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the magazine of the British Insurance Brokers’ AssociationSpring 2007 Issue 28

thebroker

BIBA – Leading the way in UK insurance

The ratings game:how insurers’solvency is assessed

We’ve figured it out:BIBA conducts theultimate intermediaryheadcount

Home or away?The pros and cons of offshoring

AchievingExcellenceLondon hosts our 2007 conference

AchievingExcellenceLondon hosts our 2007 conference

Whether it’s the energy industry or marine biology – or just

about anything in between – QBE can provide the cover.

That’s because our innovative approach and healthy appetite for

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

Even the ones that make other insurers look toothless. No wonder

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

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

FROM GASTO SHARKS,

WE’LL SEE A WAYTO INSURE THEM.

IT’S OUR POLICY TO SEE THINGS DIFFERENTLY

CONTENTS

Excellence – the 2007 BIBAconference

Management

28 Your businessUpdates on captives, websiteregulatory information andcustomer messages

31 TrainingBIBA’s new programme,including management training

33 Schemes focusFocus on caravans, nightclubsand payment protection

36 Technical briefingBob Martin outlines the newEnvironmental Liability Directive

39 PI mattersRoger Flaxman advises oncoping with a PI claim

43 ComplianceSteve White reports ondisclosure and CompensationAct regulation

44 In my experienceAon’s Jane Kielty reveals whyshe’s passionate about broking

46 Question timeBIBA’s in-house expertsanswer members’ queries

Regulars

4 ViewpointBriefing from Eric Galbraith

5 News and viewsLatest updates and columnfrom Zurich’s David Smith

7 BIBA regionsComment from south easternchairman David Perry and news

8 Media watchA perspective from the Mail onSunday’s Andrew Foxwell andBIBA press coverage

Features

10 Market analysisBIBA’s research reveals thetrue size and scope of thebroker marketplace

13 InterviewMeet our new chairman Derek Thornton

15 OffshoringHome or abroad? StephanieDenton looks at the pros andcons of this controversial topic

18 Insurer ratingsJane Bernstein provides thelowdown on insurer security

23 Conference previewThe full story on Achieving

It’s that time of the year again. We’re gearing upfor another BIBA conference and bookings areflooding in.

Each conference has its own distinct theme, and Achieving Excellence,which takes place on 23-25 May at ExCeL in London, will focus on thestrength of our industry and the consistently high standards being attained.The very best of general insurance will be on show at this year’s event and wewant as many members as possible to share the experience of the BIBAconference. So check out our preview which starts on page 23 – a fewsponsored places are still available, do contact us for availability.

We continue to promote high standards within the industryon all fronts. You may have seen BBC’s Watchdog recently.This is a tough campaigning programme, on which evenseasoned media types fear appearing – and they give shortshrift to those seeking self-promotion. But BIBA’s GraemeTrudgill put in a sterling performance when he argued thattravel insurance must become subject to regulation. Weprovide more details in Media Watch (page 8).

I look forward to catching up with as many as possible ofyou at London’s vibrant Docklands for Achieving Excellence.

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BIBA contactsEric GalbraithChief Executive020 7397 [email protected]

Peter StaddonHead of Technical Services020 7397 [email protected]

Graeme TrudgillTechnical Services Manager020 7397 [email protected]

Paul GarlandMembership Manager07808 [email protected]

Steve WhiteHead of Compliance and Training020 7397 [email protected]

Doreen CampbellOffice Manager020 7397 [email protected]

Lindsay CampbellExecutive Assistant020 7397 [email protected]

Leighann BurtrandCommunications Co-ordinator020 7397 [email protected]

Kirsty GordonMembership and Broker ASSESS020 7397 [email protected]

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

BIBA House, 14 Bevis Marks,London EC3A 7NT

Design: Beetroot PublishingPrint: SMPAdvertising: Mainline Media

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

COVER IMAGE: GETTY

thebroker

INSIDE SPRING 2007

‘‘’’

Leighann BurtrandEditor of the broker

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the broker spring 2007 03

VIEWPOINT

Time for FSA to heed its words on arisk-based approach I had to agree with a comment I heardrecently – the current level of regulationfacing the general insurance industry is likesending in MI5 to tackle a minor burglary.We now have two years’ worth of FSAregulatory experience. We can see thoseaspects of the regime that are working,such as improved systems and controlswithin firms and more formalised externaltrading arrangements. Equally, it is obviouswhere regulation is not producing thedesired outcomes.

We want the FSA to be mindful ofregulatory standards imposed across Europeand how its rules are affecting the domesticmarket. In Germany, for example, aninsurance intermediary has to do little morethan register with their local equivalent to achamber of commerce to trade, which is aconsiderably less costly approach.

BIBA is working with the City of Londonto research the style in which the InsuranceMediation Directive has been implementedacross Europe. The findings of this research,once made public, cannot fail to support ourarguments that general insuranceintermediaries in the UK are overburdenedwith regulation. We are not suggestingembracing the lowest commondenominator here, but rather that theUK’s general insurance intermediariesare subject to truly risk-based andproportionate regulation.

The FSA’s review of the effectiveness ofthe ICOB rules for retail customers and thetransition towards more principles-basedregulation are well underway. The FSA ismooting terms like ‘deregulation’ for low-risk general insurance products, but ofcourse the regulator cannot remove ruleswhere a directive requirement exists. BIBAwill support such changes if they meanproportionate regulation based on a levelplaying field for its members. What it shouldnot mean is the removal of further rules forthe benefit of insurers, but not necessarilyfor the benefit of their customers.

We also want to see a sensible decisionmade on commission disclosure. The

Exceeding expectations at ExCelWe are racing towards the 2007 BIBAconference – Achieving Excellence – and afull preview is included on page 23. Theprogramme is first class and befits what isundoubtedly the general insurance eventof the year. I would like to sign off bythanking Max Taylor for his superbcontribution during the last three years asBIBA’s chairman. Max will be handing overto a worthy successor – Derek Thornton,director at Heath Lambert Limited– whowe are delighted to welcome on board. An interview with Derek appears on page 13.

industry proved it could achieve a market-led solution on contract certainty – and Iwould not want to see further regulatoryintervention on commission disclosure.There is no need for further regulation. I amconfident that transparent terms ofengagement and proper conflictmanagement are the way forward.

Understanding the marketThe FSA has often been accused of notunderstanding the insurance industry,particularly the general insuranceintermediaries. BIBA has been workingwith the assistance of the FSA to develop amore accurate picture of the primarybroking sector and some of the results ofthis exercise are on page 10 of this issue.

There is no need for further regulation. I am confident that transparent terms of engagement and proper conflictmanagement are the way forward

‘‘’’

04 spring 2007 the broker

Eric Galbraith,BIBA’s chief executive,speaks out on thetopics affecting UK brokers

Email Eric Galbraith [email protected]

economies of scale and brokerASSESS will be firmly established asthe online learning and assessmentsolution of choice for our industry.”

Broker ASSESS will remain anindependent system withdevelopment decided by the brokerASSESS user group.

The system will also include anumber of enhancements:• over 200 new modules of

interactive e-learning content• a new ‘My Planner’ facility

enabling the creation ofpersonalised learning plans

• direct links to the ‘CII’s onlineCPD’ system.

NEWS AND VIEWS

Play to winWe have seen some changes indistribution over the past few years. Themarket seems pacier than Ronaldo,with more change than in thePremiership’s management line-up.

But brace yourselves – these have onlybeen the positioning years – with the nextthree likely to be as unpredictable.

Consolidation, growth aspirations, benignUK weather, healthy insurer returns,maturing regulation and capital availabilityare all familiar themes.

It is their combination, however, thatcreates the heady brew thatwill result in a revolution indistribution. The moredifficult issue is to predictthe consequences beyondthe inevitable reduction inbroker and insurernumbers.

It can be a waste of timetrying to predict exactoutcomes. Therefore, itfollows that it is better tofocus on what you cancontrol in a market that will

become increasingly polarised.Brokers have the options to be specialists

or generalists, to charge fees or beremunerated by commission, they canchoose solus or panel arrangements anddeal with wholesalers if they wish. They canremain independent, join networks or, at theend of the day, can sell up if they prefer.There will certainly be plenty of interestedparties, whether broker, insurer, VC, bank,maybe even Roman Abramovich.

But, in my opinion, there has never beenmore opportunity for a broker than there willbe over the coming years.

Brokers who are anxious about the futureshould stop worrying about predictions andturn their minds to the possibilities.

The essential platform for a goodbusiness remains the same whether you area broker or insurer – a selective portfolio,operational excellence and talent – but if youhave built these attributes then now is thetime to go for it.

Whether you are in the Premiership orConference, have big aspirations. Make themost of the talent in your squad. Be bold andconfident in your expertise, skills andendeavour and make the right choices –success will beckon. David Smith is broker managing directorat Zurich

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Broker ASSESS linkswith AXA Campus The award-winning brokerASSESS system nowincorporates AXA Campuswhich evolves brokerASSESS into a learning andassessment package.

The news was announced at arecent reception held to launch theCII’s Broker Academy.

AXA Campus – an onlinecoaching system – has some 8,000users and these will now betransferred to broker ASSESS whichalready has 13,000 users.

BIBA’s membership co-ordinatorKirsty Gordon comments: “We’ll allbenefit from vastly improved


New compliance recruit BIBA has boosted its in-houseregulatory expertise with theappointment of VannessaYoung, who joins ascompliance co-ordinator.

Vannessa will be working withSteve White, head of complianceand training, in this new role atBIBA House. The appointment willallow BIBA to enhance itscompliance and regulatory facilityto ensure strong support formembers as the Financial ServicesAuthority undergoes its transitiontowards more principles-basedregulation.

Vannessa was previouslyinsurance editor for Complinet, aleading provider of compliancenews and information for thefinancial services industry.

Vannessa brings to BIBAconsiderable knowledge of theFSA and the wider generalinsurance market having spentthe past 18 years commentating onthe industry.

Her strong analytical andwriting skills will be particularlyuseful making often complicatedcompliance matters more accessibleto members as well as researchingregulatory developments.

Members have a lot to contendwith on the regulatory front in thecoming months, according toVannessa. “The ICOB effectivenessreview, treating customers fairlyand a more principles basedapproach to regulation will havean impact on all our members,”she says.

BIBA membershipmanager Paul Garland(right) greets MelLyell, chair of thebroker ASSESS usergroup at the launch

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NEWS AND VIEWS


BIBA is urging members toupdate their details on itsnew self service portal whichwill create potentially valuable leads through theconsumer helpline and Find aBroker website.

The portal is straightforward touse and allows members to controltheir membership details online. Itis part of an ongoing plan todevelop and improve BIBA’sconsumer referral system. Theaim is to make this the leadingwebsite search facility forconsumers – both personal andcommercial lines – seeking aninsurance broker.

Benefits of the system include:• members can automatically

control the referrals that theyreceive from BIBA’s consumerhelpline and website

• BIBA’s consumer helplinereceived nearly 65,000 callsduring 2006 with the Find aBroker website receivingmore than 7,000 unique visitorsa month

• members can also ensure theircontact details are up-to-date sothat they can take fulladvantage of other benefits,such as the monthly newsbulletin, directory of membersand their listing on the website.A working group has been

formed to oversee the developmentof this facility and to improvesearch engine optimisation.

BIBA will be using the portal toincrease the amount of data heldon members and in the comingyear will redesign the Find a

Self-service portal isone route to valuablenew business leads

Broker service so that referrals arefurther increased.

Chief executive Eric Galbraithcomments: “The Find a Brokerfacility provides a valuableservice to many members and theportal will allow more to tap intothis resource. There is noobligation to participate butgiven the cost to advertise in areassuch as Yellow Pages and othermedia, this is an easy alterativewhich will help promote yourfirm and its services in your areaand nationally – and it’s free tomembers.”

More than 900 members havealready used the portal.

BIBA has been informed byBirmingham InsuranceInstitute of the sad news thatLaurie Harding has diedaged 65.

Laurie was a much-respected BIBA member andserved on the West Midlandscommittee in the 1990s.

He began his career withPrudential in the North West,working in Liverpool andNorth Wales.

Obituary – Laurie HardingHe was a strong CII

supporter and was electeda fellow and held a numberof positions with theBirmingham Institute,including president.

Following hisretirement from Prudentialafter 30 years, he joinedSedgwick for a further 10years, after which he ranhis own consultancybusiness.

Those with queries should contact Kirsty Gordon on 020 7397 0224 or email her at [email protected]

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There has been little time totake it easy for members ofBIBA’s West Midlands region,reports regional executiveBob Darwin.

A cheque for £2,500 has just beenhanded over to charity CancerResearch UK which was raised at theannual dinner. This was a superbfundraising effort, he says, withthanks going to all who contributed.

The region has also held itssecond Compliance Forum, withminutes containing usefulbusiness information forwarded toall local members.

Bob adds that there wasparticular regional satisfaction

when a BIBA team took part in thelocal Birmingham Institute quiznight and won, proving they aremore than pretty faces. They beatsome 15 local insurer teams.

If this was not enough, a karaokeevening has also taken place, withbroker and insurer guests showingoff their vocal talents.

Bob also recently arranged ameeting – for the fourth time – ofretired brokers and former BIBAchairmen to renew old friendships.

There is plenty more for those inthe area to participate in, so checkout the website for West Midlands –or indeed any local region – to seewhat’s happening.

BIBA REGIONS

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

West Midlands doesthe business for charity

On a missionfor BIBAWhen I became regional chairman, oneword came to mind when I felt aboutwhat I would like to achieve – outreach.

I know that sounds somewhatevangelical, and even more so when I saythis is my mission! But I have gained so much from being a BIBA supporter overthe years that I would like many more to dothe same.

Throughout the year, I will attend,wherever possible, our numerous local

events and activities, as willmembers of the committee.I want to meet as manypossible members and tofind out what they want frombelonging and what theyfeel are the main issuesaffecting their businesses.

Many will realise that myformer brokerage, WarrenHill, is now part ofTowergate. We now have ateam of around 120, but I doknow what it is like to workfor a very small business –we started with 10 staff.

I also understand how incredibly busymany members are. From my perspective, Ihave a relatively new role as head of salesand am heavily involved in an affinitybusiness as well as working on one of ourmain accounts, the Federation of SmallBusinesses.

It is sometimes hard to fit time in forregional events, but the payoff is worth it. Foranyone who has not attended for a while, Ithink you may also note that the organisationhas improved.

One of the best initiatives of recent timehas been to appoint regional executives. Inthe South East, Diane Smylie does afantastic job and I can also put in more effortas I’m relieved of the administration.

So, I look forward to catching up withmany of you soon – and of course at thisyear’s conference, which looks amazing andfor many from my region is also in a prettyhandy location too.

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David PerryRegional chairmanBIBA South East


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Merseyside, West Cheshire, North Walesand Isle of Man Region has raised much-needed funds for the Claire HouseChildren’s Hospice in the Wirral, saysregional executive Bob Nicholls.

This cares for children from 0 to 18 yearswho have life-threatening or life-limitingconditions – and their families. The aim is toenhance their quality of life, provide

specialist respite, palliative, terminal andbereavement care.

The cheque for £715 was presented bychairman Suzi Kilpatrick and she wasaccompanied by regional treasurer, Trish Sharrock.

Children’s hospicereceives a helping hand

In a good cause: (from left to right) committee member John Wood,Dr Michael Hawkins, director of Cancer Research, regional chairmanRichard Wynne-Jones and Bob Darwin

Breakthroughin travel war

MEDIA WATCH

Making insurance interesting for JoeBloggs. That’s been my Herculeanchallenge over the past two months.

Since joining the Financial Mail on Sunday last November, the hardest task hasbeen finding populist stories which wouldhave previously, in my guise as reporteron Post Magazine and Insurance Age, sailed

into print.For example, in December

I secured the front pagedetailing how car insurancerates were set to rocket in2007 because of Royal Bankof Scotland Insurance’sdecision to ramp them up.

If this story was abouta sharp increase in fleetrates, then it wouldn’t havebeen as highly placed, if itwent in at all.

Andrew Foxwell

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GInsurance stories need appeal at a high level – like

one on the possibility of the FSA having to be split in two to cope with its workload – or which affect the public’s finances.

By and large, brokers tend to be excluded from the business pages of national newspapers,predominantly because the shift in personal lines fromintermediary to direct.

When most people think about insurance, directchannels spring to mind, and journalists tend not toconsider brokers as part of the story equation; insuranceis just perceived as being bought from ‘somewhere’.

Indeed, I have found it difficult to even get Towergatementioned, even though everyone in the broker worldappreciates how powerful and important this company is.

Broker stories do get in however, for example, the sale of Carole Nash and Footman James both featuredon our front cover. Perhaps that is the way forward –find more examples of interesting brokers doingspectacular things.Andrew Foxwell is a reporter on the Financial Mail on Sunday

BIBA’s long battle to make travel insurancesubject to regulation is gaining momentum

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Achieving coverage in themainstream press oncommercial insurance tendsto be harder than withpersonal lines issues. Butour campaign on businessresilience has hit theright notes.

BIBA commissionedresearch from pollster Populuswhich found millions of SMEswere not protected againstemergencies. It showed:• nearly three-quarters of

businesses had no plans fordealing with the resultingimpact of terrorism

• nearly half had no plans to deal

with the impact of flooding• a third had no plans to deal

with the impact of a storm• only just over a half had

plans to deal with the effectsof a fire

• beyond gaining presscoverage, the campaign hasalso secured cross-partypolitical support.Chief executive Eric

Galbraith says: “SMEs are vitalto the UK economy, but it isworrying so many have nodisaster recovery plans. Wewant to get the message acrossthat brokers are ideally placedto provide practical advice.”

Business resilience worries


Graeme was interviewed bypresenter Paul Heiney and arguedthis was a serious problem and thataction had to be taken.

But travel trade body ABTA triedto convince Watchdog that it wasregulating travel agents. “ABTA isnot a Government regulator and weput the BBC straight on this,”stresses Graeme.

Economic secretary Ed Balls wasalso interviewed and supplied

with the irrefutableevidence. Graeme

comments: “We’vebeen fighting for a

long time to remedythis unfairsituation. We weredelighted whenThomas Cook

called theprogramme to say it

would now beregulated. We now want

to see regulation imposedacross the board and a fair and

level playing field for brokers.”

BBC’s hard-hitting consumerrights show, Watchdog, recentlyfeatured an interview withtechnical services managerGraeme Trudgill. It raisedconcerns over poor salespractices used by travel agentsselling travel insurance whowere not even asking about pre-existing medical conditions.

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Some needs may appear harder to fill than others.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

When one of our supporting brokers was asked by a manufacturer of animal feeds to obtain aquotation for buildings insurance, they were frustrated to discover little interest from the rest ofthe market. We however rose to the occasion and visited the client to assess the risks first handbefore offering terms that helped the broker save the day.

We enjoy a healthy appetite for business as well.

S

ANALYSIS

Conventional wisdom would haveit that if the FSA is to regulate theinsurance industry effectively, aclear understanding of the marketis essential.

Unfortunately, uncertaintysurrounding the size and scope of theprimary and secondary general insuranceintermediary markets has blurred thatcomprehension. BIBA has conductedunprecedented research to determine thecomposition of the general insurancesector in order to put an end to doubt.

It was felt to be vital to achievedefinitive figures about the brokermarketplace for a range of reasons whichwould support BIBA’s work as a trade body.Eric Galbraith, BIBA’s chief executive, says:“We have worked with figures from theFSA and indeed our own membershipnumbers. We need to know exactly howmany out there fitted our definition of ageneral insurance broker – which ofcourse are our core membership.”

The figures will also prove invaluablein areas such as discussions with theGovernment or the EU. “We need to be able

to talk specifically about the number offirms to show without any doubt thevalue our sector creates for the economy,”Mr Galbraith adds.

BIBA’s headline figures • Of the 8,515 firms that the FSA defines

as “general insurance intermediaries”ie, a firm which only has a generalinsurance permission from FSA:• there are 3,857 insurance brokers

whose core activity is generalinsurance broking in the UK in 2007

• there are also 4,658 organisationsfor which broking is not theirprimary business activity, but theyare registered with the FSA asprimary market.

• In addition to this, there are 7,900 firmsregulated as the secondary market.

• Total general insurance income fromthe primary market is approximately£8.2 billion, of which £7.8 billion isgenerated by insurance brokers.

• UK primary brokers andintermediaries employ approximately128,000 people.

How BIBA arrived at these figuresThe analysis was based on data providedby the FSA from July 2006. The FSA statesthat primary category general insuranceintermediaries are firms that conductgeneral insurance as their main regulatedactivity. But it also makes it clear thatthese figures include firms whoseprimary activity is not insurance, such ascar dealerships and veterinary practices.

The crucial fact here is that the FSAincludes firms within its overall figurethat BIBA would say were businesseswhose core activity is not insurance.Mr Galbraith explains: “In terms of itsfigures, the FSA includes intermediariesthat specialise in a particular class ofbusiness and although they are directlyauthorised, they do not fit BIBA’sdefinition.”

Secondary intermediariesBIBA decided to separate out what itconsidered to be those “intermediaries”whose core activity is not insurance togain a more accurate picture of themarket. This is what we found:

A major BIBA researchproject has uncovered the true nature of thegeneral insuranceintermediary market,Rachel Gordon reports

Figuring out thebroker marketplace


BIBA’s figures – Primary sector 2007Intermediaries 3,857Motor trade 2,216Other 787Property 555Finance 551Claims management 150Removals 97Professional 93Freight 86Caravan dealers 66Shipping 57

TOTAL 8,515

Falling numbers?BIBA found that there had been a declineof 53 in the intermediary category fromearlier information provided, which wasevidence of the continued pattern ofconsolidation.

Mr Galbraith says: “Brokers arecontinuing to acquire, merge or sell up.This will level out, but it is a concern thatthere are not enough new entrants cominginto the market.”

Meanwhile, there was a reduction of

inexperience can bring its own problems,particularly if the compliance function isunder-resourced. We feel there aresimilarities between this segment and thesecondary market.

Steve White, BIBA’s head of complianceand training, says: “We are aware that somesecondary intermediaries are notnecessarily entirely focused on their FSArequirements, although there are equallysome which do take regulation seriously.The problem is that if general insurance isnot your primary business, then you needto bring in some expertise to make sureyou get the right systems in place.”

Working with secondary intermediariesBIBA is giving strong consideration toallowing a separate classification ofsecondary intermediary membership. In the summer, BIBA will ask themembership to consider amending thearticles of association to allow for this.BIBA is confident that allowing secondaryintermediaries to join the association asassociate members would be one of themost effective ways of raising standards inthis sector.

The value of BIBA’s researchBIBA has provided the FSA with itsresearch and talks are ongoing to see howthe regulator can make best use of thisdata. Mr Galbraith concludes: “We believethat a better understanding of the marketwill provide greater impetus to a risk-based regulatory approach and market-ledsolutions which we feel are missing fromthe FSA’s approach to regulation of thegeneral intermediary sector.”

We need to be able to talk specificallyabout the number of firms to showwithout any doubt the value our ownsector creates for the economy

‘‘’’

298 in the motor trade sector and BIBAbelieves this is because many motortrade intermediaries have decided tobecome appointed representatives –often a decision based on cost benefits, asthis will involve regulatory support fromtheir principal.

Fifty intermediaries in the propertycategory had also disappeared – thisdecline is largely due to managing agentsinvolved with insuring blocks of flats forwhich the appointed representative routemay have also had greater appeal.

The need for regulationBeing clear on exactly how manyinsurance brokers there are will make iteasier to see how well they are meetingregulatory challenges, according to MrGalbraith. It is important to be clear onwhich type of intermediaries arereceiving complaints and indeed what isprompting these.

“The FSA is regulating a primarymarket in which more than half of thefirms do not transact insurance as theirmain business activity,” he adds. This


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3

IN THE SPOTLIGHT

country and participate where possible.”In an earlier role, Derek headed

Fenchurch UK and had responsibility foracquiring broking businesses throughoutthe country. “It may have been more than10 years ago, but consolidation was aliveand well then,” he says.

He targeted businesses in strongsecondary locations. “We kept the peoplein place and emphasised the localknowledge on offer. But as part of a largergroup, we could provide better productsand more competitive prices. This proveda winning formula.”

He adds: “I’m a passionate believer inthe value of independent advice and thinkit should be available for everyone. Weneed balance in regulation because in theIFA sector we now see the provision of

Taking up the reinsDerek Thornton takes over as chairman from Max Taylor this summerand brings a wealth of experience, as Rachel Gordon discovers

advice as primarily a service for high networth individuals, which is a shame.”

Derek is not concerned about managingthe chairman’s role alongside his existingdemanding job. Throughout his career hehas taken on additional responsibility andcomments: “If you want to be a seriousmarket practitioner, it makes sense to beinvolved with professional associations. Isee it as an opportunity to contribute, it’sjust a case of being organised.”

He adds putting in the extra hours isoften made possible because of theefficiency of his PA, Elaine.

His involvement with BIBA has beenlongstanding. He was on the propertycommittee for over 10 years and is also amember of the London Market Brokers’Committee.

He has also provided many years serviceto the Chartered Insurance Institute, beinga past president of the Insurance Instituteof London and founding chairman of theCII’s London Market Faculty.

The role of BIBA chairman is a high-profile one, but Derek is not looking tograb headlines. “I will be there to supportthe work of chief executive Eric Galbraith,not to start imposing views. It’s about theBIBA board working together, findingagreement and then getting the message

out to the membership, their clients, theGovernment and regulators.”

In recent years, he has beenimpressed by BIBA’s campaigningstance. “I think this has beenincreasing and we’ve a lot to thank Eric and Max for here.There are some tough issues to

deal with. Whether it isBrussels, the FSA or the

Treasury, BIBA hasshown it will makethose involved sit upand listen and I’m

determined thiswill continue.”


Meet Derek ThorntonDerek was born in 1949 inYorkshire. He has an honoursdegree in physics and maths fromLeicester University. He startedwork in London in 1972 for a smallLloyd’s broker, and then workedfor a number of major firms. Hehas travelled extensively onbusiness around the UK, NorthAmerica and Europe. Derek’sother activities include being anon-underwriting workingmember of Lloyd’s, aFreeman of the City ofLondon, a CourtAssistant of theWorshipful Company of Upholders and aLiveryman of theWorshipful Company ofInsurers.

Immediately after BIBA’s annual generalmeeting in July, a new chairman willtake over. Derek Thornton will replaceMax Taylor and will hold the position forthe next two years.

“It’s a privilege and an honour,” hecomments, “and an opportunity to givesomething back to broking and BIBA.”

Derek, a director of Heath LambertLimited and Chairman of FSJ, its LondonMarket UK Wholesale Division, haspreviously worked for Sedgwick Forbes,Jardine and Fenchurch.

He also has a close affinity with theregional marketplace and says: “In the pastit was sometimes said that BIBA was tooLondon-centric. But, I don’t think anyonecan say this now. We’re much moreintegrated and I’m hoping to get round the

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OFFSHORING

Home or away?Sending UK jobs aboard, in particular to India, remains a hot – andcontroversial – topic. Stephanie Denton takes a cool look at thepros and cons of offshoring at a time of tough market conditions

Offshoring is an emotive term and isoften mentioned in the press withnegative implications, especiallywhere UK redundancies areconcerned. However, at a time whenmarket conditions are tough andpressures on costs are high, should itbe given serious consideration bybrokers as well as insurers?

As far as insurers are concerned, Esureand Norwich Union (NU) recently hit theheadlines with news they are bothterminating a number of jobs in India.However, NU has confirmed itscommitment to offshoring stating itaims to keep around 8,000 employeesbased there.

There are plenty of benefits fromoffering a service from overseas accordingto Darren Cornish, head of customerexperience for Norwich Union generalinsurance: “The culture in India is politeand service-orientated, the values are verymuch what a customer would hope for. Wehave bright talented employees there.”

Broker Marsh is also a big supporter –

although it only offshores its businessprocesses rather than those where there isdirect contact with clients.

“The personnel are extremelymotivated and very talented,” agreesPatrick Mina, head of operations, Europe,the Middle East, Africa and Asia Pacific forMarsh, which has been offshoring someoperations for two years. “Also we can getgraduates whereas in the UK we would begetting school leavers. This has meant wecan enable and free up staff in the UK asthe administration has been taken awayfrom them.”

But for smaller brokers, offshoring maysimply not be appropriate.

OutRight is a Stoke-based call centreand works for a number of clientsincluding national brokers, providingoutsourced personal lines.

Chief executive Andy Lee says: “I cannever say never, but we have no plans tooffshore. You have far more control closerto home. I don’t think many brokers are bigenough in any case to generate the savingsthat this can bring; we certainly aren’t.”

He adds that as technology develops,this is also likely to bring savings for UK-based businesses. “We are pilotingvoice recognition software that will routeour calls more efficiently and this will also cut costs.”

Meanwhile, insurers insist thatoffshoring allows them to offer extendedopening hours – and can allow a businessto move quickly.

The culture in India is polite and service-orientated, the values are verymuch what a customer would hope for‘‘’’

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Adrian Webb, head of communicationsfor Esure, comments: “One of the reasonsto move business abroad would be thespeed of getting a functional operationgoing. It is folly to let business escape andthis is what would have happened if wehad not used India.”

Others in the market who do not useoffshoring themselves can also see thismakes sense. Rob Smale, claims directorfor Fortis, says: “If people don’t have thestaff they need or the ability then theymay need to outsource. Mergedcompanies in particular may find itdifficult to deal with all the parts of thecompanies and it may be easier to sendthe process out of house.”

One of the major benefits touted bycompanies that offshore business is thelow costs of staff and offices in India,and that this cost saving can be passed onto the customer.

However, according to Emma Holyer,spokeswoman for Direct Line, this is notalways true: “The reason why peopleclaimed to be offshoring was cost but theirpremiums for customers haven’t droppedcompared to ours. We believe the bestservice is in the UK.”

There is some consensus on this pointand many also believe those firms thathave outsourced would face higher costsin the UK if they ever decide to return.“Companies may reach a point where theyhave put so many resources intooffshoring that they may find it difficult tobring back. They will then be facing amajor dilemma,” comments Mr Smale.

Another problem commonly raised bycritics, is that of communication andunsatisfied customers. Mr Webb says:“One of the inherent factors in

The reason why people claimed to beoffshoring was cost but their premiums forcustomers haven’t dropped compared toours. We believe the best service is in the UK

‘‘’’outsourcing is that no matter how skilledyour workforce there is a growing concernin the UK about speaking to peopleoverseas. Some calls have a genuineproblem with communication but someare just due to people not being happytalking with someone abroad.”

But this problem could be due toincreased public concern about security. “Akey thing is that people like to know thatthey can go to someone’s door if somethinggoes wrong and you can’t do this with anoffice overseas. It is about security and the

Moorhouse’soffshore experienceAround two years ago, brokerMoorhouse Group decided to use anoffshore company in India for leadgeneration. The aim was to take theseleads and pass them through to its UKbusiness where quotes and saleswould be processed.

Chairman Lyndon Wood explains:“We took the decision to do this to takeadvantage of the sheer volume ofresources available which could beapplied virtually from day one and startproducing results immediately.”

But was the experience all he hopedfor? “Our experience was not the best

due to a few factors. First, you need yourown people in place to monitor andcontrol performance. We providedtraining offshore only to find when wevisited them two or three months later,they were demotivated.”

And the technology sometimes provedproblematic. He advises: “If you’reexpecting calls to be patched through toyour office, be careful. As far as India isconcerned, calls route through to the USto the UK. We experienced some failuresand so this did not allow us to meet whatwe set as a referral target on our income.”

He adds management information canbe misleading as “the offshore centre willproduce different numbers to what youare actually experiencing”.

As far as saving costs, hecomments: “The more you offshore thegreater the immediate savings –although some are now having secondthoughts and while insurers are alwayslooking to cut costs this can sometimesbe detrimental to the customer.”

Mr Wood does not believe offshoringhas reached its peak yet. “Maybe inIndia, but not China or South Africa.And in South Africa there is largeropportunity to offshore due to little orno language barrier and the highunemployment.”

So, would he do it again? “We’reglad for the experience. But, we’remore than happy operating out of theUK. We would not offshore again.”

impression is that security is a bit flaky inIndia,” Mr Webb explains.

So there are upsides and downsides tooffshoring but are more companies stillconsidering it and will other countries beused in the future? According to Mr Minait is certainly an option for brokers’ backoffice processes: “I think we will definitelysee more brokers doing this sort ofoutsourcing in the future. This has beenvery positive for us in terms of cost savingsand has exceeded our expectations interms of service levels.”

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It is vital brokers understand thesignificance of insurer ratings, asthey provide an important insightinto the insurer’s financial strengthand security.

But in an era of information overload,how much data do brokers need to takeon board and what should they passonto clients?

Whatever the size of the broker,there is little doubt of the need to beaware of an insurer’s security and theirindividual rating.

Peter Hughes, vice president, businessdevelopment, Standard & Poor’s, comments:“We would be keen for brokers tounderstand that financial strength is aboutdegrees of probability rather than a black-and-white decision, but it is really up to thebroker to decide the level of detail theywant to apply to their knowledge of ratings.”

Mr Hughes adds, for example, thatbrokers may feel comfortable to knowsimply what rating S&P applies to anyparticular insurance entity. However, hesays: “Attached to each interactive rating isa summary of why the rating applies andan ‘outlook’ which indicates the way therating may change within the next 18-24months (positive, stable or negative).”

CriteriaSpecific details on the ratings process itselfare also available. S&P, for example,publishes all its criteria and rationales, aswell as outlooks on the insurance andreinsurance sectors in domestic andinternational markets and specific nichemarkets such as P&I clubs and Lloyd’s.

There is also a widely-held view thatthis information needs to be passed on tothe policyholder too.

As far as commercial lines areconcerned, Chris Waterman, managingdirector in Fitch’s insurance group, pointsout: “One of the key concerns for a riskmanager buying a product is that the claimis going to be paid on time.”

Mr Waterman asserts most riskmanagers will be aware of what a rating is,

It is essential brokers get to gripswith insurer ratings both toprotect their clients and to coverthemselves against negligenceclaims, reports Jane Bernstein

One of the key concerns for a riskmanager buying a product is thatthe claim is going to be paid on time

‘‘’’

INSURER RATINGS

adding: “In some cases, the client will justbe happy to know that their entireprogramme is in the range of an A-ratedsecurity, whereas others would want toknow why a rating has changed from A+to A or why there have been any ratingmovements, and understand that inmore detail.”

The message is that the level of detail abroker supplies can vary according to theclient, but there are some very goodarguments for ensuring the client isprovided with the appropriate information.There is a view that requirements fortreating customers fairly and disclosinginformation mean a broker has a duty topass on details such as insurer ratings.

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Wider implicationsPeter Staddon, BIBA’s head of technicalservices, emphasises the importance ofmaking time to provide the insured withthis information.

Mr Staddon warns in particular thatfailure to explain a carrier’s security andsolvency situation could leave a brokeropen to negligence claims if an insurerthey recommend fails to pay a claim orgoes into liquidation.

It is also important to look at widerimplications. Mr Staddon points out that a“yo-yo effect”, where an insurer’s rating isgoing up and down regularly, might raisesome questions, whereas a steadymovement upwards could be a goodindication of an insurer’s stability.

Mr Staddon also recommends analysingthe ratings data in conjunction with a lookat research from bodies such as Defaqto.“Don’t just look at an insurer’s rating inisolation – look at their past record, see

what they are doing and also take intoaccount wider analysis,” he concludes.

Analytical reportsThe ratings agencies themselves doprovide much relevant information, inaddition to the actual insurer rating.Rebecca Tween, manager, WesternEuropean Markets, AM Best Europe,explains: “To support the ratingconclusions, AM Best analysts preparedetailed analytical reports for each ratedorganisation.

“These full reports cover a broadrange of pertinent information, includingcommentary on each company’soperations, strengths and challenges, aswell as details on a company’s formationand capital structure and an in-depthassessment of its current financialperformance.”

One of the key issues to bear in mind is that a rating is not a static entity and

Vulnerability to negligence claims

Brokers should be aware thatthey must make insurersecurity a priority. Ross Risby,partner with lawyers DaviesArnold Cooper, states: “Abroker who places businesswith an insurer withoutchecking the insurer’s rating isvulnerable to a negligenceclaim if the insurer issubsequently unable to pay aclaim due to insolvency.Whether such a claim wouldsucceed will depend on thefacts of the case.”

Factors include:k the insurer’s actual rating:

a claim against a broker for placing with a strongly ratedinsurer that unexpectedlycollapses is unlikely to succeedeven if the broker was unawareof the good ratingkmarket knowledge at

placing: if it is public knowledgethat an insurer is in financialdifficulties a claim is more likelyto succeed if the insurersubsequently enters insolvencyk the sophistication of the

broker’s client: if a corporateclient has its own securitycommittee and is known tostudy the insurance market asuccessful claim is less likely.This may also be evidence thatthe client did not rely on thebroker’s advice.Brokers are not expected to

be able to predict the future.Keeping good records ofmonthly security committeemeetings or less formalreviews of a rating agency’sreport on a particular insurer ishowever crucial, sinceevidence of analysis of aninsurer’s financial standing islikely to be one of the first areasfor investigation in a potentialnegligence action.

For a more detailed analysisof non standard security, see

the BIBA website for sub-brokingand offshoring – a risky business.

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so brokers must remain up-to-date onmovements.

Mr Waterman emphasises: “The ratingsare always current, so if something takesplace that has ratings implications thenwe will respond to it immediately. It is vitalthat we make the right ratings calls andmake them in a timely fashion.”

Mergers and acquisitionsSo what type of event would cause a ratingto change? Mr Hughes explains: “Althoughthere are many reasons why a rating maybe upgraded or downgraded, it is certainlytrue that a change in previously statedplans or a failure to meet objectives wouldbe two reasons that the rating may alter.”

Merger and acquisition activity couldbe another cause of a rating change. “AnyM&A activity would have to be judged on acase by case basis and there are plenty ofexamples of where it hasn’t had animpact on the rating. However, as a generalpoint, S&P recognises that there is aninherent risk in the process of bringingtwo companies together,” explainsMr Hughes, adding: “Therefore aCreditWatch negative outlook may well bethe initial response to the announcementof a merger – which says that if the dealgoes ahead, there will be a downgradewhile the integration issues are resolved.”

The CreditWatch is a term that brokerswill need to be familiar with and will comeacross when assessing insurer ratings.Standard & Poor’s explains: “A CreditWatchlisting is based on events and short-term

trends that have materialised and thatmay cause the rating to be put underspecial surveillance.

“Examples of events that have caused aCreditWatch announcement includeshifts in reserving levels, mergers, andchanges in capital. A CreditWatch listingwill be ‘positive’, ‘negative’ or ‘developing’.This designation indicates the possibleimpact on the rating.”

There are some basic points thatbrokers may want to have at their disposalwhen understanding how a ratings agencyarrives at certain conclusions. Ms Tweensummarises some of the facts: “Theassignment of an interactive rating isderived from an in-depth evaluation of acompany’s balance sheet strength,operation performance and businessprofile, as compared with AM Best’squantitative and qualitative standards. Afinancial strength rating is assigned onlyto operating insurance companies anduses a proprietary rating scale. Thisranges from the highest “A++” (Superior),to the lowest “F” (In Liquidation), and isdivided into two broad categories Secureand Vulnerable.”

The insurer rating is an invaluable pieceof information. Of course, it is just one of agrowing number of factors that brokers andinsureds will take into account from theproduct price, to the service levels provided.As Mr Hughes concludes: “S&P ratings arean opinion of an insurer’s ability to pay itspolicyholders. Whether that is the mostcrucial factor is a matter for debate.”

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BIBA CONFERENCE 2007


World classThis year’s event – Achieving Excellence – takes place at ExCeL Londonon 23-25 May. Nick Chapman presents an in-depth preview

Welcome from chiefexecutive, Eric Galbraith

By the time you read this edition ofthe broker I trust you will havealready booked your place at nextmonth’s Achieving Excellenceconference and exhibition.

I hope you are looking forward to it asmuch as I am. The BIBA conference is, for

many, the highlight of the year. It’s aunique occasion when brokers of allshapes and sizes can meet, socialise anddiscuss the issues close to our hearts. It’s atime to meet friends and, of course, tonetwork with all segments of our industry.

But if, by chance, you still haven’tcommitted yourself, time is running out.There may still be a few bursary places leftso don’t wait any longer to get yourapplication in for these complimentaryregistrations.

If you have booked, but haven’t yetchosen which of the multitude ofassociated social events to attend, againtime is getting short. The official BIBAevents are always popular, details of whichcan be found later in this report.

So, if you still have a free evening wewould be delighted to welcome you oneither the Thursday at Leadenhall Marketor on Friday at the Gala Banquet at TheBrewery in the City.

All the conference news and a full list of

exhibitors can be found by following theconference link on the BIBA website.

If you haven’t already done so, could Ialso ask you to think about a question thatcan be put to Martin Sullivan and the restof the debate panel at the Wednesdayafternoon session.

I am keen for the panel to addresstangible issues facing all of us in the UK.Please email Lindsay Campbell [email protected] and we’ll do ourbest to include your suggestion.

So Ladies and Gentlemen, it’s up to allof us to make BIBA 2007 the mostmemorable few days you will spend thisyear. Remember it’s your event – if we’redoing something right, tell us, if there’ssomething you would like us to address,again please let us know.

See you all in Docklands!

Eric Galbraithchief executive

World class



The Wednesday programmeSponsored by AIG

BIBA 2007 isdelighted to welcomeMartin J Sullivan,president and CEOof AmericanInternational GroupInc., who will address

the conference at a special keynote session,on the afternoon of Wednesday 23 May.

Martin’s presentation will then befollowed by a cross-industry debate onmanaging future risks. Joining Martin onthe stage will be Dennis L Mahoney,chairman, Aon Global; Richard Ward, CEO, Lloyd’s; and Peter Cullum, groupchairman, Towergate Partnership. Thedebate will be chaired by Max Taylor,chairman, BIBA.

Following this session, the exhibitionwill open at 18.00, with an informalreception. With wine, light refreshmentsand some fun entertainment this is a verypopular time to meet friends andcolleagues and visit the UK’s biggestinsurance exhibition.

It’s a unique occasion when brokers ofall shapes and sizes can meet, socialiseand discuss the issues close to our hearts‘‘’’

ExCeL London – ourvenue for AchievingExcellence

ExCeL London is the capital’s largestconference and exhibition venue. On aself-contained campus, easilyaccessible from the City and from theWest End, it has 65,000 square metresof pillar-free event halls, the PlatinumSuite for up to 1,100 delegates and 45other meeting rooms. Capable ofhandling 50,000 visitors daily it has sixonsite hotels, 90 serviced apartmentsand 6,000 car parking spaces.

It is host to two of the biggestconsumer shows in the UK, the LondonBoat Show and the British InternationalMotor Show.

Now chosen as a host venue for theLondon 2012 Olympic Games, thedevelopment of ExCeL London kick-started the regeneration of the LondonDocklands and the Thames Gateway.

It can be reached from CentralLondon via the Limehouse Link, it is 15minutes from Canary Wharf, and 20minutes from Waterloo and LondonBridge via public transport. London CityAirport is five minutes away.

The principal sponsors

Achieving Excellence is supported bysix principal sponsors, all of whom areintegral to the success of theconference. BIBA is extremely gratefulfor their support and indeed to allsponsors and exhibitors. Withoutthem, the conference would not havebecome the biggest insurance eventin the UK.

This year our principal sponsorsare involved with different aspects ofthe event:• AIG is sponsoring the Wednesday

sessions and the openingreception

• AXA will once again be sponsoringthe gala banquet

• Allianz is sponsoring the plenaryconference sessions

• Groupama will once again host theBusiness Centre

• Norwich Union is sponsoring theseminar sessions

• Royal & SunAlliance is behind theego Graduate Initiative programme.

The gala banquetSponsored by AXA

The gala banquet will onceagain be sponsored by AXA.The Brewery in the City – votedvenue of the year in 2006 byCEA – will be the location forthis year’s event and transportto and from the conferencehotels is included in the ticketcost. Join us for great food, finewines and excellent cabaret.

BIBA’s gala banquets areknown for discovering newtalents, and many have gone onto become big names in theentertainment world. This yearwill be no different, while thecomedy will be in the capablehands of the more establishedMilton Jones, the organisingteam are promising new acts,which must remain a secret untilthe night itself. Tickets can bebooked online.

SUPPORTED BY:PRINCIPAL SPONSORS:


The plenary presentationsSponsored by Allianz

Voted by members as one of the mostpopular parts of the BIBA conferenceexperience, the plenary programme thisyear, for the first time, will be sponsoredby Allianz.

Opening the conference on Thursday morning, Sir Christopher Meyer KCMG, the British Ambassador to the United States during the build up to the Iraq invasion, will look at howBritain is represented overseas and howBritain’s interests have sometimes beensold short by our politicians.

Now chairman of the PressComplaintsCommission, SirChristopher hasbeen in the newsrecently, caught upin the controversy

over the treatment of Prince William’sgirlfriend Kate Middleton.

On Friday we have two plenarysessions. Starting the day, the conferencewill have the chance to hear at first handthe extraordinary life story of ChrisGardner. The inspiration behind Will

Smith’s characterin the hit film ThePursuit ofHappyness, Chrishas experiencedsome of life’s moredramatic highsand lows. Poverty

and a short stint in jail for non-paymentof car parking fines meant he becamehomeless while still caring for his smallson. However, by sheer determinationand perseverance Chris worked his wayup the stockbroking ladder until finally

in 1987 he wasable to found hisown Chicagobrokerage,Gardner Rich andCo.

Closing theconference will be

left in the capable hands of one ofBritain’s most popular writers and TVpersonalities, Ian Hislop. The awardwinning editor of Private Eye since 1986,Ian has many stories of taking on theestablishment and even if he hasn’t wonall his battles, he has at least been able tominimise the libel damages!

The Business Centre Sponsored by Groupama

At the 2007 BIBA conference youneed look no further than theBusiness Centre and Internet Cafésponsored by GroupamaInsurances, for the virtual office thatwith that extra something. TheGroupama Internet Café is just theplace to grab 10 minutes to relax,catch up with business contacts, orsimply enjoy a cup of coffee.

Free internet access The Café will host six on-line PCs,offering fast access to the web, aprinter and a further two telecomconnections for laptops.when brokers of

n meet, socialiseclose to our hearts

The seminar programmeSponsored by Norwich Union

This year’s seminar programme, thecore of the conference, is once againsponsored by Norwich Union.

Comprising 12 individual streamsacross four seminar sessions,delegates can choose from threeconcurrent streams. The programmewas put together to ensure that withineach of the four sessions there is sureto be something to appeal to the broadconference audience base.Sessions range from the purelytechnical to more general interest.Technical subjects include:• regulatory issues• telematics and database use in

motor broking• brokers’ PI• climate change• ebusiness• continuity planning.Marketing and general interestsubjects include:• cross selling to existing customers• defining excellence for a small

business• putting a value on your brokerage• six steps to success• ethical business practices• working a room.

Find out about the latest conference and exhibition news. Log on towww.biba.org.uk and follow the link to ‘Achieving Excellence’



Wednesday 23 May

15:45 Registration opens16:45 An audience with

Martin J Sullivan.president and CEO,American InternationalGroup Inc.

17:15 ‘Think globally, react locally?’A cross industry debate onmanaging tomorrow’s riskstoday.Participants: Martin J Sullivan,president and CEO,American InternationalGroup Inc; Dennis L Mahoney,chairman, Aon Global;Richard Ward, CEO,Lloyd’s;Peter Cullum, groupchairman, TowergatePartnership.Debate chaired by: Max Taylor, chairman,BIBA

18.00 Opening reception in theExhibition Hall

20:30 Exhibition closes

Thursday 24 May

08:30 Registration andexhibition opens

09:30 Welcome.Max Taylor, chairman,BIBA

09:45 Opening address.Eric Galbraith, chiefexecutive, BIBA

10:00 – 10:45 Punching above our weight?Fighting for Britain’sinterests abroad.Sir Christopher MeyerKCMG

10:50 – 11:35 Refreshments11:45 – 12:35 Seminar Session 1

Stream 1Towards excellence inregulation.Stephen Bland, FSAStream 2Should motor brokers feartelematics and databasedemands?Ashton West, MIBNick Rendell, SiemensTom Roberts, DFTChief Constable MedHughes, ACPOStream 3: Smaller Broker SessionLoyal customers buy more.Unlocking hidden profit fromexisting business.Andy Chemney, ChemneyConsulting

12:45 -14:00 Lunch 14:10 – 15:00 Seminar Session 2

Stream 1Brokers PI. Avoiding theelephant traps.James Dingemans QCStream 2 More storms and floods. Willinsurers be out of their depth?Professor David Crichton Stream 3: Smaller Broker SessionWhat does excellence meanfor a small business?Chairman: René Carayol MBE

15:10 – 16:00 Refreshments16:10 – 17:00 Seminar Session 3

Stream 1What is your brokeragereally worth?

Andy Halstead,Erinaceous InsuranceServicesGrant Ellis, BrokerNetwork Holdings plcKieran Marsh, MarshCorporate ConsultingStream 2Achieving eBusinessexcellence. The tools andtechniques for success.David Rasche, SoftwareSolutions PartnersStream 3: Smaller BrokerSessionSix simple steps to success.Bill Cullen

Friday 25 May

09:30 Welcome back.Eric Galbraith

09:35 – 10:20 The pursuit of happyness.Chris Gardner

10:30 – 11:20 Seminar Session 4Stream 1Broker continuity planning.Paul Dyer, TowergatePartnershipStream 2Making waves.David Robinson, ‘Weare what we do’Stream 3: Smaller BrokerSessionDo you brighten a roomwhen you walk in or whenyou leave?Roy Sheppard

11:30 –12:00 Refreshments12:10 – 12:55 Keeping an eye on Britain.

Ian Hislop13:00 Conference close.

Max Taylor13:15 – 14:30 Lunch 14:30 Exhibition closes

TThhee ccoonnffeerreenncceepprrooggrraammmmee

The ego graduate initiativeSponsored by Royal & SunAlliance

For 2007, R&SA will be actively promotinginsurance as a career path of choice forgraduates, this initiative will be known as‘ego’ (if excellence is your goal weprovide the opportunity). Working withBIBA, R&SA will be inviting second andfinal year students and career advisors toattend the conference, take part indedicated R&SA sessions and to meet

insurers, brokers and suppliers at theexhibition.

Universities and business colleges inthe London area have been selected anda marketing programme has beencreated to reinforce the benefits ofseriously considering insurance as acareer. Students will have the opportunityto gain an insight into the insuranceindustry by attending some of thedelegate sessions and presentationsfrom R&SA and the CII on a number of

topical and relevantsubjects. In additionstudents will beeligible to apply for awork placement with R&SA, BIBA andthe broking market which has beenspecially designed to give students aunique view of the industry.

Delegates and exhibitors are urged tointroduce themselves to the attendingstudents and career advisors and topromote the benefits of our chosen career.

Abbey Legal Protection is a trading division of Abbey Protection Group Limited which is authorised and regulated by the Financial Services Authority in respect of insurance mediation activities only.

Who

Trust us to benefit your business by adding value to your portfolio, differentiating you from the competition and providing additional income streams.

Trust us to give your clients all the expert legal advice they need to avoid expensive litigation. Our 24 hour advice line is staffed by an extensive team of employment solicitors and barristers - Abbey Legal is the largest supplier of professionally qualified employment lawyers in the market.

Trust us to provide your clients with comprehensive commercial insurance solutions, specialist schemes for trade sectors and affinity clients, as well as facilities for property owners and the construction industry.

Trust us to be professional, efficient at all times and nice people to deal with.

Contact us now for details of our legal insurance protection, advice, information and risk management solutions.

TELEPHONE: 0870 600 1480 • EMAIL: [email protected] • WEB: www.abbeylegal.com

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YOUR BUSINESS

The advantages of using brokers, the benefits of captives, website compliance and new Ofcom rules are this issue’s topics

BIBA is urging members tobe clear with their clients onthe benefits of using abroker.

It is continuing to campaignon this matter and is also callingon the Government to give moresupport to the broker channel

Key messages for clients

• BIBA members treat customers fairly• BIBA members work to achieve your best interests – so

they will ask you about your insurance needs and searchfor a suitable policy

• they will make your choices clear by telling you the rangeof products they offer

• they will explain any professional advice they give to you –clearly and honestly

• they will secure their best deal for you by using theirexpertise and buying power

• they will make sure you understand what is, and isn’t,covered by your policy

• they will clearly state the costs of your policy – includingany fees they may charge

• they give clear information and documents – as well asany help you need with the paperwork – to make sure thepolicy is in place promptly

• they will explain their support for you in the event of aclaim

• they will explain the right to complain if you aredissatisfied with your policy and the right to cancel if youchange your mind about the policy.

Steve White, BIBA’s head of compliance and training, says:“We hope members will be encouraged to use thesemessages and develop their own whenever possible withintheir own businesses – on websites, printed material, emails,renewal documentation and when speaking to existing andpotential clients.”

He emphasises brokers should also look at the messagesconveyed on their websites: “It makes sense to ensure theseare short and snappy. Again, it should be emphasised thatBIBA members treat customers fairly and that a good choiceof insurance is on offer. Why settle for the only policy aninsurer can offer, when experts can help choose the rightpolicy for you?”

Make sureyour website is rightBrokers should check thattheir websites are compliantwith a change in the law orthey risk being fined.

The changes came into placeat the start of the year and are asa result of the Companies Act.

Sites must now contain

certain regulatory details asshould email footers. This isalready required on businessletters but is being extended towebsites, order forms andelectronic documents.

This should include the name,geographic address and emailaddress of the service providerand details if the trading namediffers from the registered name.

It is not sufficient to include a'contact us' form without alsoproviding an email address and

geographic address. A PO Box isunlikely to suffice as a geographicaddress, but a registered officeaddress would.

The company's registrationnumber should be given andunder the Companies Act, theplace of registration should bestated.

If the business is a member of atrade or professional association –such as BIBA – membershipdetails, including any registrationnumber, should be provided.

Brokers should also look toinclude details of the FSAauthorisation.

If the business has a VATnumber, it should be stated –even if the website is not beingused for e-commercetransactions.

On websites, the specifiedinformation does not have toappear on every page – themost obvious place to put thiswould be either in the ‘about us’or ‘legal info’ sections.


so that consumers are able tomake better informed decisionsabout insurance products.

And to provide support forbrokers in their businesses,BIBA has developed a series of10 succinct messages (seetable, right).

Be on message

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There is another way. Once captiveinsurance was the preserve of largeinternational organisations. However,innovation in the sector has meant this is now more accessible for small to medium-sized businesses.

A captive, in its purest form, is a companyset up by its owners primarily to insure therisks of its parent and/or subsidiaries. This canoffer several advantages in comparison withinsuring through the commercial market:These include:• the insuring of unusual or catastrophic risks

or multiple small risks• avoidance of paying large overheads and

profit margins• premiums that relate to the insured’s

previous claims record• direct access to the wholesale reinsurance

market• benefit from the investment return on

retained premiums• retention within the group of the excess of

net premiums over claims• tax efficiencies• improved risk management.

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Act now as changeis coming for 0870Any BIBA members who areusing 0870 numbers for theirbusinesses must be aware thatchanges are coming into forcein January 2008.

Regulator Ofcom hasannounced new rules which willimpact on companies using theprefix 0870, which can be used togenerate revenue.

But the changes, which haveboth financial and customer serviceimplications, state that anyorganisation will have to ceaseearning revenue from 0870numbers.

Beyond this, the cost of calling0870 numbers will be cut to thesame price as national landlinerates. This follows concern fromconsumer groups about unclearpricing and high costs.

Many consumers are unawarethat while daytime calls to 01 or 02landlines cost 3p a minute, those to0870 numbers from UK landlinestypically can cost around 8p aminute. Under the new rules,mobile phone and landlineoperators will be required to chargethe same, or less, for 0870 calls thanfor those to geographic numbers.

The numbers will also nowcome under the remit of premiumrate regulator ICSTIS.

Brokers with an 0870 numbershould be aware there will be cost in making the change, such as in new stationery, advertisingand signage.

Meanwhile, BIBA’s schemeproviders for telecoms facilities,Swinglehurst CommunicationsLimited (SCL), is also able toprovide guidance. ConsultantPaul Isaac comments: “There aremajor changes coming in whichwill affect so-called non-geographic numbers (NGN)which are 0800, 0845, 0870, 0844and 0871. These issues are allpotentially confusing. Allmembers using an NGN orconsidering doing so, shouldassess their options carefully.”

Members who want todiscuss the impact or to

receive general advicesurrounding the changes,should contact SCL ontelephone number0844 770 5190 or [email protected]

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Participating in a rent-a-captive scheme removeshigh start-up and ongoingcosts.

In 1997, Guernseypioneered the protected cellcompany (PCC) – acompany made up of a coreand individual cells, wherethe legal segregationensures no claim against onecell will be covered by thefunds furnished by another.Also, now there is theincorporated cell company(ICC). An ICC, like a PCC,has cells but they are

separately incorporated and distinct legal entities,offering an added layer of protection in the separation ofassets and liabilities.

The use of a third-party cell company rather than a full-blown captive has distinct benefits. These are:• lower operating costs• less management time – attendance is not required at

quarterly PCC Board meetings• quicker and cheaper to set up and exit• no minimum capital – there is a need to cover the

minimum margin of solvency and the risk gap but thismay be less than the £100,000 minimum required for aseparate captive.Indeed, clients’ risk management strategies could be

considered somewhat deficient in scope and responsibility ifit does not involve the use – or at least consideration – ofsome form of captive insurance.Peter Niven is chief executive of Guernsey Finance

Peter Niven

TRAINING

In a league of its own

For many brokers, having well-trained and competent staff is notonly essential in regulatory terms,but an investment that can payhuge dividends.

In fact, if they are to compete, or indeedsurvive, brokers must take this seriously. Ifnot, they may not only incur theregulator’s wrath, but even more likelylose their clients to a more switched-onrival up the road.

There remains a misconception thattraining courses result in astronomicalbills. This does not have to be the case – interms of quality and value, BIBA’s trainingcourses are consistently highly-rated andare facilitated by experienced trainers –yet the cost is only £150 per member or, fornon-members, £230. As a non-profitmaking organisation, we seek only tocover our costs.

They are held in a wide range oflocations, including Birmingham, Bristol,Cardiff, Ipswich, Leeds, Leicester,Liverpool, Manchester, Newmarket,Norwich and Romford – plus London, of course.

In terms of content, the full list is fartoo extensive to provide here – membersshould check out the training section ofthe website to see what is available. Youwill find everything that is on offer, fromcourses aimed at complete beginners –perhaps suited to those who are new tothe industry – to complex subjects, suchas reinsurance, or the workings of theLondon Market. There are courses for thegrowing numbers of brokers who mustnow take on compliance responsibility,to risk management which is ideal forthose firms that want to provide value-added services for clients.

Build your ownBeyond this, BIBA members can designtheir own courses. Whether firms needtechnical, business skills, compliance orIT training – BIBA can facilitate theappropriate course to be held either inyour offices or a convenient location.Contact us with your requests, and we’llprovide an outline that fits the bill.Steve White is BIBA’s head ofcompliance and training

Management trainingmade easyWhat makes a good manager?There’s no one answer, but certainlyit encompasses a range of skills.These include having the technicalskills and, beyond this, the peopleskills needed to bring out the best in others.

Anyone who has been in theworkplace for a number of yearswill almost certainly have hadexperience of bad managers andthose who were inspirational – or at least worthy of respect.

A poor manager can be a liability– and can increase the likelihood ofan employer facing litigation. Yet, asurprisingly high number of brokerswill still promote their employees tomanagement roles based entirelyon their technical or sales ability.

One of the most affordablemethods of delivering managementtraining is a new package producedby BIBA and training specialist,Searchlight Solutions.

Essentials of Management is aCD-based training and referencepackage which provides the know-how for would-be managers andsupervisors within insurancebrokers. Each of the nine modulescontains 12 units of learning and10 multi-choice questions chosenrandomly from a 30 questiondatabank.The course comprises ninemodules:kEffective communicationkManaging people (part 1)kManaging people (part 2)kPlanning and objective settingkManaging conflictkNegotiationkTeam workingkLeadership v managementkCoaching.It provides exceptional value. Eachof the nine works out at under £4 anhour and members can find outmore by visiting the BIBA website,where a demonstration is available.You’ll need to downloadMacromedia Authorware Player toview this and full details areprovided.

BIBA has launched its widest-ever trainingprogramme covering London and the regions– and if you can’t find a course to suit, opt fora bespoke one, advises Steve White

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www.cna.com www.cnaeurope.com

.......................................................................................

Renewable Energy .......................................................................................

Cargo .......................................................................................

Freight Liability .......................................................................................

Health Care.......................................................................................

D&O .......................................................................................

Professional Indemnity .......................................................................................

Stock Throughput.......................................................................................

Retail, Sports & Leisure .......................................................................................

Excess of Loss/Casualty .......................................................................................

Accident & Health .......................................................................................

Business Travel .......................................................................................

CNA is a registered trademark of the CNA Financial Corporation CNA Insurance Company Limited Registered in England no 950 Registered Office 77 Gracechurch Street, London EC3V 0DL VAT registration number 245813851 Member of the Association of British Insurers Member of the CNA Financial Group CNA Insurance Company Limited is authorised and regulated by the Financial Services Authority under registration number 202777

The world is evolving,so is our business

CNA is a leading insurance provider to the wind energy sector.

We have over 100 years of business behind us, $58 billion in assets, employ over 10,000 people, have over 1 million business and professional policyholders and are rated A- by Standard and Poors.

Great partnerships need strong foundations. CNA, your alternative insurance partner.

SCHEMES FOCUS

Caravan insurance and cover for nightclubs are the latestschemes to join BIBA’s stable, along with an enhanced PPIpolicy. Graeme Trudgill explains what’s on offer

Launching a new scheme or facility togo under the BIBA brand takes time.Throughout the year we areapproached by many providers, bothbig names and niche specialists alike.But we do not take the decision tooffer products to our members lightlyand more are turned down than makethe grade.

Each product must stand up to strongscrutiny from our General InsuranceBrokers’ Committee and only when theyare certain that it will be a valuableaddition to our range and will truly addvalue to a broker’s business, will it receivethe green light.

Ace cover for clubsThe Licensing Act 2003 came fully intoforce in England and Wales on24 November 2005, effectively combiningseven licensing regimes into one, andtransferring licensing responsibilitiesfrom the magistrates’ courts to localauthorities.

The move towards liberalisation hasbeen forecast by the Government to createa “continental café culture” by adiversification of the night-time economy.

This launch will be welcomed bybrokers that want to access a dynamicmarket and offer their clients specialistservice. It allows ease of delivery includingelectronic documentation issued atinception and in-house authority enablingrapid quotes.

Qualification for the ClubPM product islinked to policyholders being able todemonstrate compliance with a riskmanagement code setting out theminimum acceptable standards ofoperation. Members involvement isimportant to this process and theClubSAFE risk management programme,which is free to ClubPM policyholders,recognises this.

Managing director, Paul Tasker, says:“Policyholders are expected to demonstrategood standards of management andhousekeeping and a commitment to acontinual improvement programme asidentified by our risk managers. Inrecognition of this, our policy contains widecover and is extremely competitive.”

It includes personal loss of licence cover,low excess, discounted rates and offers 15 per cent commission to BIBA members. It will be updated as new regulation, such

Best of breed


This is presently geared towards the 18-24year old age group, based upon theconsumption of alcohol and exemplified inthe emergence, over the last two decades, ofchain pubs and themed bars. These cannow be found across most town and citycentres in Britain.

Maestro Tasker identified that acompetitive and specialised insurancesolution was needed to cater for the newbreed of venues and to work in harmonywith the new regulation affecting them.

Working exclusively with BIBA, theClubPM product for late night operatorswas devised.

Throughout the yearwe are approached bymany providers, bothbig names and nichespecialists alike

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SCHEMES FOCUS

as the smoking ban, becomes effective.ClubSAFE risk managers can also advisepolicyholders regarding the planning rulesand insurance requirements for outsidesmoking shelters and the necessity for thecorrect display of no smoking signage.

Towing the lineCaravan insurance is a niche cover andwhile not necessarily hard to place, manybrokers tend to sell it on an ‘as and when’basis. But there is significant untappedpotential in this market. Statistics for 2003show there were more than 800,000caravans in use, and in 2005 nearly 32,000new ones were registered.

Caravan insurance is not compulsory, somany of these are not insured. But unlikemotor cover, for those who do choose tobuy cover, it is less likely they will shoparound. There are good opportunities forcross selling here.

More brokers are looking to concentrateon their core business while offeringcustomers a broad range of insurances, sowholesale broking is a natural route forcaravan products.

Wholesale broker K Drewe offersunderwriting expertise, strongrelationships with insurers, flexibility,

personal service and service excellence forproducts which can have modest averagepremiums – as little as £200 to £250annually. Although the company hasmany existing relationships in the brokermarket, it recognised the opportunitiesavailable by working alongside BIBA anddeveloped this product exclusively formembers. The aim is to give them theopportunity of tapping into this profitableand rapidly growing area of business.

K Drewe Insurance Brokers wereestablished in 1956 and is one of the UK’slargest providers of caravan insurance. Thecurrent managing director, Ian Drewe, isthe third generation of the family to headthe business.

Key benefits of the scheme include:• robust and easy to use web-based

process for all transactions – newbusiness, mid-term adjustmentsand renewals

• no minimum levels of support• available to all members, including

Northern Ireland• BIBA-exclusive no claims bonus scale• new for old cover up to 10 years • quality product with value for money

premiums and flexibility• 16 per cent commission on new

business and renewals• expert back-up from the highly

experienced administrators• personalised in-house claims service,

using only established relationshipswith specialist suppliers – claimssettled efficiently and sympathetically

• provides contract certainty• A-rated security.

Putting PPI back on trackThe FSA has recognised that paymentprotection insurance can be a valuableproduct, but cover needs to be of goodquality and sold correctly.

To encourage more brokers to includePPI within their portfolios, BIBA has linkedup with specialists British Insurance tolaunch a series of products with enhancedbenefits, a more competitive ratingstructure and improved commissions.

The enhanced loan, income andmortgage payment protection productsoffer greater benefits to consumers,including partial cover on often-excludedstress, back-related and pre-existingconditions and lower premiums. Theexclusion relating to AIDS has also beenremoved.

There is no doubt that the fact someproviders have been challenged by theregulator, and the media, and this hasshaken consumer confidence. The

BIBA’s schemes: the full range

1 Accident, Sickness andUnemployment

2 BIBAlet3 BIBA Caravan4 BIBA Crisis Control5 Business Travel6 Commercial Combined7 Cyber-Liability8 Electronic Marine Cargo9 Excess Liability10 Haulage and LGV Insurance11 High Net Worth12 Holiday Travel13 Home14 Late Night Entertainment

(Club PM)15 Loss Recovery Insurance16 Marine Cargo17 Motor18 Non Standard Property19 Personal Accident20 Unoccupied Properties21 Web Based Directors and

Officers

BIBA facilities

22 Broker Continuity Planning23 Contract Law Services24 Financial Compliance Support25 Insurer Security Services26 Members’ Own PI Insurance27 Personal Lines Administration28 Premium Finance29 Telecoms30 Conflict Investigation Service


solution is to be advised by a broker andthese products are the right tools to dothis. There are opportunities to seizemarket share.

It is widely-recognised that complianceand marketing are the main hurdles forbrokers selling PPI, so British Insurancewill be offering training and marketingsupport. Managing director SimonBurgess says: “We will give brokers andtheir clients whatever level of supportthey require, from material and web linksto telephone and email.”

A direct mail and email campaign willalso take place later this month andmembers who express an interest inselling PPI can obtain an agent pack withweb links and supplies of client brochures. Graeme Trudgill is BIBA’s technicalservices manager

Policyholders areexpected todemonstrate goodstandards ofmanagement andhousekeeping

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Issued for use by insurance intermediaries only. This information has not been approved for use with customers.

Norwich Union Insurance Limited. Registered in England No. 99122. Registered Offi ce: 8 Surrey Street Norwich NR1 3NG. Authorised and regulated by the Financial Services Authority.

BFPAG0646

we know what’s what

We’re committed to ending the peaks and troughs ofthe rates cycleHaven’t you had enough of going up, down and round and round? You know whatwe mean: underwriting cycles, hard and soft markets, losses as a result of competitiveprice-cutting, followed by a huge hike in premiums to get back in the black. It’s unstable,shortsighted and bad for business. So we think it’s time for some clear, long-term thinking.Time to break the mould and hold one’s nerve. Which is why we’re flattening out the ratesrollercoaster to ensure we can all enjoy a smoother ride.

To find out more about our consistent rates thinking, talk to your Norwich Unionaccount manager.

we’re helping fl attenout the rollercoaster

ROLLERCOASTER BROKER.indd 1 26/2/07 11:53:13

TECHNICAL BRIEFING


A new EU directive means it is timebrokers woke up to environmentalrisk, advises Bob Martin

Why pollutionprotection is a priority

There have been some keydevelopments in the environmentalrisk field, so brokers must ensure theyare up-to-date so that they can givetheir best advice.

One crucial fact to be aware of is thatclean-up costs may not be covered by publicliability policies.

This was shown in the recent judgementin Bartoline Limited v (1) Royal &SunAlliance Insurance (2) Heath LambertLimited (2006, unreported). The costsincurred through complying with statutorynotices served on an insured by theEnvironmental Agency were not covered bythe relevant public liability policy. And thisshould cause insureds to question thepollution protection these policies actuallyafford – and brokers to think about theadvice they have been giving to their clients.

While the sudden and accidentalpollution clauses within public liability andother general liability and directors’ andofficers’ policies are still believed to providecover against third-party claims, the extentremains to be tested in a Court of Law.

Until then, what the insurer andinsured understand by the words “sudden”and “accidental”, and whether they have aconsensus of understanding, isquestionable.

It should be remembered that insurancecompanies originally introduced theseclauses as gradual pollution exclusions, andnot, as some now believe, as an extension tothe core policy wordings.

Onus is on brokersAs a consequence of the judgement inBartoline, the onus falls on brokers to advisetheir clients on the potential gaps in theirinsurance cover. Clients then need toreconsider whether some of the currentrange of specific environmentalimpairment liability (EIL) insurancepolicies provides the real protection theyneed, especially as these policies aretriggered by a pollution event, irrespectiveof the event being sudden or gradual.

The non-US EIL market has developedsignificantly since its emergence in theearly 1990s. Unfortunately, many brokersstill use the old, ill-informed, argumentsagainst EIL policies to hide from the factthat they have not kept up-to-date withdevelopments in the niche EIL markets. Ifthey do not do something about this,brokers will expose themselves to errors andomissions claims.

So, will the enactment of the EuropeanUnion Environmental Liability Directive(ELD) have an impact on brokers’ clients?

The directive is scheduled for enactment


by member states on 30 April 2007. Thedeadline for submission of comments to thefirst round of consultation by Defra, prior tothe statute coming into effect, passed on 16February. But, how many brokers are awareof it, and have they advised clients? Howmany have taken part in the consultation asan individual, a firm, as a conduit for clients,or through a professional association, suchas BIBA? The next and final round ofconsultation will be on the draft statuteitself. All BIBA members are advised to lookout for the updates on this, which will beavailable on the Defra website.

Impact on all businessesTo date, although some of the non-US EILinsurers are already writing endorsementsto take account of the directive, we have yetto see how public liability and directors’ andofficers’ insurers will react to the potentialextensions to their cover for liabilities toprotected species and natural habitatsintroduced by the directive.

Indeed the aforementioned Bartolinejudgement, as well as the “sudden andaccidental debate” calls into question theextent to which these policies offer trueprotection for clients’ potential ELDexposures. This may well impact on thetypical brokers’ client base.

Defra has stated it believes the majorimpact of the enactment of the directivewill be on small and medium sizedenterprises. But this is but one aspect thatwill bring about a greater profile forenvironmental risks in the boardrooms ofboth large and small entities alike across theUK. That increase in prominence willnecessitate that brokers and risk managershold real dialogue at board level of theirclients’/employers’ organisations, instead ofmerely aspiring to do so.

Polluter pays principleHowever, many may still need clarificationon the polluter pays principle.

While it is true that the polluter paysprinciple is a cornerstone of the directiveand much of the environmental lawthroughout the EU, this does not mean thatthose in non-polluting industries, such as

the service sector – even brokers – canignore environmental risks. They too canhave real, potential and perceived liabilities.

The directive relates to events after 30 April 2007 but questions on joint andseveral liability, and proportionalitythereof, are still to be resolved through thecurrent consultations, which may open thedoor for liability to former owners andusers of sites.

One interesting debate arises from thenumber of sites currently impaired byeither known or unknown contamination –whether quantified, or not – that pre-datesthe directive. While many believeenvironmental law is not retroactive, thepractical reality is that any present or pastowner, or sometimes even a user, of a sitemay be held liable for on- and offsiteenvironmental liabilities resulting fromcontamination in defined circumstances.

Reporting requirementsThe challenge for insurance brokers hasalready started. Environmental risks cannotbe conveniently categorised and some ofyour clients may prefer not to get involved,but procrastination is no longer an option.Such sentiments as “I don’t see mycompetitors doing anything about it”, or“The last person in my job got away withdoing nothing about it, so why should I?”are commonplace.

Environmental law has been evolvingexponentially since the introduction of theEnvironmental Protection Act 1990. Besidesthe directive, there has been an avalanche ofnew laws, mainly driven out of the EU, onwaste, air, water and packaging, to name buta few non-industry specific areas. In 2006 wesaw the proposed Soil Directive, and in 2007the proposed Environmental CrimeDirective has been unveiled, with proposedprison terms for directors of up to 10 years!In addition, we are witnessing ever-increasing financial and corporategovernance reporting requirements,coupled with public opinion onenvironmental issues at an all-time high.The past is no longer a good indicator forthe future for any aspect of environmentalrisk. Furthermore, the relatively recentregulation of insurance intermediariesby the FSA places a clear responsibilityon brokers.

The pressure is on brokers to provide aproactive environmental risk financeadvisory service to their clients. This createsan immediate challenge. After all, brokerscannot bury their heads in the sand, it mightbe contaminated!Bob Martin is director of risk managementsolutions at Aon Limited

This does not mean that thosein non-polluting industries,such as the service sector –even brokers – can ignoreenvironmental risks

‘‘’’

For more information contact Paul Dyer Tel: 0870 411 1890 Fax: 0870 411 1891or E-mail: [email protected] www.brokercontinuity.co.uk

Broker Continuity Planning (BCP) has been created to provide brokers with Work Area Recovery sites to help them complywith FSA rules for testable continuity planning.

Brokers are required to have a plan to help them recover from a disaster, but crucially, to make the plan work, a newlocation is necessary. That’s where BCP comes in, providing replacement offices around the country. A range of 3 serviceoptions are available. One of the options comes complete with IT preplanning to ensure that within hours your softwarematches the profiles pre-stored by BCP and your business is running smoothly from the BCP office. All at a BIBA discountfrom the normal price.

With purpose built offices in Wakefield, Stockport, Gloucester, Milton Keynes, London, Poole, Colchester and Whitstable,Broker Continuity Planning will be able to satisfy the continuity needs of most brokers. More offices are on the way and all include:

• Modern office space for up to 75 staff• Convenient location adjacent to motorways and trunk roads• Good parking (except Central London)• Close to Retail Parks• Latest version Dell PCs• Full internet connectivity (2 Mb)• Latest telephony• Advance ghosting of IT profiles available• Special discount to BIBA members – 30% year 1, 20% year 2 and 10% year 3

Where do you go if disaster strikesyour business premises?

Everything you need to satisfy the FSA and your stakeholders that you meet therequirements of SYSC 3.2.19G of the FSA Senior Management arrangements.

PROFESSIONAL INDEMNITY

Roger Flaxman provides straightforward and practical guidance forbrokers who could be faced with a professional indemnity (PI) claim

In the hour of needThere are few things more alarmingand disruptive than the realisationthat a claim may be made against abroker for negligence. But thesituation becomes even worse if it isfound PI cover does not give thesupport expected.

It is one thing to advise clientsimpartially and dispassionately as a broker,but quite another thing advising yourselfwhen you’re personally and emotionallyinvolved. The first reaction, and often thedominant initial reaction, is denial that aclaimant has any cause for grievancewhatsoever. While understandable, thisstance can be damaging and mayultimately lead to a worse outcome thanmight otherwise have been achieved.

BIBA has helped many members overthe years with their PI claims and the nextphase of its PI initiative is to publish acomprehensive guide to professionalindemnity policies. But what do you do ifyou find your claim runs into trouble?

BIBA member Akhil Chaudhry of Jaggiand Co comments: “I cannot praise BIBA’sclaims support service highly enough. In

more than 20 years we have never had aclaim made against us, but when we did,we were sadly let down by our insurers. Ifit hadn’t been for the BIBA team we wouldhave been uninsured and probablyuninsurable as well. We thought the claimagainst us was unjustified but we nowknow that that is no impediment tolawyers. BIBA’s specialist advisersexpertly guided us through this mostdifficult time and we thoroughlyrecommend them to other members.”

Problems frequently encounteredinclude disputes about exclusion clauses, knowledge of material facts, non- disclosure or late notification,conditions precedent, activities covered

We thought the claim against us wasunjustified but we now know that that isno impediment to lawyers‘‘’’


by the policy and the conduct of a claim.Alan Eyre, managing director with

accredited BIBA PI broker Towergate,comments: “Claims handling andresolution are the proof of performanceof your PI. When faced with a claim, BIBAmembers must feel confident they have astrong knowledgeable and supportiveteam alongside them.”

Neville Miles, director with Locktonanother BIBA accredited broker, says:“The quality of the insurance policy andthe integrity of the insurers is critical.Lockton will be happy to help memberswho have any concerns about their PIclaims or coverage.”

One firm bought PI from the insurerdirect and the other through brokersadvertising themselves as specialists inthe field. Each broker had correctly, andin a timely manner, declared

PROFESSIONAL INDEMNITY

circumstances which could give rise to aclaim. In each case, insurers initiallyrefused to accept the notificationsarguing that there was “insufficientdetailed information to constitute anotification”.

This put the brokers in a quandary asboth were receiving correspondencefrom the claimant that they did not knowhow to handle without expert advice.One broker was still acting as broker tothe claimant which potentially posedgreater difficulties that could prejudicethe outcome of the claim. Both brokerswere required to act as “a prudentuninsured” and incurring significanttime and expense, not to mention worry.

Hugh Price, director of insurance withsolicitors Hugh James and one of the BIBAPI advisers, says: “By dealing with theseissues early on – that is, before the partiesbecome entrenched in their respectivepositions – we can save a lot of time andtrouble later. The BIBA specialistsprioritise resolving problems quickly andwithout rancour. As Charles Dickenswrote: ‘The one great principle of theEnglish law is to make business for itself.We take a very different stance’.”Roger Flaxman is BIBA’s professionalindemnity consultant

Dealing with a PI claim

A top tip for every broker facing a PIclaim is to stop, look and listen.

Stop: Do nothing until you havetaken stock of the facts. Do notreact – particularly by email. Keepcalm and look at the facts. Ifsomeone makes a complaint,allegation or claim then it must betaken seriously and dealt withprofessionally.

Look: Look carefully and, as far aspossible, dispassionately, at whatis being alleged. Ask someone elsein the firm who is not directlyinvolved with the claimant, toadvise and act as co-ordinator.Quietly go through your own filesand records to see if you canrecognise the situation beingcomplained about and try tounderstand what is in the mind ofthe complainant. Try to view thesituation from the complainant’sperspective.

Listen: Above all, listen. Saynothing and listen to what thoseabout you are saying. Try to find outwhat the real issues are, considerthem carefully and only then, act.Don’t allow emotion to cloud yourjudgement. It is often possible tosee the problem and how to resolveit without fuss.

Notifying insurers At the first practicable opportunitynotify PI insurers with a short,dispassionate, detailed account ofthe complaint, allegation or claimas it has been put to you. There isno need to offer a defence at thisstage. Next, ask underwriters fortheir instructions and promise tosend a more detailed summary in afew days when you have collated


the information available. Keep intouch with your insurers and makesure you get an acknowledgment ofreceipt of all your communications.Chase them if you do not receiveresponses.

In the meantime, do not enterinto correspondence, telephonecalls or meetings or do anythinguntil you have advised your insurersand asked for their advice as towhat to do – and what not to do.

DifficultiesIf other difficulties arise thatthreaten to prejudice your policy oryour settlement, seek independentadvice. You must not risk thebusiness becoming uninsured, andtherefore in breach of FSAregulations.

Further helpBIBA has recently launched a newsupport service combining theexperienced insurance services ofFlaxman Partners, specialistprofessional liability insuranceconsultants, and solicitors HughJames. Any member who has anyconcerns about their professionalindemnity insurance claims orcoverage can have a free initialconsultation. Their services arethen available to members at aspecial member rate.

Any broker experiencingdifficulties or simply needing asecond opinion on a PI claimnegotiation should contacttechnical manager Graeme Trudgillat BIBA who may recommend aninitial consultation, which is free tomembers.

For more information on the PIinitiative, visit the new PI website,

www.biba.org.uk

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COMPLIANCE

The FSA’s commitment to movingregulation, where possible, awayfrom detailed rules and towards amore principles-based approach iscommendable. So too is the FSA’sreview of the new regulatory regimefor general insurance which has beenoperational since January 2005.

The FSA has mooted that some personallines products – such as motor and homeinsurance – could be deregulated. BIBAargues that any further moves towardshigh-level rules and deregulation need tobe handled with care, however. Theregulator cannot remove rules where aDirective requirement exists.

We believe the FSA may propose“turning off” certain rules in respect ofinsurers. BIBA argues that both consumersand brokers will be the loser if that doeshappen. Our independent research hasshown that many consumers buying coverare confused by direct and intermediarychannels and that they can mistake beinggiven information for receiving advice.

It may appear that products such asmotor cover are commoditised, but thereality is that any insurance contract ispotentially complex and no two buyers arealike. We only need look at the problemswith the sale of travel insurance throughunregulated travel agents, for example, to

see the potential dangers and to realise whyprofessional advice is so important.

Brokers should be extremely concernedby the FSA’s plans. Why should consumershave to listen to lengthy disclosureinformation from a broker, yet not whenbuying direct from the insurer? Whyshould insurers reap the competitiveadvantages of a speedier sales process?

Any moves to reduce the level ofdisclosure that insurers as opposed tobrokers must make to an already confusedpublic, sit uneasily with the FSA’sincreased efforts and spend on improvingfinancial capability.

BIBA has also argued that taking thisaction could potentially conflict withstatutory obligations placed on the FSA bythe Financial Services and Markets Act

In pursuit of thelevel playing fieldBIBA is campaigning on a number of regulatory issues toensure that brokers are treated fairly. Steve White reports

2000 which require it to secure the rightlevel of protection for consumers and topromote public understanding of thefinancial system. We believe that theGovernment needs to do more to letcustomers know about the benefits oftaking independent advice and how thisdiffers from buying direct. This is why wewill be participating wholeheartedly in anynational efforts to increase consumerfinancial capability, because the industrycan only benefit from better informedcustomers.

Members should be mindful of newregulations covering the activities of claimsmanagement services providers, warns BIBA.

These came into force on 6 April, and areas a result of the Compensation Act 2006.The new rules have been produced by theDepartment for Constitutional Affairs(DCA) and make it an offence to offerclaims management services in six areaswithout being authorised or exempt fromthe legislation. These are: personal injury,criminal injuries compensation,employment, housing disrepair, claimsrelating to certain financial products orservices and claims for industrial injuriesdisablement benefits.

These regulations are aimed at stampingout malpractice among unscrupulousclaims farmers – but some brokers couldwell be caught out. The rules also affectthose intermediaries who refer injuredcustomers to solicitors or accidentmanagement companies in return for areferral fee, where the injury is not thesubject of a contract of insurance – eg, in thecase of a motor accident claim where thereis not a before the event legal expensespolicy in force.

Members should be aware that there isan exemption available for intermediarieswho make less than 25 such referrals percalendar quarter.Steve White is BIBA’s head of complianceand training

For further information, take alook at the regulation section on

the BIBA website.


Brokers should beextremelyconcerned by theFSA’s plans

‘‘’’

Crèmede lacrème

Jane Kielty is oneof the UK’s bestambassadors forcareers in broking.She tells RachelGordon about her riseto the top

How did you start in broking?I took a law degree at ManchesterMetropolitan University and found outabout broking at a careers fair where Marshhad a stand.

Does it bother you to be singled outas a woman?I don’t have a problem with this – often it’snice. And, if it encourages other women towork in broking or insurance, then that’sfantastic. Generally, there are now morewomen taking on senior roles and as anindustry we probably need to look atdiversity more. It’s more trying to bereferred to as a “young achiever”. This doesnot always go down well with clients whomay think that you’re inexperienced. I’m30 now, so ready to drop that label!

Why did you move from Marsh to Aon?Marsh was my first job and on the graduatetraining scheme I learned a huge amountfrom using the photocopier to dealing withclients – they let me fulfil my potential. Istill think about what mentors taught me.The Aon role appealed. Sometimes it’sgood to move and experience a differentculture. I am now dealing with largerclients and have more autonomy.

Do you work long hours?If you take on a job with high levels ofresponsibility you can’t do nine to five.That said, my hours are not too bad.Sometimes you will have to stay late or

Why did you become BIBA regionalchairman?I’ve been involved with BIBA for aroundfour years. I enjoy meeting brokers fromdifferent firms and finding out aboutwhat’s going on and the issues that affectother businesses, including smaller ones.It’s been useful to find out about schemes,compliance topics and being part of thewider industry.

How do you relax away from work?Spending time with my daughterCharlotte who’s almost five – she providesimmediate stress relief – and my husband,Tony. I’ve also started to learn golf.

work at weekends though. A work/lifebalance involves lots of juggling and myfamily provide a great deal of support.

Would you recommend broking asa career?Definitely. There are many opportunities,fast progression, good levels of pay andbenefits and great people. If you havetalent and work hard, it’s easy to shine.Every day I enjoy what I do – I have apassion for it. There are few jobs where youget the inside story on how businesseswork. But we can do more to promotebroking and I’ve been involved in careersfairs. I think the CII’s talent initiative isexcellent – it’s time we glammed things up.

What has been the toughest thing youhave had to do in your career to date?At Marsh, you’re on a steep learning curveand I had five different roles. On one, I feltout of my depth but it was the quickest wayto learn. My boss took a bit of a gamble withme. I had to think on my feet and provideanswers – this is how you prove yourself.

How would you describe yourmanagement style?I would say fairly relaxed because I workwith competent and capable people – wework as a team.

Every day I enjoy what I do– I have a passion for it‘‘’’


Jane’s achievements

kwon BIBA’s Young Broker of theYear Award and is a finalist inBritish Insurance Awardskmentored by Marsh CEO Bruce

Carnegie-Brownk led an award-winning

community programme fordisadvantaged childrenk represented her company at the

European Women ofAchievement Awards.

IN MY EXPERIENCE

QUESTION TIME

DCA as an additionalregulatorQ: I sometimes refer businessto a claims management firm.Do I need to be regulated bythe Department forConstitutional Affairs as wellas the FSA?A: One of the outcomes of theCompensation Act 2006 is theregulation of claims managementservices. These have beenprimarily designed to regulateclaims farming and ambulancechasing. However, the regulationsalso potentially catchintermediaries as well. Where anintermediary refers an injuredcustomer to a claims managementcompany or solicitor – in theabsence of a ‘before the event’legal expenses policy – andreceives a referral fee, such activityis caught by DCA regulation.However, where the intermediarymakes less than 25 such referralsin a calendar quarter, there is anexemption available. To undertakereferral activities without DCAauthorisation will be a criminaloffence after 6 April 2007, so firmsare strongly encouraged to checktheir own situation.

The DCA has a dedicatedwebsite for the

forthcoming claimsmanagement servicesregulation at:www.claimsregulation.gov.uk

Taking responsibility forfire safetyQ: Who is responsible underthe new fire regulations tocomply with the new fire safety

order where there is amanagement companyoperating a block of flats? A: Responsibility for complying with the fire safety order rests withthe “responsible person”. In aworkplace, this is the employer, and any other person who mayhave control of any part of thepremises such as the occupier or owner.

In all other premises, the personor people in control of the premiseswill be responsible. The managingagent or owner is responsible forshared parts of premises or sharedfire safety equipment such as fireearly warning systems or sprinklers.

If you are the responsibleperson, you must make sure youcarry out a fire risk assessmentalthough you can pass this task to some other competent person.However, you will still beresponsible in law for meeting the order.

Ask the oracle

Email questions to:Regulation questions:

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

ongoing situation – irrespective of what the actual caution wasgiven for.

We understand that certainbodies have indicated that thecaution does not need to bedivulged. However, from ourdiscussions with insurers theyfeel that it is material and as such the caution does need tobe disclosed.

This conflict in itself showsuncertainty and it would beadvisable to take your clientsinstructions in this respect.

To disclose or not todisclose?Q. My client had been givena caution. Does this need tobe disclosed and when will itbe “spent?”A. Under the Rehabilitation ofOffenders Act, there is amechanism regarding convictionsand when they could be viewedas being spent. However this isnot true in relation to a caution.

A caution is not a conviction,and as such the Rehabilitation ofOffenders Act cannot giveguidance on this problem. We dounderstand, however, that this isto be addressed within the shortterm in relation to futureamendments to any new CriminalJustice Act and the “cautions” willbe one of the provisions of theRehabilitation of Offenders Act.

It is therefore advisable toidentify this caution with theinsurance company as an

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When it comes toknowing the ins andouts of insurance, theBIBA technical teamcan almost alwaysprovide the answers


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