance issues.

BIBA chief executive EricGalbraith presented the award toJonathan at a ceremony held atMarsh’s head office in the City ofLondon. He said: “This was one ofour strongest years in terms of thequality of work submitted and wereceived over 100 articles for ourjudging panel to assess. I believethat this year’s short-listedjournalists represent the strongest

group that we have ever had thepleasure to work with.”

He added as well as looking atthe originality and style ofwriting, and the quality of relatedresearch or investigatory work,the judges were asked to identifythe journalists that raisedawareness of general insurancesubjects through their work andprovide an insight into generalinsurance issues.

Sharp writing and market knowledge gainJonathan Swift the top BIBA accolade

The roll of honour

Judges

John Greenway MP,Chair of the SelectCommittee for the TreasuryDavid Slade, Perkins Slade LimitedKevin Sinclair, AALord Hunt, Beachcroft Guy Munnoch, ZurichCommercial & MunicipalToby Foster, Marsh LimitedJerry Wilson, Goss & CoGrant Ellis, Broker Network

Winning feeling:Jonathan Swift

reminders and e-links in the planner. Broker ASSESS also has a link to the CII’s

online CPD system, providing users with a singleCPD record which can be submittedelectronically.

Although it has many thousands of users,BIBA ensures that broker ASSESS retains thepersonal touch – whether brokers have atechnical query or want to recommend newcontent, queries are dealt with promptly.

And, in particular, the user group plays a vitalrole in taking on board feedback andimplementing changes. For example, one brokerrecently suggested that questions on taxis andmotorcycles would be useful for his employeesand these have now been incorporated into thequestion bank.

The user group is chaired by Mel Lyell,compliance manager with Poole-based broker EColeman. He comments: “Broker ASSESS is good –and since the merger has become even better –content has grown massively and I feel we canmeet the needs of almost all brokers. What ismore, the costs are reasonable. Prices varyaccording to the size of the firm. Both BIBA andthe CII are non-profit organisations and so therevenue earned goes back into development and

making the changes users want.”The user group meets around

every two months and Mel adds: “Wewelcome broker users getting involved

and we’ve invited former AXA Campusmembers to join us so that we all work together.Brokers want to offer their people a variety ofdevelopment options, but this system providesthem with a consistent and affordable way to giveeveryone structured and relevant training. It alsomeans managers have the information on eachemployee’s training at their fingertips – thismeans they can conduct a skills gap analysis andidentify the most appropriate training. And, onemajor advantage is that it provides electronicverification that training has been carried out,which is ideal in the regulated market.”Kirsty Gordon is BIBA’s membership andbroker ASSESS co-ordinator

Training is now a far bigger issue for mostbrokers than it was in the past – thecompetitive market, the need to retainquality staff and regulatory pressures areamong the reasons for this. But manycompanies say they are busier than everand so are looking for straightforward andcomprehensive solutions.

Step forward broker ASSESS. Manyintermediaries will be familiar with the systembut could still view it as an assessment tool.However, the reality now is very different. BrokerASSESS goes far beyond this and is now acomplete online learning and developmentsystem – it’s also the market leader andcontinuing to grow.

Earlier this year, broker ASSESS merged withanother training system, Campus – both of thesehave won awards in their own right. AXA Campushad some 8,000 users, while broker ASSESS hadaround 13,000.

Meanwhile, content is now being provided bythe Chartered Insurance Institute and brokerASSESS is the CII’s endorsed online system for theCII’s Broker Academy, which was launched inFebruary 2007. The academy also offers brokersother training options, including face to face ifrequired, but broker ASSESS is likely to provideone of the easiest ways to supply consistent andauditable training to as many of their employeesas they wish – it also means employees can betrained in the workplace.

One key improvement is that the content hasnow been vastly expanded with more than 200new learning modules being recently added.There is also a new ‘My Planner’ facility whichenables the creation of personalised learningplans. This offers the ability to self-manage thepace of learning by users through email

All aboardthe one-stop

training solution

Broker ASSESS has merged with AXA Campus to create a market-leading e-learning and development facility. Kirsty Gordon explains

Managers have theinformation on eachemployee’s trainingat their fingertips

‘‘’’

TRAINING


All aboardthe one-stop

training solution

www.stpaultravelers.co.uk

Some saw excessively large exposure. We saw opportunity.l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l

New businesses can find it difficult and costly to obtain insurance cover, especially if they operate in unusual or high-tech areas. Our TechsureR underwriters specialise in the technologysector and were pleased to provide PI cover for a giant screen television consultancy right fromstart-up. Our view is that new technologies and new businesses present new opportunities andnot necessarily unacceptable risks.

At St. Paul Travelers we always try to see the bigger picture.

BIPAR/WFII


When it comes to being heard in Europeand indeed globally, brokers have achampion based in the heart of Brussels.

BIPAR – the European Federation of InsuranceIntermediaries – is responsible for representingthe interests of both insurance agents andbrokers. It works closely with its sisterorganisation, the WFII – the World Federation ofInsurance Intermediaries.

The number of brokers represented isimpressive. BIPAR covers in excess of 80,000members, with around 250,000 employees andlinks with 47 national associations in 30countries. Meanwhile, the WFII works withmore than100 national associations (in morethan 80 countries) across the world. It waslaunched in 1999 in Washington DC andrepresents more than 400,000 intermediaries.

BIPAR was established in Paris in 1937 and in1989 relocated to Brussels. It has a team of six –three lawyers, two administrators and directorNic De Maesschalck, who has worked for theorganisation for 15 years. Nic is also a director ofWFII, of which BIPAR was a founding member.

Nic is an economist by training but his familyrun a brokerage in Belgium, where he gaineduseful work experience – including training inthe London market.

And while it is a small team, he points out thatnumbers are boosted considerably by volunteers– it operates a number of committees and has twomain meetings a year where a cross-section ofbrokers visit BIPAR’s offices. Most recently,former BIBA chairman Max Taylor also acted asBIPAR chairman. Today, BIPAR’s chairman isManuel Vila, a representative of the Spanishconsejo. Beyond this, there are regularteleconferencing meetings.

InterventionBIPAR aims to intervene early to ensuremaximum impact and constantly keeps incontact with other associations which also haveinfluence with the EU. For example, these wouldinclude CEIOPS, the Committee of EuropeanInsurance and Occupational PensionsSupervisors, and the IAIS, the International

Association of Insurance Supervisors. In 2002, BIPAR also set up the POI, Partners of

Intermediaries, to explain the realities of thesingle market between members andnational associations.

In terms of EU issues, Nicexplains that currently BIPAR isfocused on three core topics – theimplementation of the InsuranceMediation Directive (IMD),

the EU’s review of VAT onfinancial services and theEuropean Commission’sinquiry into business insurance.

It is anticipated that next year the EU willevaluate the IMD and bring in any necessaryrevisions. It was because of this law thatregulation wasimposed on brokersworking with the EU – andthe directive has not beenwithout controversy. Notleast BIBA has spokenout in the UK on the fact that many other EUcountries have made little effort to implementthe IMD on time and carried on doing businessregardless.

Nic comments: “From where I sit, I can see thatthose states which were not doing enough arecatching up – the gap is closing.”

He emphasises: “I think the IMD is a very goodpiece of legislation, it provides a minimum level ofconsumer protection and allows intermediaries toundertake business across borders. I canunderstand those who say the UK may have goneoverboard in its implementation. However, theprinciples are meant to create a level playing field.”

Gold-platingNic argues that UK brokers may feel disgruntled

because of gold-plating but points out that isbeing addressed. “The FSA is looking atintroducing a relaxation of rules whereappropriate. It will act if it is felt that over-

regulation is stifling the market. It is also clearthat the FSA is highly respected globally and

from the meetings I have had withits people, can confirm they areamong the most experienced and

sophisticated in their knowledge.”Meanwhile, the EU’s review of

Intermediaries across the world have their interests representedby BIPAR and the WFII. Director Nic De Maesschalckspoke to Rachel Gordon about the issues on the agenda

Brokerssans fron tières

BIPAR and the WFII –being heard globally

k Reaches across five continents– North and Latin America, Asia,Africa and Europek Liaises with EU Commission

and International Association ofInsurance Supervisors k Promotes profession with

international bodies such as theUnited Nations, World Bank,International Monetary Fund,the Organisation for EconomicCooperation and Development(OECD) and the World TradeOrganisationk Deals with a range of

stakeholders includingpoliticians, the media, tradeunions and other tradeassociations.

From where I sit, I can see that thosestates which were not doing enoughare catching up – the gap is closing‘‘’’


main business sectors, whether they are bankingor insurance. This review is not necessarily to saythe current market has problems, but whetherany changes are needed. There is no point usbeing overly critical of the review taking place.We have to live with it, but are lobbying to showthe market is competitive and in particular thatthe role of the intermediary in maintaining thisis understood.”

Some UK brokers may raise eyebrows whenthey realise BIPAR also represents insuranceagents. But, Nic comments: “Agents are verymuch accepted in a number of Europeancountries and they do not mean customers aregetting a bad deal – it is just a different way ofdoing business and customers can still benefitfrom good service. Many agents are offering thisand are running their own business – they areentrepreneurs as brokers are. Of course, issues

such as disclosure are important, but it is not forus to say being a tied agent is a bad deal. In anycase, I think many brokers would find they havemuch in common with agents.”

LiberalisationIndeed, although it is focused on and indeedsupports sound regulation, Nic says the need forliberalisation is a driving principle runningthroughout BIPAR and the WFII. “We don’t wantto see too many excessive rules imposed. And,outside of the EU, the WFII wants to see brokersable to trade freely in as many countries aspossible. One major example of this is China,where we have been lobbying and whereconsiderable progress has been made. We areabout explaining the benefits of using anintermediary and the know-how they bring andthe advantages for customers, wherever they are.”

Hot topics on the agendak IMD implementationk EU Competition Enquiryk VATk Disclosurek EU Green Paper on Retail

Financial Servicesk Contract certaintyk Impact of the Solvency II

Directivek Insurance education of the

public k Anti-fraud/anti-money

laundering.

n tières

VAT has been dragging on for some time – it isexpected to be completed around 2008.

Nic says BIPAR supports the view that reformis needed, since it impacts on those who tradeacross EU brokers – namely in hidden VATcharges from suppliers of insurance services toother businesses and on those which outsource.BIPAR wants intermediaries to be exempt withimproved guidance made available, since costsare being passed onto policyholders under thecurrent regime. This also puts EU-based insurersat a competitive disadvantage compared tothose which are non EU.

Certainly in the UK it has been arguedthat the EU did not need to conduct a reviewinto the competitiveness of businessinsurance, but Nic is philosophical on this.

“The EU sees its role to gather pictures of the

AGEING POPULATION


particular, penalise this group rather thanhelp them.”

Travel insurers especially have beencriticised for hiking premiums for oldercustomers. Sam Heath, a spokesperson for AgeConcern England, asserts: “The area aboutwhich I hear most complaints is holidayinsurance.” Mr Heath concedes that there is agreater risk in some cases: “It is notunreasonable when looking at the figures tosuggest that someone in their 80s is more likelyto fall over and that when they do, they are morelikely to hurt themselves.” It is, however, widelyagreed that the problem lies in viewing ‘oldpeople’ as a homogenous group.

“What insurers tend to do is take a cut offpoint of 65 or 75 years old and at that point,

premiums either go through the roof or theystop insuring altogether,” comments Mr Heath.Age Concern is calling for these issues to berecognised under the forthcoming SingleEqualities Act. He explains insurers should stillconsider age as a risk but also take other factorsinto consideration.

For many, a key issue is that the insuranceindustry needs to adapt its view on whatconstitutes old age. As Mr Gratton summarises:“Someone who is 55 or more now is notnecessarily the same, health or outlook wise assomeone who was that age 20 years ago. Theydon’t see themselves as ‘old’ but often have thespending power and health to enjoy life formany years to come.”

Certainly as more people of retirement age

A golden opportunityAs the UK ages, so the insurance industry needs to adapt. JaneBernstein finds there are opportunities for those willing to seize them

The UK’s population is living longer andrecent studies have indicated that by 2025nearly a third of the population will be agedover 55. So it is vital insurers and brokersgrow with their customers and ensureproducts and services accommodate thischanging demographic.

But has the insurance industry been as quickto respond to the changing nature of thepopulation as other business sectors?

Bob Gratton, executive manager withbroker Bollington, explains: “Other sectorssuch as garden centres, restaurants, DIY chainsand savings companies recognise the financialclout this growing sector has by offering betterdeals. Insurers still tend to take the oppositeview. Travel and private medical insurers, in

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AGEING POPULATION


choose to travel, insurers who refuse to coverthem are missing out on a growing market. PeterStaddon, BIBA’s head of technical services, adds:“It must also be understood the emergence oflow-cost airlines has made an enormousdifference to this. Therefore we need to cater forthis in the products we offer.”

Targeted ratingsMr Staddon points out: “There are a number ofinsurance considerations. What about thehiring of a mobile home to visit the culturalcentres of Europe for three or four months at atime? We have to address the fact the mainhome could be left empty and medical covercould be required either under travel insurance,the use of the EHIC (European Health InsuranceCard) or via private medical insurancepurchased by the traveller.”

The good news is many brokers report someinsurers are taking a more flexible view and thatproducts are beginning to accommodate theolder customers.

Ian Brown, group technical director forProtectagroup, observes, for example, that thereis an increasing trend towards targeted rating.

And Shelley Wright, customer propositionmanager at Groupama, emphasises: “It is unwiseto generalise about the needs and aspirations ofthis sector.” Ms Wright takes the example ofhousehold insurance, observing: “Older people

were historically viewed as a lower risk; asignificant factor being the assumption thattheir homes would have shorter periods ofbeing unoccupied. However, if they go abroadfor longer periods during the winter monthswhen they retire this can actually increase therisk of losses through theft, malicious damageor water damage.”

For those insurers and brokers looking todifferentiate themselves on factors other than

The sector also responds better to personalcontact and demonstrates far greaterloyalty towards their suppliers‘‘’’

price and to attract loyalty through good service,this can be a good target market.

Personal serviceMs Wright explains: “Research shows that themore mature sectors of society tend not to be asprice sensitive as others and purchase more onthe basis of brand and reputation of the companythey are dealing with and the quality of cover andthe advice that they are offered. The sector alsoresponds better to personal contact anddemonstrates far greater loyalty towards theirsuppliers.”

As far as marketing to this segment isconcerned, Mr Brown says in his experience,personal service remains a high priority. “Wehave quite a large high street presence andpeople will walk in. I still think they do wantface-to-face contact and the more they can pop inand talk to someone, the happier they feel.”

That is not to say that the over 55s willnever go online. Paul Green, head ofcommunications for Saga, points to a mix ofhuman contact and internet use in buyinghabits. He explains: “It is very important withthis age group to ensure that you serve people inthe way that best suits them – that meanspersonal service with no automated callanswering. But, we have also seen a significantgrowth in people buying online.”

However, online sales are unlikely todominate in all areas. Mr Staddon says:“Purchases of uncomplicated products likegroceries or low cost airline flights constituteone size fits all. But in relation to theinsurance product where ‘advice’ is an integralpart of the product, then speaking to a personhas its advantages.”

Older employees – are brokers doing their bit?Apart from more older consumers,the workforce is also ageing. Butare brokers aware of age issueswithin their own organisations?

Cressida Courtney, manager,broking for Joslin RoweRecruitment Consultants, saysbrokers should adapt their jobdescriptions when looking forcandidates in order to comply withthe Age Discrimination Act.

She points that that some jobdescriptions will need to beamended to take these issues intoconsideration and titles changed –for example in the case of the role“junior” technician.

Companies will also need to be wary of describing theirorganisation as “young and

dynamic”, for example. She saysbrokers should be able to receiveguidance from their recruitmentconsultants on how to complywith the act.

So, does she feel brokers arewilling to take on older employees– and do they understand thepossible additional costimplications in terms of pensionsand health cover? Ms Courtneycomments: “Yes, brokers havebeen to some extent willing to takeon older employees, although I still feel it will take a while formindsets to change in certainorganisations/divisions andthose with HR expertise aregenerally aware of the costimplications involved.”

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ACTION FOR MEMBERS


BIBA people are involved in a huge rangeof activities, from helping to shapeGovernment policy and regulation, tohelping out brokers in dispute withinsurers and finding ways to givemembers access to niche products.

One notable result of BIBA’s efforts has beenthe Government’s decision to handover theregulation of insurance sold by travel agents tothe FSA. Subject to further consultation, theregulation will begin in January 2009.

Graeme Trudgill, manager, technicalservices at BIBA, says the trade associationhas been publicly saying for two years thattravel agents were on an “unlevel playingfield”. What is more, consumers were notreceiving proper advice for cover such asmedical expenses and hazardous sports fromtravel retailers.

This concerted campaign led to high-profiletelevision appearances for Graeme on BBC’sReal Story and Watchdog. He was joined onWatchdog by Ed Balls, the former economicsecretary to the Treasury, who is now secretaryof state for the Department for Children,Schools and Families.

Uninsured driversThe appearance of Mr Balls was no coincidenceas BIBA had already met with him earlier toexplain why it felt regulation was soimportant. And BIBA had also stated its case informal discussions with the FSA and the ABI.

Having achieved a “level playing field” fortravel insurance, the BIBA team has also madesignificant progress in the drive to penaliseuninsured drivers to create a safer and fairerenvironment for the vast majority ofpolicyholders.

The Department for Transport regularlychecks in with BIBA as a sounding board, andBIBA participated in an inquiry into uninsureddriving undertaken by Professor DavidGreenaway in December 2003. Many ofProfessor Greenaway’s recommendations haveFigh

ting

your

cor

ner BIBA is involved in

many activities whichimpact on all aspectsof a broker’s business.Andrew Tjaardstraprovides a flavour ofits work


The BIBA team has also madesignificant progress in the driveto penalise uninsured drivers‘‘’’

for personal travel insurance, when forbusiness travel or motor it is five per cent.We don’t expect to win this battle, but weneed to be fighting and the Treasury has toreview this.”

BIBA has also been heavily involved intrying to achieve the best deal for brokers innew arrangements for the Financial ServicesCompensation Scheme (FSCS).

When the FSA proposed a solitary “pot” forinsurance when considering a restructure ofthe FSCS, BIBA commissioned a report byLondon-based consultancy EuropeanEconomics which was presented to the FSA.

As a result, the independent body changedits plans by including sub-limits for bothinsurers and brokers. Steve White, head ofregulation and compliance, and a member ofBIBA’s executive team, says the lobbying has“produced a likely result better than expected” for brokers. The relationshipbetween BIBA and the FSCS should furtherimprove when former BIBA chairman MaxTaylor takes up a new role this year as non-

executive director of the FSCS on 1 September. Further regulatory initiatives include

the BIBA-led drive to remind customers thatthey can request details of their broker’sremuneration. This proactive approach hasgiven the FSA evidence of a “market-led”solution, similar to the work on contractcertainty, which led to the regulatorbacking away.

In addition, BIBA is watching the proposedreforms on its Insurance Conduct of BusinessRules closely and has made its views heardover the payment protection insuranceinvestigation, especially the importance ofTreating Customers Fairly, in this area. There isa barrage of crucial regulatory issues whichneed a coherent, unified industry response.

This year, BIBA launched a professionalindemnity (PI) initiative in order to issueguidance over policy wordings. Graeme says:“Often the customer is not getting the bang fortheir buck and we want to help membersunderstand the demands and needs for PI.”

BIBA’s proactive approach was evidencedafter a broker had a dispute with an insurerover a burnt down warehouse. Peter says:“Where we feel the broker has a case we canbeat a path to the door of the underwriter andbring in the experts. We have a pool of contactsincluding chief executives at insurers.”

BIBA is often called upon for its knowledgeand expertise and it has already beencontacted by the Ministry of Justice overadvice on work it was doing on the legalexpenses insurance market.

In order to keep on top of industry issues,there are four technical committees at BIBAfor motor, property, liability and regulation atwhich BIBA formulates strategy andinvestigates latest market trends.

Medical insuranceOn 8 August the new private medicalinsurance working group met. In addition,there are 13 regional committees.

In addition to lobbying and providingadvice, BIBA has assembled 30 schemes ofstandard and non-standard insurance cover forits members.

For example, Davis Underwriting providesa haulage and LGV scheme and CFCUnderwriting provides cyber-liability.

The BIBALet scheme run by LumleyLetsure is worth £5 million of gross writtenpremium and is subscribed to by 300 brokers.

BIBA receives around 20 offers a month foradditional schemes but it is selective and onlylooks for cover which adds something extra tothe broking community.

As each scheme comes up for renewal,BIBA takes a small percentage in thetransaction which goes towards keepingmembership fees low.

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now been implemented into law. But BIBA feels the laws have yet to go far

enough. Graeme describes as “derisory” the£100 fine for uninsured driving and thepotential 90-day period before it is issued.

This is especially as each uninsured vehiclecosts the average consumer an extra £30 in thepocket and is 10 times more likely to have anaccident. BIBA welcomes the introduction(probably next year) of emailed motorcertificates, of which 30 million are producedevery year, to the Motor Insurance Database.This will save time, paper and money,especially as it notes that “some insurers arefailing miserably at submitting information tothe Motor Insurance Bureau on time”.

AmbitionsHowever, BIBA wanted the Government to gofurther, so that all parties including the policeand DVLA have access to this database,including Statutory Off-Road Notifications, sothey can concentrate on chasing those vehicleswhich are not insured. The Governmentsubsequently implemented BIBA’srecommended changes.

There are wider ambitions for the tradeassociation, such as a reduction in insurancepremium tax for travel insurance. PeterStaddon, head of technical services at BIBA,comments: “There is no sustainable reason forhaving insurance premium tax at 17.5 per cent

PLACING BUSINESS OVERSEAS


Language, distance, time differences andculture can all contribute to makingdealing with an overseas insurer riskierthan normal for an intermediary.

However, failing to check that an overseasinsurer has the necessary FSA permission to beconducting regulated activity in the UK couldseriously impact on a broker’s reputation and itsrelationship with clients.

The FSA’s recent decision to ban DavidWilliam King for managing two offshoreinsurers unauthorised to carry out businessin the UK serves as a stark warning to thosewho operate illegally that the regulator willnot hesitate to take action when consumersare at risk.

In this particular case, King was responsiblefor managing CIC Costa Rica and CIC Greece,two companies which regulatory investigationsfound were not approved in the UK, Greece orCosta Rica to carry out insurance business as itwas claimed.

Despite this, they issued more than 1,800insurance policies to UK businesses throughtheir underwriting agents. This meant that thesepolicies were invalid and unenforceable.

ConfidenceThe FSA argued that the case significantlyundermined consumers’ confidence in theinsurance sector. CIC policyholders were leftwithout proper insurance and risked substantialloss and even prosecution as some of thecontracts involved related to employers’ liabilitycover which is compulsory in the UK. It alsomeant that they had to spend additional time andmoney to obtain alternative cover when the FSAfinally put a halt to CIC’s activities in the UK.

Intermediaries should take heed of thisenforcement action too. Under section 19 of theFinancial Services and Markets Act 2000 (FSMA),

no firm may carry on a regulated activity in theUK, or claim to do so, unless the firm isauthorised by the FSA or is an exempt person. Abreach of section 19 may be a criminal offenceand punishable on indictment by a maximumterm of two years imprisonment and/or a fine.

PermissionsThe FSA, when authorising a firm, generallygives the firm a part IV permission, which listsall the regulated activities that the firm is allowedto offer. For insurers this permission mustinclude the ability to ‘effect and carry outcontracts of insurance’.

BIBA members should always check the FSARegister to determine whether the insurer thatthey want to do business with has the necessarypermissions to do so. If the insurer is notauthorised to conduct business in the UK, then itwould be illegal for an intermediary to carry outany of the following activities on their behalf,which are:• operating a binder or delegated authority• putting a customer on cover without a case-

by-case decision from the insurer• handling or settling claims on the

insurer’s behalf.Overseas insurers located within the

European Economic Area* are able to apply totheir home state regulator for a passport,allowing them to undertake regulated activitiesin the UK. Overseas insurers located outside theEEA and wishing to undertake regulatedactivities in the UK will need full FSAauthorisation to do so. In both cases, the name ofthe overseas insurer will appear of the FSARegister at http://www.fsa.gov.uk/register.

The restriction does not prevent anintermediary from arranging cover with anunauthorised overseas insurer, providing thateach individual risk is accepted individually by

Passport control for brokersIntermediaries must check that any insurerthey use has the necessary credentials fromthe FSA – and BIBA can provide plenty ofguidance, as Vannessa Young reports

the insurer and not incepted by the intermediaryin accordance with a pre-existing arrangementbetween the insurer or the intermediary. If theinsurer is located outside the UK, it is also vital forthe intermediary to establish whether thecontract will be subject to UK law. If the contractis not subject to UK law, then the customer willneed to be informed that should they need to seeklegal action against the insurer, then recoursewould have to be through the courts in theinsurer’s home country.

The UK financial services market is oftentargeted by unscrupulous firms keen to partconsumers from their hard-earned cash. The FSAhas drawn up a list of unauthorised overseasfirms that they know to be conducting regulatedactivity in the UK. Members can find this list onthe FSA’s website at:• www.fsa.gov.uk/pages/Doing/regulated/

Law/Alerts/overseas.shtmlBIBA often receives queries from members

regarding insurers operating in the UK under apassport from elsewhere in the EEA. Thesequeries tend to be around jurisdiction, customercompensation issues in the event of an insurerbecoming insolvent or what happens if a

complaint arises about a product or firm. The Financial Services Compensation

Scheme (FSCS) acts as the UK’s statutory fund oflast resort for customers and can paycompensation if a firm is unable, or likely to beunable, to pay claims against it. The FSCSprovides an important safety net forconsumers, but members should bear in mindthat it applies only in respect of all ‘protectedcontracts of insurance’ such as general insuranceand pure protection contracts only. Thisprotection does not extend to reinsurancecontracts or large risks, a definition of which canbe found in the FSA Glossary.

Unfortunately, most EEA states do not haveequivalent schemes to provide consumer


ntrol for brokers

The passporting system isnothing new but as morecountries have joined the EU, itis expected to grow and indeedis a vital component for theconcept of a single market

‘‘’’

PLACING BUSINESS OVERSEAS


protection in the event of an insurer’s failure.This is why the FSA requires all inwardpassporting insurers to participate in the FSCS.Thanks to the FSCS, claims arising under theinsurance policies of passporting insurers arecovered if the risk (for general insurancebusiness) or the policyholder (for life insurance)is in the UK. If, however, a passporting insurer’shome state has an equivalent compensationscheme then it is likely to be triggered in theevent of that firm’s failure and would handleclaims arising from its collapse. The FSCS wouldalso be triggered by such an event and bothschemes would liaise to ensure that betweenthem, UK policyholders are protected to the samedegree as if the insurer had been based in the UK.

Dispute resolutionThe customers of insurers located outside theEEA will not have access to the FSCS. In suchcases, the intermediary needs to establish, byasking the insurer whether they participate in acompensation scheme in their home state, and, ifso, obtain the full details of the facility.

Another frequent query from BIBA membersrelates to dispute resolution. UK customers areable to call on the Financial Ombudsman Serviceto help settle individual disputes between themand the businesses that provide financialservices. Overseas insurers based in the EEA electto join the voluntary jurisdiction of the FOS.Members need to establish whether the insurerthat they are dealing with has decided to join theombudsman’s voluntary jurisdiction and agreedto be bound by its requirements. If they have not,then members must establish whether theoverseas insurer participates in a disputeresolution scheme in their home state and, if so,obtain the full details of that. Intermediaries maycheck with the FOS to ascertain whether theoverseas insurer that they are doing businesswith has signed up to its voluntary jurisdiction.

FSA spokesman Robin Gordon-Walkercomments: “The passporting system is nothingnew but as more countries have joined the EU, itis expected to grow and indeed is a vitalcomponent for the concept of a single market.”

He adds: “I would agree with BIBA thatbrokers should inform clients aboutcompensation arrangements. Some countriesoffer these, while others don’t and, in any case,they will vary from the UK’s. Beyond this, brokersmust ensure their client knows all the relevantdetails under our disclosure rules.”

He points out that while it might make sensefrom a competition point of view to have moreoverseas insurers operating in the UK, in reality,the vast majority of consumers are not interested.“There has been more success in the investmentareas, but as for insurance and mortgages,demand is overwhelmingly for UK-basedproviders. I would think almost all homeownersor small business owners, for example, would

prefer to know they are dealing with a companybased here and where there will not be potentiallanguage problems.”

Passported insurersMr Gordon-Walker states that at least for retailbusiness, he does not see insurers, even withpassports, making much of an inroad.Nonetheless, he says the fact that an insurer isbased overseas does not necessarily mean theyshould be shunned by brokers. “There may berisks where an overseas insurer may beappropriate, but what matters is the client isaware of this and we would recommend thatbrokers familiarise themselves with howpassporting works.”

Indeed, Lyndon Neale, director of policy andcompetence at Aon, says there can be benefits:“Working with passported insurers enables us tooffer further choice to our clients. They have notposed any particular issues for us. All of theinsurers we work with, either UK or overseas-

based, go under the same scrutiny when they are considered for entry on our list ofapproved insurers. The fact that passportedcompanies which operate in the UK know thatgenerally they must meet the samerequirements at the point of sale as UK insurersunder FSA’s rules can provide further confidencefor our clients.”

Steve White, BIBA’s head of compliance andtraining, concludes: “There is nothing to stop abroker arranging business with any insurer –including outside the EU. But, we want to makesure they understand all the issues surroundingwhat can be a complex area. I would urge anymember who is concerned, or who wants to knowmore, to check out the BIBA website and to speakto us if they need further clarification.”

*Austria, Belgium, Cyprus, the Czech Republic, Denmark,Estonia, Finland, France, Germany, Greece, Hungary, Iceland,Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg,Malta, The Netherlands, Norway, Poland, Portugal, the SlovakRepublic, Slovenia, Spain, Sweden and the United Kingdom.

There may be risks where an overseasinsurer may be appropriate, but whatmatters is the client is aware of this‘‘’’

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YOUR BUSINESS

Boost your benefits package, mobile communications security andmaking the right choice when selling a business are on the agenda

Brokers who have providedtheir employees with mobilecommunications devices,such as Blackberries or PDAs,should provide guidance onprotecting against fraud.

Business adviser GrantThornton says possiblecrimes include:• Bluetooth pairing attacks,

whereby an attacker gainsaccess to the memorycontent of aphone/laptop/PDA at thepoint of first communication,gaining the PIN code

• BlueSnarfing attacks, wherethe hacker gains access tophonebook and calendarinformation and can divertcalls to their own phone

• BlueBug attacks, where thehacker has full access to thedevice and can initiate calls,text messages, etc, from thevictim’s phone.John Dunne, IT security

manager with Grant Thornton,says: “There are a number of verysimple precautions that can beundertaken to ensure that thelikelihood of an attack is

minimised, such as disablingthe Bluetooth signal on yourdevice when it’s not in use.”

His tips to prevent fraud are:• disable the Bluetooth signal

on a device once it hassynchronised with the parent

• limit the sensitive data stored• consider anonymising data

and ensure you have thedevice protected withadditional encryption

• if you believe the devicehas been intercepted,inform managers and thepolice if necessary.

It’s a sellers’ marketplaceBrokers planning to selltheir businesses shouldnot take the first offer –there are now a number ofavenues they can explore.

Certainly larger brokers willfind they have a number ofsuitors, with AXA andGroupama having recentlymade high profile acquisitions.

Meanwhile, establishedconsolidators, such asTowergate and the BrokerNetwork, are continuing to buy up businesses.

Towergate also has set upan acquisition vehicle to buyup smaller brokers, CullumCommercial Ventures (CCV),which is headed by TimJohnson.

It is notable that sincebrokers are in short supply,those doing the purchasingare now willing to be far moreflexible. CCV says it can buy a partial stake and sortout a deal where theremainder is bought at alater stage – say in several

years when the principal isready to retire.

Meanwhile, a new business,C-Scape, was set up to providea match-making service forbrokers looking to sell.

“Price is important, but oftenthe broker will want to make surethat their clients go to a goodhome,” comments director Pete Loughborough.

He says brokers also use C-Scape because it is a personalservice. “We don’t just pass ondetails of potential buyers,although we have many of these.It is more about making sure theselling broker is comfortable withthe deal and we are there as thebusiness transfers.”

Mr Loughborough formerlyworked for Norwich Union andwas involved as the insurermade numerous brokeracquisitions. “What I’m doingnow is different, but veryrewarding. We also work withbrokers pre-sale, makingrecommendations that can helpsecure a better price.”


Watch out for Bluetooth fraud

The benefits of flexbetter deal than they would buyingas an individual.

Broker Oval Group also operatesan employee benefits division,which includes an administrativecentre to service clients with flexschemes. Reward director DebbyHannaford says flex is nowbecoming more commonplace withsmaller firms, although theytypically have over 50 employees.

She adds: “We recentlyconducted research among ourclients which showed 76 per cent ofthem wanted to introduce someform of flex. The demand is there.”

She says communication is vitaland brokers setting up flex plansmust make sure employees areaware of them. “There is no pointjust having a website withinformation if people don’t knowabout it and paper is still read more.You also need to recommendbenefits that fit the age ofemployees and try and include amix of those which are useful withthose to get them interested in thebenefits programme – reducedprice theatre tickets, for example.”

Oval uses the Staffcare ITsolution and its chief executiveofficer, Phil Hollingdale, says flex isfeasible for SMEs. “Software such asours allows a more commoditisedapproach – and also creates anopportunity for IFAs who want tomove into employee benefits.”

With many brokers saying theyare struggling to attract andretain quality staff, now is thetime to look at improvingbenefit packages.

In recent years, new technologyhas been developed which bringsflexible benefits within reach ofsmaller firms. A flex plan enablesemployees to choose what benefitsthey take beyond the specified core.This includes exchanging holidaysfor cash, share schemes, gymmemberships, retail vouchers andfinancial products.

There are varying degrees offlexibility, for example the largestfirms with big HR teams canprovide the greatest choice,because they have the systems inplace to run the administration.But a growing number of IFAs arealso offering smaller firms basicflex packages.

Stuart Grey, managing directorof Portus Consulting, comments:“Brokers should no longer just bethinking about pensions. Althoughadvice may be needed here, aconsultant should also be able touse their buying power torecommend a range of either paidfor or voluntary benefits such ascash plans or other perks such asdiscounted holidays.”

Voluntary benefits involve theemployee contributing towards thecost themselves, but they receive a

Consolidation, increased regulation, softmarket conditions – the dynamic nature ofthe broking market is well documented.The challenge is deciding the beststrategy to pursue in order to secure acertain future.

Some brokers will decide to sell to anotherparty. To maximise the price, these brokersmust ensure that their financial structure,regulatory controls, key personnel, marketingdiscipline and client base are all geared tomake the business as attractive as possible topotential buyers.

But an external sale should not be seen as afait accompli.

Growing your firm and putting in place asensible succession plan is a viable alternative,particularly for brokers wishing to retainsome control over the future of their business,clients and staff.

Senior partners need to think about howthey will exit the firm. If the plan involves sellingdown to existing management, you need toevaluate how the buy-out will be funded. Toreduce financial strain on the other partners,look for a financier who understands the

FIN

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industry and can lendagainst the value of thebusiness and its cash flowsrather than relying on theindividual’s assets.

Another approach issupporting ‘star’ performerswho could lead the businessin the future. Often, suchemployees do not have theimmediate resources to buyinto the business. They arealso prone to being poachedby competitor firms.Providing them with amechanism to take equity inthe business can lock in

quality staff and ensure business continuity.In the current soft market, growing your business and

market position matters.It may also involve pursuing your own acquisitions or

mergers. Not only can this expand your areas ofspecialisation, but it combines the skills of senior businessowners to build greater value and provides another possibleexit opportunity.

Every broker will have a unique set of circumstances andobjectives. The key is having clear goals and a well formedstrategy with the finance to make it happen. The rightfinancier who specialises in the industry and takes time tounderstand your business will help you explore options,develop a suitable plan and provide the financial power topursue your goals. Aden Nguyen is an associate director with Macquarie Bankwith responsibility for Macquarie’s specialist lendingservices for UK insurance brokers

Aden Nguyen


Towergate Partnership is Europe’s largest independently owned insurance intermediary. Our product range continues to grow, offering a range of standard and specialist products, many of which are not readily available elsewhere.

BIBA brokers can benefit from the market strength which comes with this scale through Towergate Partnership’s BIBA schemes, underwriting agencies and wholesale facilities.

Towergate are dedicated to providing insurance solutions for Brokers and giving you access to great expertise and real decision makers. We will work with you to offer your clients the Insurance they need, backed by leading UK insurers, with underwriting & claims services that will make your life easier.

www.towergateunderwriting.co.uk

Towergate BIBA Schemes

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

Commercial CombinedTowergate Commercial UnderwritingTel: 0870 901 2595E-Mail: [email protected]

Professional IndemnityTowergate Professional IndemnityTel: 0161 831 3222E-Mail: [email protected]

Personal AccidentTowergate Underwriting Personal Accident & TravelTel: 0870 905 0672E-Mail: [email protected]

Telephone our Broker Support Unit for detailsof the full product range

0870 901 [email protected]

The Broker’s Partner

Towergate Broker ad.indd 1 23/07/2007 16:15:45

‘‘’’

SCHEMES FOCUS


BIBA’s schemes and facilities continueto expand. Each has been rigorouslyassessed to ensure it is of high quality andfulfils a market need. It will also respondto members’ requests wherever possibleto provide products which give an edge.

Well worth itCunningham Lindsey is providing memberswith a valuation service, focused on commercial and domestic buildingreinstatement valuations for insurancepurposes.

The service is supported by a number ofmajor insurers, including AXA, AllianzInsurance, Norwich Union and NFUMutual. They provide average waiverguarantees for a period of up to three years totheir customers following a CunninghamLindsey/BIBA valuation.

Cunningham Lindsey has over 15 formal national and regional schemes in placewith a range of insurers, brokers, associations

and property management companies. It is particularly important for brokers to be

aware of the problem of under-insurance andfrom a sample of 1,500 properties valued in2006, Cunningham Lindsey has identified a totallevel of under-insurance of approximately £2 billion. Sean Durden, Cunningham Lindsey’svaluation services manager, says more than 90 per cent of properties valued were identifiedas being under-insured.

The level of under-insurance established percustomer ranged from £50,000 to £25 million –the higher figure relates to a client’s propertyportfolio.

According to Mr Durden, under-insurance inexcess of £5 million for a single property hasbeen identified on a number of occasions and hestates that, had a valuation not been undertaken,it is unlikely that these businesses would haverecovered in the event of a significant loss.

Meanwhile, over-insurance has also beenidentified, totalling some £103 million in thelast three years. Cunningham Lindsey says this

accounts for approximately five per ofproperties valued, resulting in premium savingsfor brokers’ clients.

Cunningham Lindsey has recently valued acouple of properties that have beenapproximately 40 per cent over-insured, in onecase by as much as £2.5 million and it has alsovalued a property owners’ portfolio with over-insurance of £7 million.

Quite often the market value of a propertyhas been used as the basis for setting the suminsured. However, market values typically bearno relation to the cost of reinstating a building,with reinstatement costs generally being muchhigher, explains Mr Durden.

UK coverage is provided by CunninghamLindsey’s valuation surveyors, a team ofchartered surveyors/loss adjusters who draw ontheir extensive knowledge of costs associatedwith reinstating properties following aninsurable loss.

The service provides a number of benefits tothe key stakeholders which include:

Out of the ordinaryBIBA’s schemes and facilities are all about standing out from thecrowd. Our latest launches include an insurer ratings service, anenhancement to our loss recovery insurance and a new valuationsurvey facility, as Graeme Trudgill reports

More than90 per centof propertiesvalued wereidentifiedas being under-insured

‘‘’’

SCHEMES FOCUS


• brokers – assists in meeting obligations underthe FSA and provides them with a value-addedservice to promote to new and existingcustomers. It can also help to maintain clientrelationships in the event of a loss

• policyholders – receive peace of mind thatthey will not be penalised in the event of aloss against the effects of under-insuranceand will have sufficient funds available toeither rebuild their homes or enable theirbusinesses to continue trading.Identification of over-insurance avoidspayment of unnecessary premiums

• insurers – an innovative product offeringfor insurers to add to their range of riskmanagement services, which assists theclaims management process and enablesthem to calculate premiums based on thetrue values at risk.

For more information, contactCunningham Lindsey/BIBA

helpline on 0116 281 4658 or [email protected]

We rate itStandard & Poor’s has introduced a new web-based insurance product, RatingsView,exclusively designed for BIBA members. It will help them tell, in real time, what rating the insurance companies they are usinghave achieved.

Insurance RatingsView will help to ensurethey are fully compliant with FSA requirementsfor due diligence in this important area. Theservice is very user friendly and straightforward.Following a simple login, users will have accessto UK property-casualty insurer ratings andreports as well as the Lloyd’s SyndicateAssessments (LSAs).

The Insurance RatingsView product willenable brokers to keep up to date with thefinancial strength rating of over 100 UK andIrish insurers. Each rating is only issued

following the analysis of nine criteria whichtake financial, industry and business factorsinto account. It therefore provides acomprehensive view of the company’s financialstrength, which could prove invaluable.

The service also provides key financials, sobrokers can quickly view how a particularinsurer has performed over the last few years.

There are optional email alerts, which willinform subscribers directly of any ratingchanges. BIBA members are thereforeguaranteed access to the very latest information,whenever they need it.

The benefits of the service include:• Insurance RatingsView is a real-time web

source for objective ratings and analysis• Standard & Poor’s provides an independent

view of the credit worthiness of these insurers• instant access to the latest ratings and

research from Standard & Poor’s analysts• both interactive and public

information ratings• optional email alerts that will inform you of

any rating changes.And this is all available for £325 + VAT.

For more information, contactChristina La Rocca, Standard &

Poors, on 020 7176 7022 or [email protected]

Turning a loss into a winLoss recovery insurance provides access to aproven network of qualified and independentchartered loss adjusters and is a true productdifferentiator. It enhances renewal retentionand offers additional revenue from cross-selling.

Provider Lorega has improved BIBAmembers’ loss recovery scheme which coversloss adjusters’ fees by introducing an easy to use,banded-rating system and reduced the standardmarket rates. The scheme, which is exclusive tomembers, allows brokers to submit individualrisks to Lorega without the need to commit toeither an “opt out” or “whole account” cover andthere is no minimum monthly requirement.

Benefits include:• personalised claim consultancy service• reduces the amount of time staff need to

spend on clients’ claims• gives the opportunity to offer an extensive

claims service to compete in a highlycompetitive marketplace.Lorega’s loss recovery insurance is now held

on lineslip basis by RJ Kiln and HeritageSyndicates, allowing members to offer clients a Lloyd’s policy which is A plus-rated. Thescheme now includes a panel of more than 67claims handlers, all of whom are chartered lossadjusters (members of CILA) and are allindividually regulated by the FSA.

For more information, contactChrissy Quinn on 020 7469 5555 or

email: [email protected]

Graeme Trudgill is BIBA’s technicalservices manager

BIBA’s schemes: the full range1 Business Travel2 Caravan – Touring and Static3 Commercial Combined4 Crisis Control5 Cyber-Liability6 Directors and Officers7 Electronic Marine Cargo8 Excess Liability9 Haulage and LGV Insurance10 High Net Worth11 Holiday Travel12 Home Insurance13 Late Night Entertainment

(Club PM)14 Let Property (BIBALet)15 Loss Recovery Insurance16 Marine Cargo17 Motor18 Non Standard Property19 Personal Accident20 Unoccupied Properties

BIBA facilities

21 Conflict Management Service22 FSA Financial Compliance23 Insurance RatingsView24 Legal Services25 Personal Lines Administration26 Premium Finance27 Telecoms28 Valuation Services29 Members’ Own PI Insurance

An exclusive new schemefor BIBA members and their clients

Available to BIBAmembers from

mid-September

FSJ is a division of Heath Lambert Limited which is authorised and regulated by the Financial Services Authority.

FSJ announces the imminent launchof our new medical malpracticescheme offering top quality policycover and highly cost-effectivepremiums exclusively available toBIBA members.

As a BIBA member you and your clients will benefit from

the expertise of FSJ, who have specialised in placing cover

for medical malpractice for more than 40 years.

Plus, you and your clients can enjoy a range of additional

benefits which are automatically included in our special

BIBA members facility:

• No minimum premium restriction

• European jurisdiction for UK clients

• Breach of confidentiality cover as standard

• No AIDS exclusion

• No nurse indemnity

This important new scheme is open to all BIBA members.

For more information call us today on

020 7234 4085

or email

[email protected]

BIBA PARTNERS

PROFESSIONAL INDEMNITY


The launch of part two of the BIBAProfessional Indemnity Initiative – acomprehensive guide to professionalindemnity (PI) policy wordings for brokers –was accompanied by our firstquestionnaire seeking feedback about PIfrom members.

The results told us that members’ overall toppriority, at 78 per cent, is getting help and advicewith regard to risk management and claims.Security of the insurer is a top priority for 77 percent, while having the best policy wording isimportant to 64 per cent and, unsurprisingly,61 per cent were most concerned about gettingthe lowest cost.

Managing risk and the FSAIn answer to the question: “What would be yourpriorities for phase three of our PI Initiative?”Some 78 per cent responded to the proposal“Support on how torisk manage ourexposure to theprinciple-basedaspects of FSAregulation such as

Treating Customers Fairly and Demands andNeeds of Clients.”

This was the subject of the professionalindemnity workshop at the BIBA conferencewhen James Dingeman QC both entertained andalarmed the delegates with a dramatic exposé ofhow easily the modern broker can fall foul ofsuch a broadly-based regulatory principle.

He explained that “demands and needs” isonly another way of saying “duty of care”, whichof course is not new to insurance brokers but, hesaid, is not appreciated by the great number of us.

“We are delighted that so many membershave taken the trouble to air their views,” saysGraeme Trudgill, BIBA’s technical servicesmanager. “Consequently, the 2007/8 PI Initiativewill concentrate on management of risk andoffering practical advice in knowing how torecognise demands and needs and meet thestandards required so that members are protected.”

The limit of indemnity is a key factor. Whenselecting a limit of insurance, 52 per cent of

respondents say that they select the lowestamount of cover required by the FSA. BIBA findsthis somewhat alarming. It is likely that these arethe firms that have not experienced a claim.

Mediation matters The next most popular proposal from the survey isa BIBA-dedicated mediation service for insurance-related disputes. We found 77 per cent saying itwould be a high priority for them.

Mediation, being one form of alternativedispute resolution, has gained significant groundin popularity in recent years as a result of theintroduction in 1999 of the Civil Procedure Rules –known as the Woolf Reforms or the CPR.

They were introduced with the aim ofspeeding up pre-trial procedure and reducing thecost of litigation. The CPR rules are a proceduralcode with the overriding objective of enabling thecourt to deal with cases justly. This includes:• ensuring that the parties are on an

equal footing• saving expense• dealing with a case in ways which are

proportionate to the amount of moneyinvolved

And our survey says…

BIBA recently contacted members to gain their views onwhat they want from PI cover and how we can serve thembetter. Roger Flaxman provides a round-up of the results

We are delighted that so many members have taken the trouble to air their views‘‘’’

PROFESSIONAL INDEMNITY


BIBA could help to overcome any otherdifficulties and the responses included:• “Improve brokers’ service standards.”• “Improve our choices of cover and insurer.”• “To continue working with the FSA and

insurers to provide standard wording andcover for the protection of all members.”

• “Promoting BIBA as a badge of competenceand strength (for the benefit of our clients).”As Richard Bowdidge, a partner with broker

First City, comments: “As the survey shows, theneeds of BIBA members vary significantly.Therefore the use of an accredited broker willallow members to benefit from their expertiseand experience, in conjunction with FlaxmanPartners, which supports members by offeringexpert risk and claims management services.”

Meanwhile, Richard Gledhill, accountmanager with Towergate Group says: “We would,however, issue a warning that the oftenextremely low prices currently seen could bereflective of a policy wording lacking in key areasand which itself possibly leads to some of thegripes brought into the open by the survey.Intermediaries would thus be stronglyrecommended when undertaking their renewalexercise, to refer to the BIBA PI policy wordingguide as a starting point and discuss theirrequirements with their BIBA accredited broker.It should be possible to have a suitable wording atcompetitive rates.”

We thank members for responding to thequestionnaire and continue to invite suggestionsfor improvement or alerting us to matters inwhich BIBA could make a difference. Roger Flaxman is BIBA’s professionalindemnity consultant and managingdirector of Flaxman Partners, theindependent professional liabilityrisk consultants

• the importance of the case• the complexity of the issues• the financial position of each party• ensuring that it is dealt with expeditiously

and fairly.Claims against insurance intermediaries are

particularly complicated because of the peculiarrelationship between the insurer and the brokeron the one hand and the broker and the insuredon the other.

It is rare that a claim against a broker does notinvolve in some way a dispute or potentialdispute with the insurer and so mediation hasquite rightly been selected as a high priority. BIBAwill accordingly look into this as a priority.

Managing claimsThe third most popular proposal is “a claimsreporting and management advisory supportservice”; 64 per cent seeing this as a high priority.BIBA has already set up this service via FlaxmanPartners, independent specialist PI consultants,and Hugh James solicitors.

Any member experiencing difficulties orconcerns with a problem that might turn to aclaim or a claim that is perhaps being mishandledor threatening to turn worse, can have a freepreliminary consultation. And to organise this,they should contact Graeme Trudgill at BIBA whowill activate the access to Flaxman’s and HughJames. This service has already proved verybeneficial to some BIBA members.

Lobbying successBIBA has become recognised as an effectivelobbyist on behalf of members. Respondentswere asked “what are the priorities for lobbyingto FSA in regard to PI matters” and here is aselection of the answers:• “Overcoming spurious/opportunist

claims to the Ombudsman.”• “Demanding consistency and

accountability from insurers.”• “Reducing indemnity levels.”• “Acceptance of one established policy

wording.”And, you also told us…The questionnaire gave an opportunity for

respondents to give their own observations. Hereis a selection in answer to the question: “What areyour grievances, if any, in connection with yourexpectation of PI insurance?”• “Lack of guidance up front on reducing our

exposure to claims.”• “Cost.”• “Not all insurers act honourably and

professionally.”• “It seems PI insurers want our premium but

they want to evade a potential claim – itbecomes a scene from LA Law.”

• “The vagaries of costs and the limited numberof providers leading to poor competition.”

• “Claims handling – rarely feel the insurer isacting in policyholder’s interest.”BIBA is taking these, and other comments,

into serious consideration. Finally, we asked if

BIBA is taking these,and other comments,into seriousconsideration

‘‘’’

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The face of motor insurance and itsdistribution is changing. We’ve seen EDI,direct writers, aggregators and retailers –and now come the mysterious black boxand pay-drive insurance.

A major claim for telematics-basedinsurance is that it promotes the principle offairer pricing. But it has yet to really take off inthe UK and around the world.

Telematics involves a small electronic boxthat is fitted to the vehicle. The box records pre-determined data every time the vehicle is used.Depending on the particular system, this datacan include date and time, journey time,average speed, maximum speed, route,acceleration, deceleration and braking.

This data is then downloaded to the insurer,often by GPS, which will use it to calculate thepremium. This is based on the vehicle use, thetype of roads the vehicle has been used on, thetimes and day of the week the vehicle has beendriven and the age of the driver.

Studies show there are more seriousaccidents late at night, particularly involvingyoung drivers and therefore the insurance rate

per mile will be higher to reflect these risks.Currently only two UK insurers offer

telematics-based private car insurance, bothdirect writers. Current sales represent less thanone per cent of the UK private car marketalthough the schemes are still in their infancy.

With such low volumes and targetedadvertising campaigns it is difficult to establishwhat the general consumer reaction is.

MonitoringConsiderable concern has been expressedrecently over the extent to which the UKpopulation is being monitored, such as byCCTV cameras. It has been said the UK isthe most spied-on nation in the worldand telematics can only serve to heightenthis concern.

The barriers to pay-drive are numerousand include:• cost to purchase the telematics device

(currently subsidised by insurers butconsumers still pay around £50)

• cost to fit the device (currently absorbed bythe insurer – but where is this funded from?)

TECHNICAL BRIEFING


Inside the black boxTelematics technologyhas the potential torevolutionise the motorinsurance market, buthow does it work andwill it impact onbrokers? GraemeTrudgill reports

• cost to transmit and administer thedevice data

• cost of sending a monthly itemised bill• cost for fitting another device if the client

changes vehicles (around £95)• reduced premium income for a given risk• the driving of other cars extension is not a

viable option• older vehicles (over 15 years old) may not be

suitable for a telematics box• consumer concerns over “Big Brother”

monitoring• data protection issues.

These issues explain why the concept hasbeen slow to take off.

However, as with satellite navigation, costbarriers can reduce quickly – prices have comedown from £1,000 to £100 with the result thatmore than four million ‘sat nav’ systems arenow in use in the UK.

ProliferationPay-drive appears to present a threat to thebroker market and BIBA takes this seriously.

BIBA has set up a telematics sub-committee


which has already met with a number oftelematics companies and interested insurers –the variety in platforms, business models andcost is astonishing.

The variety of platforms is a double-edgedsword as the proliferation of systems with anabsence of standardisation is holding backpotential players from committing.

There is certainly an atmosphere of wait andsee with certain insurers – nobody wants toinvest in the Betamax version!

But, in the US, Claire Wilkinson, vicepresident of global issues at the InsuranceInformation Institute, says: “Technologiessuch as GPS systems are playing a growingrole in the auto underwriting process. To date a few US insurers, including Progressiveand Safeco, have tested several programmesusing GPS technology. Most recently, insurershave been doing their part to reduce the number of accidents involving teenaged drivers by subsidising the cost of electronicdevices that parents can install on cars tomonitor the way teenagers drive – or by offeringdiscounts to policyholders with teens who usethese devices.”

PrivacyShe adds GPS technology has also had abeneficial impact on reducing losses in motortheft. “However, formal approval of suchschemes is subject to state-by-state regulation inthe US and there has been some reluctance togive the go-ahead to such schemes, amidconcerns over privacy.”

John Radford, managing director of One CallInsurance Brokers, leads BIBA’s sub-committee

and is ensuring we protect members’ interests. He says: “We want to ensure brokers are

represented to insurers, Government andtelematics companies at all times in this area.One area of particular interest is the ‘universal’black box that would enable brokers andinsurers to switch around policies withoutincurring additional costs of buying and fittinga different insurer system each time.”

The good news is that there is already a

precedent in the fleet market with manycommercial vehicles already benefitingfrom similar black boxes and – on largervehicles – tachographs.

It is a widely held view that tachographshave improved safety on the road, whichbenefits fleet operators, insurers and the wider community. In the right circumstances,telematics on private cars can play a similar role.

So if brokers can make a success of this in thefleet market can we do the same in private cars?

Question marks remain over the likelycustomer base – the current focus is on lowermileage users and young drivers.

One of the key debates surrounds who ownsand has access to the data – the client, thetelematics provider, the insurer, or the broker?

What are the implications if the data showsat the time of an accident the driver wasspeeding – will this affect how an insurer dealswith the own damage and third party claims? Ifthere is a serious accident, will the police oraccident investigators have access to the dataand, if so, what are the implications for thedriver? Can the data be used for other purposes,for example, marketing, and does existinglegislation provide the appropriate level ofpublic protection? BIBA’s legal team isinvestigating these areas.

The ABI does not believe telematics willachieve universal coverage. This is, perhaps, agood thing as currently most telematics systemsaround the world do not involve brokers.

InnovativeEven so, telematics may offer benefits inother areas. Being able to establish what the driver and vehicle were doing immediatelypre-accident will help to reduce the potentialfor fraud.

Telematics also has a part to play in thedebate surrounding road pricing andcongestion charging although the insuranceindustry will not want to take on the role of tax collectors.

Jack Brownhill, director of World MotorInsurance Consultancy, comments: “Pay-driveinsurance is here to stay and is a clear challengefor brokers. There has never been a moreimportant time for broker-orientated insurersto work in close harmony with their brokerpartners. There is also no reason to believethat traditionally priced insurance productswill disappear – they will just have to becomemore innovative.”Graeme Trudgill is BIBA’s technicalservices manager

If you would like to discuss thissubject with any of the BIBA Motor

Panel please contact Graeme Trudgill [email protected] or on 0207 397 0218.

k boxTechnologies suchas GPS systems areplaying a growingrole in the autounderwriting process

‘‘’’

It is close to 10 months since the FSAdecided that the insurance industryhad made sufficient progress with amarket-led solution for contract certaintyto ease back on its threat of regulatoryintervention.

The FSA’s deadline for contract certaintymay have come and gone, but that by no waymeans that it should become a lesser priority forintermediaries and insurers alike.

The FSA effectively supported what BIBAhad achieved on contract certainty in December2006, but it wanted to ensure that the industrydid not walk away from the issue.

Contract certainty has therefore continuedto be a regulatory priority for the FSA during2007 and the regulator wants to ensure that themarket-led solution is a success both now and in the future.

This determination can be seen in the FSA’ssupervisory work. The FSA has been keen todetermine that contract certainty is right upthere on the board’s agenda at a firm.

They have wanted to see that seniormanagement is fully engaged with contractcertainty and is giving due consideration towhat it means for their businesses and whetherthey have robust systems and controls tosupport it.

In June, the Contract Certainty SteeringCommittee published a revised code of goodpractice, which consolidated 11 previousworking documents. This committee, of which

BIBA is a member, is the cross-market groupof chief executive officers which providesthe FSA with the interface to the whole UKinsurance industry – insurers, brokersand customers.

The new code modified the definition ofcontract certainty, by removing theinconsistency and confusion arising from theuse of inception date as part of the olddefinition. The code has also hopefully been“future-proofed” because it has been builtaround principles which are as far as possibletimeless. Members can download a full copy ofthe code of practice from BIBA’s website. Thereis also a handy, pocket-sized guide available onthe site which summarises the main points ofcontract certainty.

Our team at BIBA has the unenviable taskof collating the market’s contract certaintyfigures for commercial business centrally. Thedata sought aims to capture the number ofpolicies a firm has; the number of policies that

have achieved contract certainty at inception;and the number of policies issued within thedesignated 30 day timeframe. But ourenthusiasm is unwavering and we urgemembers to keep on submitting their figuresto us on a monthly basis.

We are still looking for brokers andintermediaries to send us their contractcertainty figures throughout 2007. It isimportant to keep the momentum going withthis initiative and these figures provideevidence that the market is on top of theproblem and that we continue to improve onour contract certainty strike rate, whichcurrently stands at 94 per cent of policies.

The figures will also help us demonstratethat the code has become embedded in themarket and has become something that firmsdo as a matter of course because it makes goodsense for both their businesses and theircustomers, and not because they feel compelledto do so by the FSA.

Members may submit their contractcertainty data on a simple form which can befound on BIBA’s website at: www.biba.org.uk/contractcertainty

Real progress has been made in contractcertainty and in January of this year, thecommittee stated this was “fundamental,demonstrable and enduring”.

We must now all make sure this is sustained.Peter Staddon is BIBA’s head oftechnical services

Making good progressMembers can play an important role as the industrystrives to achieve contract certainty. Peter Staddonexplains why and provides an update on this key topic

The code hasbecome embedded in the market‘‘’’

CONTRACT CERTAINTY


Constructing a liabilitysolutionQ: Construction industry sub-contractors must now beverified as being independentbodies with their own publicliability insurance, or theymust be paid via PAYE. So, canwe stop advising ourcontractor clients to includelabour-only sub-contractors intheir employers’ liabilityfigures, but include all sub-contractors in their publicliability figures?

QUESTION TIME


If you have an insurance-related question, whether ontechnical or compliance matters, then BIBA’s in-houseteam is ready and waiting to provide answers

within the meaning of theEmployers’ Liability Act.

A matter of principal…Q: I’m having problemsunderstanding the ‘Indemnityto Principal’ clause on apublic liability policy. Canyou help?A: The ‘Indemnity to Principal’clause is frequently found underthe public liability sections ofcontractors’ policies. It allows foran indemnity to be provided toany principal, following anagreement entered into betweenthe policyholder and principal,and where the policyholder islegally liable and not solely due toacts of the principal. This is at thespecific request of the insured.

There are other provisos, suchas where more than one partyrequires indemnity, then the totalshall not exceed the overall limit ofindemnity under the policy.

The policyholder’s insurersalso have sole control of theclaim. In practice, this is mostlikely to be relevant where acontractual agreement existsbetween the policyholder and themain contractor (the principal)which may say something like“the contractor will keep theprincipal indemnified” followingincidents giving rise to a claimand for which the principalthemselves are not responsible.

Know your SCPOs…Q: I have heard of an ASBO,but what is an SCPO? I heardit being talked about andwondered if it will have anyimplications for insurers?A: An SCPO is a serious crimeprevention order and these havebeen dubbed ‘super-ASBOs’ bythe media. They are a new type

of civil order designed to make lifemore difficult for organised crime.

The order, imposed by theHigh Court, can be imposed onindividuals and organisationsbelieved to be involved in drugand people trafficking, moneylaundering and other forms oforganised crime. The SCPO isbeing ushered in under theSerious Crime Bill which iscurrently working its waythrough the parliamentaryprocess. It can impose a broadrange of prohibitions, restrictionsor requirements on an individualor business.

The Bill introduces three newoffences designed to outlawencouraging or assistingsomeone to commit an offence;these will have implications forfirms who may be caught up,even inadvertently, in criminalbehaviour. Breach of the order isa criminal offence and carries asentence of up to five years’imprisonment.

It also has provisions aimed atimproving data-sharing bothwithin the public sector andbetween the private and publicsector. The latter will beparticularly helpful in the fightagainst fraud as it will allow publicauthorities to disclose informationto specified anti-fraudorganisations, such as CIFAS.

Do you have a question? You can email these to:

Regulation questions:[email protected] or legal questions:[email protected] /[email protected] /[email protected] the BIBA website forfurther guidance –www.biba.org.uk

Look no further

A: It is ultimately for the courts todecide whether or not thesepersons are employees within themeaning of the employers’ liabilitylegislation. However, if they mustcarry their own public liabilityinsurance, this presumablymeans that they will be personallyresponsible for any injury ordamage that they cause, andmust, as such, indemnify theiremployer as the principal to thecontract. In these circumstanceswe do not believe that they wouldbe viewed as being an employee

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