issue 1 british insurance brokers’ association the broker...18 trade credit what the arrival of uk...

The BrokerBritish Insurance Brokers’ AssociationIssue 1

February 2012

Shaping our FuturesManchester 2012 Conference preview

Sharing an SME survival strategyBring business continuity planning to life

The best insurance is a BIBA broker

www.biba.org.uk

Member helpline: 0844 77 00 266

The benefits of the merger in a changing environment

A new dawn for members

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Many thanks to all the brokers who responded to our membership survey which we sent out at the end of last year. We want to ensure we represent you as effectively as possible – and your views count.

Responses are now being analysed and will be of influence as we look at the best way BIBA should be structured following our merger with the IIB – and as the new regulator is established.

2012 is set to be an important year in the lead up to the Financial Conduct Authority becoming operational. Now, more than ever, we need to be heard. We’ve made it clear that regulation is going to be a major focus in terms of our forthcoming activity and many members have stressed to us that they feel overburdened by the current system and are extremely concerned by rising and disproportionate costs.

But, while regulation is something which affects all brokers and will be a priority, there is a lot more going on – and our newly published Manifesto outlines our core campaigning issues. Whether you are an existing BIBA member or are reading this as a former IIB member, now could be an opportune time to find out more about our full range of services.

We’ve been holding a number of breakfast events aimed at introducing the benefits of membership and there is also a regional calendar on the website. Whether it is informal networking, training or a compliance forum, the emphasis is on sharing knowledge and boosting your expertise.

It is not just the regulator which is changing, so too is the business environment and being informed matters. If you’re not already doing so, make trade association membership work for you – and tap into all BIBA can provide.

Eric GalbraithChief Executive020 7397 0201

[email protected]

Leighann ForsythHead of Communications

020 7397 [email protected]

Graeme TrudgillHead of

Corporate Affairs020 7397 0218

[email protected]

Becky PledgeCommunications Co-ordinator


Steve White

Head of Compliance and Training


Steve FoulshamHead of Technical Services


Lindsay CampbellExecutive Assistant


Barbara BradshawExecutive Director


Vannessa YoungLondon Market and

Compliance Co-ordinator020 7397 0233

[email protected]

Kirsty WingroveHead of

Membership 020 7397 0224

[email protected]

British Insurance Brokers’ Association

8th Floor, John Stow House18 Bevis Marks

London EC3A 7JB

Design: beetroot (020 7749 0170)Print: Newnorth

Advertising: Mainline Media(01536 747333)

16 Industry benchmarkingThere remains an encouraging appetite for acquisitions shows the latest research from Macquarie Bank18 Trade creditWhat the arrival of UK Export Finance will mean for brokers

Management22 Professional indemnityOur new guide focuses on PI-related risks24 Your businessNotification of temporary fleet vehicles, regulations surrounding agency staff and challenging the compensation culture 27 Schemes focusSpotlight on valuations, private medical insurance and let property30 RegulationWays to mitigate financial crime risks. Details of BIBA’s new sanctions facility

Regulars04 ViewpointOpinion from Chief Executive Eric Galbraith 05 NewsNew Chairman Andy Homer speaks to members, and an update on our Manifesto 08 RepresentationA flavour of BIBA’s activities to promote the broker sector

Features 10 BIBA-IIB mergerWhy joining forces will benefit us all 12 Business continuity planningBIBA is working with the Cabinet Office and aims to help firms survive disasters 14 BIBA 2012 ConferencePreview of forthcoming Shaping our Futures event

Contents

BIBA contacts

While every care has been taken in the compilation of this magazine, errors or omissions are not the responsibility of the publishers or editorial staff. © All rights reserved. Products and services advertised within The Broker do not carry endorsement or recommendation by BIBA. The BIBA logo is added free by request to members’ advertisements. It warrants or signifies nothing more than the advertiser is a member. The views expressed in the articles within The Broker are those of the authors alone. They do not represent the views or opinions of BIBA.

Welcome In with the new

Inside Issue 1 2012

18

12

Follow @BIBAbroker on Twitter and YouTube, and join LinkedIn group BIBA

Leighann ForsythEditor of The Broker

Issue 1 / February 2012 3

04 The Broker

Chief Executive Eric Galbraith speaks out about the issues which matter to members

Viewpoint

RegulatoRy issues peRsist europeWhilst concerns about what is going on in Europe continue to dominate the global news, changes to the Markets in Financial Instruments Directive (MiFID) and the Insurance Mediation Directive (IMD) could also directly impact our sector.

We are increasingly concerned about mounting pressure to adopt a horizontal approach to all the legislation proposed with MiFID as a ‘benchmark’ rather than an ‘orientation’. Legislative proposals regarding MiFID and Mortgage Credit have been

published and are in the legislative process.You may also be aware that the European

Commission will probably at the end of February, publish the so called “retail package” comprising the proposals for IMD II and Packaged Retail Investment Products (PRIPs).

Though all of these legislative proposals are not directly linked, it is clear that the European Commission, Parliament or Council will, where appropriate, seek to adopt a consistent approach to common themes that arise in each area.

BIBA, through its European Federation, BIPAR, has for many years been closely

monitoring these developments and been successful in influencing the thought processes that have shaped the various positions that have been adopted by European bodies such as the Commission and the European Insurance and Occupational Pensions Association (EIOPA).

However given these pressures this could change overnight and we could quite easily find ourselves having to vigorously defend our members and consumer interests. We can take nothing for granted and will continue our lobbying activities both through BIPAR and directly. We have already raised our concerns with Mark Hoban, Financial Secretary to the Treasury and if appropriate, will call upon members to help add weight to our lobbying.

uKOur UK focus continues as we work on the new regulatory architecture with specific focus on Threshold Condition 4 (Adequate Resources)/Client Money and have engaged consultants to assist in our response to the review of the FSCS.

Welcome to iiB membersI would also like to welcome members from the Institute of Insurance Brokers who are now part of BIBA. It is great to have you with us as we embark on a programme of lobbying and fighting for a fairer deal for brokers from the regulator – and having some good times too.

Of course, many IIB members were already part of BIBA, but for those of you who are new to us, please familiarise yourselves with what we have to offer. You should be provided with log-in details for the members’ area of our website and you can also find out about our range of schemes and facilities. Could I also remind you about our Find a Broker facility where members list their areas of specialisation and location and which can result in new business when people search our website for a local expert.

looking ahead to ConferenceI also look forward to seeing as many as possible of you at our conference, Shaping our Futures, which takes place in Manchester on May 16-17. We’re well underway with planning the event and already it is clear that many brokers will be there. With so much being done remotely, this genuinely is one of the few times when we really can catch up and come away with invaluable new ideas and inspiration – and talk far more than a Tweet will allow.

“We can take nothing for granted and will

continue our lobbying activities both through BIPAR and directly”

Market brokers and MGAs want to have their own trade bodies, however I would like to see a reunification of our interests. A single body may not be on the agenda for many years, but we should talk – we should explore co-operation.

The essence of BIBA lies in the root and branch of its membership and it doesn’t matter what ideas I have, the BIBA Executive has to deliver

membership satisfaction. The current survey will provide us with the feedback we need to build this satisfaction and I will do my level best to support the BIBA team in doing just that.

I will be out and about meeting members during 2012 but in the meantime if anyone has ideas or suggestions about how BIBA might improve its performance please email me at: [email protected]


Comment

The first thing to say is that I am pleased to take on the challenge of chairing BIBA from Patrick Smith who has helped to complete the merger of BIBA and IIB and whose contribution will be a lasting one.

My focus will be to find out what our members want – nothing clever about that. However, we have a broad church and we need to figure out how we promote the needs of different groups. We have international brokers, London Market brokers, large regionals, small regionals, large personal lines, brands, aggregators and managing general agents. If we are not careful, we will please nobody.

The CII responded to a similar challenge by segmenting its membership via the system of “Faculties” which it operates today. BIBA similarly has a focus on different sectors in

the intermediary market and I believe we can strengthen this approach, making sure we speak with one voice when one voice is required.

The BIBA Executive, under Eric Galbraith’s leadership, do punch above their weight in the regulatory and technical areas. Often the work is beneath the radar and hardly glamorous. But a trade body has to stand up for the trade it represents and lobbying government, politicians, regulators and the judiciary is a vital part of what BIBA has to do.

There is much BIBA can do together with ABI and I’d like to see us working ever closer together. Let’s not forget many ABI members own brokers and it is important we know how we, ABI and BIBA, intend to tackle the never – ending scrutiny of our business and business models.

I understand too why London

Close co-operation counts: Working together to benefit brokers

Responses to the merger between BiBa and the iiB has been overwhelmingly positive from members – and we anticipate this being a major advantage in the mission to speak on behalf of brokers with one voice.

BiBa Chief executive eric galbraith comments: “We’re delighted with feedback – although i have to say, many members of both organisations knew that work has been going

on for some time to achieve this aim. We now just have some final details to iron out, but we are well set to work together as a united and powerful association on behalf of members.”

Barbara Bradshaw has moved across to the BiBa executive where she has been given specific responsibility for developing BiBa’s focus on issues that affect smaller firms. she adds: “We’re now

all part of an association that is focused and high profile. i’m excited about my role and what we can do to ensure small brokers have effective representation and will be giving it everything. We’ve been out talking to brokers and i’d also invite members to speak to us about matters they want us to address.”

Meanwhile at the recent iiB/BiBa reception at the House of Commons, Jonathan evans

Mp, Chairman of the all party parliamentary group on insurance & Financial services, said: “i’m delighted to mark the BiBa and iiB merger and to see one unified group on behalf of the industry”. He also noted that treasury Minister Mark Hoban was in attendance and that “the merger makes the industry voice more effective”.

* you can read more about the merger on page 10

BIBA – IIB merger receives support from all quarters

Andy Homer took over as BIBA Chairman at January’s board meeting. We are delighted to welcome him to this key role and here he outlines his plans for his tenure

A wealth of experienceAndy Homer was most recently Towergate Insurance’s Group Chief Executive Officer, and is now a non-executive board member there.

His insurance and broking experience spans 40 years including appointments as General Manager of Commercial Union UK (now part of Aviva) and Chief Executive Officer of AXA Insurance UK.

He has also held the position of Chairman of the Motor Insurers Bureau and is a Past President of the Chartered Insurance Institute.

‘Protecting our future’, BIBA’s Manifesto for 2012, is now out and will be our key document for the year ahead in terms of our lobbying work.

Chief Executive Eric Galbraith comments: “Producing an annual manifesto has proved highly effective for us in recent years. It allows us to get across quickly and concisely what we are seeking to achieve and what we believe in – it also shows the importance of brokers to the UK economy. This is our primary calling card with Government, the regulator and the media and I would ask that members also make sure they are up-to-date with the issues – many will be familiar since they are based on their feedback.”

The campaigning issues outlined in the Manifesto are based around four main areas, with the aim of empowering:– uK consumers – uK businesses – the insurance sector– the uK to trade worldwide.

empowering uK consumersThis encompasses our support of signposting to help direct those customers who find it difficult to obtain insurance. BIBA’s ‘Find a Broker’ service already helps more than 400,000 customers a year to access insurance protection. We believe the Government’s signposting service should be rolled out further.

We are also calling for improved financial education to be available.

Further, we want to see improved tackling of fraud. We will seek greater access to the DVLA driver licence database to reduce motor insurance fraud.

We will also continue our campaign to ensure customers

buying on the internet achieve clarity, certainty and appropriate insurance cover and continue to work with the Government to look at improving the cost of motor insurance.

empowering uK businesses We are promoting business resilience and will promote our research with the Cabinet Office.

We are also focusing on

catastrophe cover with a focus on flood risk and weather related claims, and will continue to work with government and our members to provide sustainable products to strengthen the resilience of our society.

The riots during 2011 highlighted the importance to businesses of having comprehensive business interruption insurance. Brokers are able to advise on the correct cover for businesses ensuring that they are able to continue to operate and are supported in times of need.

We also want to see raised awareness of underinsurance for businesses.

Further, we believe it is unfair for banks or other organisations to pressurise customers into purchasing insurance as a condition of other services. We will also continue to champion trade credit insurance.

empowering the insurance sector We are calling for a more appropriate, proportionate and cost-effective approach to regulation with specific regulatory consideration for general insurance brokers and intermediaries and we support reform of the UK regulatory architecture.

As the following table shows, brokers in the UK incur a far higher proportion in regulatory costs compared to the rest of Europe.

We are calling for the new regulator, the Financial Conduct Authority, to institute a revised regime and we are also demanding reform of the Financial Services Compensation Scheme. We want separation of professional insurance brokers from the secondary sellers of insurance and to end the practice of cross-subsidies.

We will also work with the

BIBA’s ‘calling card’ – our Manifesto for 2012 is out

News

06 The Broker


News

BIBA has progressed further in its work to alleviate potential issues between insurers and brokers and has now set up a formal Broker-Insurer Liaison Group which will be a forum for both parties to discuss matters openly and seek resolution.

The Group is chaired by General Insurance Brokers’ Committee (GIBC) member Denis Morgan and he comments: “We formally expressed the importance of continuing to work constructively with insurers within our 2012 Manifesto. Working together to jointly resolve cross market issues is obviously good for both parties and also the end customer.”

Work began in 2011 when we set up the subgroup and we now have in place representatives from ABI insurer members who will attend meetings on a regular basis. Denis continues: “Apart from working to resolve issues that affect us both, it is also very important to record the outcomes of our deliberations and communicate these to members of BIBA and the ABI. In this way we will create a reference point which will improve communication, avoid reinventing the wheel later down the line, and help to ensure

standards of professionalism within the industry are upheld. We plan to establish an ‘Issues Register’ which will be available to members of BIBA and the ABI this year.”

He says topics on the agenda have included reporting and transfer mandates, index linking, Terms of Business Agreements, and the Employer Liability Tracing Office (ELTO).

“In future, we are keen to engage early on as soon as significant market issues are identified so that we can prevent rather than cure – we would rather look at best practices and try to align thoughts in advance as opposed to picking up the pieces after the event. In non-competitive areas, we have already found that shared ideas can save everyone time and money.”

If further work is needed on a

particular issue, then the group may refer it to a relevant BIBA or ABI committee. Denis says: “I am sure that this forum will play an important part in forging improved relationships between brokers and insurers and that the Issue Register will assist all parties, as well as being useful reading. As soon as the format of this has been agreed, BIBA will host the register on the members’ only section of its website.”

Ian Dickinson, Chair of the GIBC, adds: “We’re confident a lot can be achieved through this group. It will work extremely closely with the GIBC and the aim will be to focus on practical ways of working through issues. While we will not be tackling individual grievances, we will take on challenging matters that impact on brokers across the market – it is going to make a difference.”

Working together: Broker-Insurer Liaison Group launches

regulator to build upon existing client money requirements. On the regulator’s Threshold Condition 4 – ‘adequate resources’, it is our view that if the regulator requires firms to hold more capital, that it should be on the basis of consulted upon and costed rules, rather than a judgmental approach.

Working effectively with insurers is also a priority and our General Insurance Brokers’ Committee will work constructively in this area. We also support the Consumer Insurance (Disclosure and Representations) Bill and its move to create greater confidence in the insurance industry and will work with the Law Commission to progress this.

empowering the uK to trade worldwideWe will work with the Government and other bodies to ensure that the regulatory, fiscal and legislative environment does not affect adversely our London Market members’ competitiveness. We will raise awareness about brokers’ activities and their importance to the UK economy. We will also work to identify and reduce barriers to growth for UK brokers.

We will also play an influential role in promoting and protecting our members’ interests in Europe. We want appropriate European regulations and for them to be implemented proportionately. In particular, we are calling on decision makers within the European Commission to provide a level playing field for insurance brokers and their customers through the reform of the EU Insurance Mediation Direction.

In summary BIBA wants to help members and their clients. If our Manifesto points can be progressed this should support growth in the UK broking sector.

Liaison Group Chairman: Denis Morgan

GIBC Chairman: Ian Dickinson

BIBA’s General Insurance Brokers’ Committee led the formation of the Broker–Insurer Liaison Group and will continue to work closely with it

Representation

08 The Broker

Representing brokers needs to take place on many different levels. We do this regionally through talking to MPs across the UK in addition to dealing directly with Government departments and relevant parties in Europe.

Then there is talking to the media to ensure our campaigns reach a large audience and that we do as much as we can to inform the wider public. We also meet up regularly with other trade associations, whether linked to financial services or in key business sectors.

This is a sample of some of the work we were involved in during the last few months of last year to provide a flavour of what we do. And if you are involved in representation work in your area, such as meeting your MP or are involved in a particular issue linked to brokers, then let us know – we’ll be pleased to share our insight.

– We met with the Environment Agency on the future of flood insurance.

Regulator meetings– We met with the FSA for discussions on

how the new regulator, FCA, will supervise our sector

– We met with the FSA to discuss client money

– We attended the FSCS advisory panel meeting

– We participated in Financial Ombudsman Service industry meeting

– We met with the FSA’s Practitioner Panel Secretariat.

europe– We attended The European Insurance

and Occupational Pensions Authority (EIOPA) consumer strategy day in Frankfurt

– We attended BIPAR’s key European Commission event about the future of catastrophe insurance for floods and storms

– We attended the European Commission’s Environmental Liability Directive experts’ meeting and conference in Brussels

– We discussed FSA price comparison website guidance with EU Commission officials in Brussels

– We met with representatives of the Dutch insurance market to discuss current issues.

industry and other organisation meetings– We met with the CII to discuss the further

development of broker ASSESS– We caught up with the new Managing

General Agents’ Association – We attended the Smaller Businesses

Forum 2011– We attended the CBI Trade Association

Council meeting– We attended a Lloyd’s regulatory

affairs meeting– We discussed new model TOBAs for the

London Market with LMA and IUA– We attended the Federation of

Independent Practitioner Organisations breakfast briefing.

leighann Forsyth is BiBa’s Head of Communications

political meetingsSome of the politicians we met with recently included:– Mark Hoban, Financial Secretary to the

Treasury who is a key influential stakeholder on regulation issues for brokers

– Lord Hodgson, to discuss access to insurance

– Andrew Cooper, Director of Political Strategy at the Prime Minister’s office

– Norman Lamb, Liberal Democrat MP for North Norfolk, to discuss regulation issues

– BIBA also attended the Conservative Party Conference, where we raised key member issues with 40 stakeholders including Government Ministers, MEPs and MPs.

government department meetings– We attended a number of the All Party

Parliamentary Group on Insurance and Financial Services meetings

– We met with HM Treasury and Government Equalities Office on signposting to brokers

With 2012 already up and running and so much work ahead, there is limited time for reflection, but Leighann Forsyth looks at some of our recent activities which rounded off a packed year

Spreading the word

Whether it’s cover for a skiing holiday, what insurance university students need or what to disclose on household proposal forms about solar panels, BIBA responds to a vast number of press queries over the year – and our team answer many questions which are sent in directly by readers, as part of the Mail on Sunday’s Ask the Expert panel.

It may be a technical query or it may be something which is highly relevant to consumers – young drivers is a typical example – but we always look to assist and whenever possible, inform or remind readers about the benefits of using a broker. There are many occasions when needs are not met from direct insurers or aggregators, from queries about business cover to

working abroad and in one recent example, the situation for ex-offenders.

We also make TV and radio appearances – for example, such as on BBC One’s Rip off Britain to talk about motor insurance or on local radio, often also on motor insurance and flooding. This is on top of the many requests we get from the trade press – and we also take part in their events. For example, we were on the judging panel for the recent Insurance Times Awards and we took part in Insurance Age’s ‘Big Idea’ judging panel and presented at Post Magazine’s fraud conference.

We can also assist members who are contacted by the press – and we recently ran media training for members to increase broker involvement in our PR activity.

Ask us anything

IIB merger

10 The Broker

BIBA and the IIB have successfully reached agreement on their plans to merge – a momentous decision which is set to bring benefits for the whole broking community at a time which is critical in terms of regulatory change, says Rachel Gordon

The merger proposals were first revealed at last year’s BIBA conference in Manchester, which took place in May, when Chairman Patrick Smith made the announcement during his opening address. The news was largely greeted with optimism and a sense that this was a necessary move – indeed this was a topic which had been regularly discussed within broking and was being mooted by the trade press.

Since then, a number of meetings have taken place to ensure the integration goes smoothly with IIB Chief Executive Barbara Bradshaw spending weeks on merger plans. She will now move to a new role as part of BIBA’s Executive with a brief to champion the cause of smaller brokers.

Barbara comments: “Working with BIBA over the past few months has been enormously rewarding and I can say that I’ve been impressed by the amount they do – in fact at times, it was a baptism of fire. The people have a fantastic work ethic and this is going to serve all our combined membership well.”

A membership survey is currently being conducted on the future structure of the

United we stand


Meanwhile, the motivations for the merger are clear. There are now far fewer brokers than in the days when the IIB was formed back in 1987. Times are very different and having multiple organisations makes no sense when there is a clear need for a single voice.

As Eric says: “More than 50 per cent of BIBA’s members could be classified as smaller brokers and they are one of our key focuses. But, I want us to be seen as the trade association for all brokers and intermediaries – because this is how we will get more done.”

Malcolm Lee, Managing Director of IIB member TEn Insurance Services, says he is fully supportive of the merger and is calling for all brokers to get behind it and in particular for those who have not joined to make membership a priority. “We were also BIBA members and I am a firm believer that all brokers should support their trade association. This is the way in which we as an industry will secure change. Brokers who are not members should not be complaining about regulation or other issues as they will not have the same influence.”

association and Barbara says feedback from members will be incorporated. “I would say to all brokers that now is the right time for them to join – and of course, for IIB members to renew their membership. We have already said that their fees will remain the same. In terms of the big picture, this is a golden opportunity for us to have the broking voice heard and for all members to benefit from a high profile and influential organisation.”

Barbara will be joined on the board by former IIB Directors Barry Fehler, Deputy Chairman of South Essex Insurance Brokers, Bryan Whicher, Head of Retail Professional Indemnity at Oamps UK, and Robert Pybus, Director of NPA Insurance.

Eric Galbraith, BIBA’s Chief Executive, comments: “The feedback from everyone has been really positive. We are now officially working together, but this has been happening for many months now – the IIB’s Ann Peel and Steve White have been collaborating on regulatory work which is so crucial now, such as what we want from the new Financial Conduct Authority and the FSCS review – and it’s been going exceptionally well.”

He continues that apart from regulatory and industry issues, trade association membership has an important role to play in promoting brokers. “It’s clear that not enough value is placed on what brokers do and there is a lack of understanding. We have to do all we can to change these perceptions.”

The IIB’s name is going to be used as part of a joint branding process during the transition period. However, IIB people will be at the heart of the new enlarged association. As Malcolm says: “I am delighted that Barbara is still going to be deeply involved. It sounds as though her role will be vital as smaller independents face so many challenges.”

Richard Gillingham, Managing Director at Dorset broker RM Gillingham, is also a member of both associations and says he believes it is the right time for the IIB to merge with BIBA.

That is not to say that many IIB members will not keep fond memories and be able to look back with pride at what their association achieved. Many still miss Director General Andrew Paddick who died suddenly in 2008 and was a charismatic individual. As Richard says: “The IIB punched well above their weight. Barbara’s work has always been excellent and it’s great she’s going to stay closely involved with a strong focus on the provincial broking community.

“In many respects both BIBA and the IIB have complemented each other and the merger is a natural progression which will benefit us all. With an ever-changing regulatory landscape and increased influence from Europe, UK brokers will need the support and guidance an enlarged BIBA can provide.”

Ian Dickinson, Chair of the General Insurance Brokers’ Council (GIBC), concludes that he is also looking forward to working with new colleagues. “As the GIBC, we’re the link between the grass roots membership and the executive, so all the members of this committee actively want to engage with IIB brokers, and indeed, to encourage new brokers to join the association. My one concern is that there is still some fragmentation in the London Market and I would urge them to work with us – the regulator is not interested in nuances within our sector – it wants to deal with one association.

“That said, I’m extremely positive about the future – we’re firing on all cylinders now and as has been shown, BIBA can achieve some outstanding results – we now need to get on with the job in hand as a united force.”

“In terms of the big picture, this is a golden opportunity for us to have the broking voice heard and for all members to benefit from a high profile and influential organisation.”

Backing the BIBA/IIB merger at our recent board meeting. Standing up – left to right: Alec Finch – AFL Insurance Brokers LtdBrendan McManus – Giles Insurance Brokers LtdKen Davidson – Crispin Speers & PartnersBarry Fehler – South Essex Insurance Brokers LtdMartin Oliver – Barbon Insurance GroupRobert Brown – Aon Risk ServicesDavid Perry – CCV LtdRobert Pybus – NPA Insurance GroupIan Dickinson – Brunsdon Group Sitting down – left to right: Neil Thornton – BluefinAndy Homer – BIBA ChairmanBryan Whicher – Oamps (UK) LtdBarbara Bradshaw – BIBA Lorraine Dillett was not in attendance at this meeting.

BIBA/Cabinet Office research

12 The Broker

Now, more than ever, SMEs need to switch on to business continuity planning (BCP). This is the message from the Government, which wants to see the UK better able to cope if disasters strike. Graeme Trudgill reports

BIBA has been working with the Cabinet Office Civil Contingencies Secretariat on a research project to gauge why having sound resilience measures in place can also bring businesses wider benefits than simply being able to start trading again.

The core audience for the survey is the SME sector which historically has failed to prepare for potential catastrophes. This is an issue which in general is not on their radars, in contrast to major corporates which will have a trained risk manager with plenty of insight.

With ongoing economic uncertainty, the Government wants to see all businesses taking BCP seriously. None of us know what is round the corner – respondents we spoke to said that the most common disruptions

which they felt companies could be affected by were flood/escape of water at 41.1 per cent and fire at 32.7 per cent – but other risk factors could be terrorism, serious IT failure or a power fault.

Views from brokers and insurersBIBA conducted the survey among our broker members and partner insurers in conjunction with the Cabinet Office Civil Contingencies Secretariat. We wanted to get across that BCP has a wider reaching impact. It can improve competitiveness in addition to ensuring continuity of service during common disruptions and more serious emergencies. It can also mean reduced insurance premiums and excesses.

More than a survival strategy...

“Clearly, from a risk management perspective, it makes a lot of sense if companies do have a business continuity plan in place.”


Sometimes directors are so busy on leading the company and looking ahead that it makes sense to find out exactly what roles employees fulfil, if new suppliers have been brought on board and to assess what alternatives are available.

Clearly, from a risk management perspective, it makes a lot of sense if companies do have a business continuity plan in place. It can make claims more manageable, leading to reduced business interruption settlements because the company is trading again. This has obvious benefits for the insured as the longer they stay out of the market, the more vulnerable they become. Our survey also found various respondents stated that a tangible benefit of a BCP was turning what would probably be an unacceptable risk into one which insurers would write.

There is a worrying lack of awareness. It is not unusual to find a small business which has little or no idea of what BCP is, even at a rudimentary level. Therefore it was not surprising to find that only 3.4 per cent of respondents felt that the British Standard

Key findings From speaking to brokers and insurers, our research found:

• 61.6 per cent of respondents said that those businesses with a Business Continuity Plan (BCP) will benefit from doors opening to new markets, a premium discount or a reduced excess

• 90.4 per cent of respondents said that large or medium size businesses are most likely to have a business continuity plan, compared to 3 per cent and 2.2 per cent of respondents who thought small and micro businesses respectively were likely to have plans

• 45.5 per cent of respondents said that business interruption insurance would benefit from improved terms or discounted premiums if a robust BCP was in place

• 55.7 per cent of respondents said that a premium discount is given if a BCP is in place. Of the insurer partners that responded, 83.3 per cent said they would give a discount or improved terms to a business interruption policy if a business continuity plan was in place.

First stepsCertainly while few businesses have vast amounts of surplus cash at their disposal, simply investing some time can get BCP started. Even if this just means putting a ‘mini plan’ in place, then this would still put the UK on a much firmer footing. As a nation, small firms are critical to our economy even if it tends to be major businesses which are always on the news.

It is worth remembering that according to the Office of National Statistics, SMEs, that is those with 249 employees and under, account for some 99.9 per cent of the UK’s 4.8 million private enterprises. There are 4.63 million business which have less than 10 employees and so fit into the ‘micro’ category.

Basic planning – with which brokers can assist their clients – means making sure that a company can keep trading if premises are forced to close. It is about having backed up data and contact details for customers and suppliers, including telephony, IT and utilities companies. Employees should be able to work from home if necessary and be aware of their roles if they needed to contact customers to provide reassurance.

BS 25999 was being promoted. This is the world’s first British standard for business continuity management and was developed to help firms minimise the risk of disruptions.

Looking aheadAt BIBA we would support Government moves to raise awareness of BCP and why it is important for even the smallest company. When there is understanding then the value becomes clear – the survey showed that some 95.9 per cent of respondents with sufficient information on business continuity felt that having a plan in place would have kept a business trading when they would have otherwise likely failed, or it would have been likely to reduce the cost of disruption significantly.

While there are experienced consultants within the BCP sector, the cost of their services may be prohibitive for many SMEs. As such, we would welcome the development of a more simple, reliable and low cost guide that could provide solutions.

Ministerial supportFrancis Maude, Minister for the Cabinet Office, said: “This survey has underlined the need for simple guidance on business continuity aimed at smaller firms. This echoes the commitment made by the Government in the Strategic Defence and Security Review to provide support to SMEs by improving their business continuity.” Our work with the Cabinet Office is ongoing in this area and we will keep members fully up-to-date with progress and how they can get involved.

Graeme Trudgill is BIBA’s Head of Corporate Affairs

“...respondents we spoke to said that the most common disruptions which they felt companies could be affected by were flood/escape of water...”

Francis Maude Minister for the Cabinet Office raising awareness for business

BIBA 2012 Conference

14 The Broker

Lindsay Campbell provides members with a preview of the forthcoming Shaping our Futures, BIBA conference, the must-attend event that has something to offer all brokers

This will also be the first time we welcome our new Chairman, Andy Homer, who is a passionate advocate of professionalism and expertise within broking. Andy will be making his inaugural conference address before Chief Executive, Eric Galbraith.

The Programme – insight, understanding... and entertainmentAs ever, there is a packed programme, with the emphasis on business and industry specific issues. Our keynote speaker on Wednesday, is Andrew Marr, one of the UK’s leading journalists with his own BBC 1 show. He will also act as host for the conference programme, showing plenty of charm and a touch of steel – and will no doubt will extract plenty of choice information from our panellists.

Our main panel event on Wednesday, ‘Shaping our Futures – the industry perspective’, features Arthur J Gallagher’s David Ross, Lockton’s Julian James, Stuart Reid of Bluefin, Sean McGovern from Lloyd’s and Towergate’s Nick Houghton, who will debate the key issues facing our sector.

On Thursday, we look at the broader picture with a panel event entitled ‘Britain against the rest of the world?’ Executive Editor of The Times, Daniel Finkelstein, Andrew Rawnsley of The Observer, Liberty Director Shami Chakrabarti and online Dragon and CEO of Ariadne Capital, Julie Meyer, will discuss the momentous events taking place in our society both nationally and globally.

Closing the conference will be an unmissable presentation from Sir Tim Berners-Lee, the Oxford University graduate who invented the World Wide Web, while he was at CERN, the European Particle Physics Laboratory in 1989. He has been rated as equal first in a list of 100 Greatest Living Geniuses.

The seminars – take something new back to your businessWe have expanded the number of seminars being held this year – and there genuinely

It’s the one and only

Shaping our Futures, the 2012 BIBA Conference and Exhibition, takes place at Manchester Central on 16 and 17 May and promises to be the most worthwhile business experience you attend this year.

Many of you may remember last year’s event, where our merger with the IIB was announced. This time, we will be gathering for the first time as a united association and we’re looking forward to welcoming all brokers both old and new.

Compelling and timely contentThis is set to be a pivotal year for brokers. We have a new regulator being established, but beyond this, the UK has been caught up in the turmoil of the euro debt crisis and the ongoing pressures of European regulation which can have a profound impact on us and our customers.

Shaping our Futures is about planning our next moves in terms of influencing the regulator – and we have shown this can be done – but also in making choices that are going to lead to better service for clients and more innovative ways of doing business. For many brokers, the BIBA conference is the one event they make time to attend and because the business ideas and contacts are without parallel, they know time taken away from the office will be repaid manifold.

Sir Tim Berners – Lee, Inventor of the World Wide Web

Andrew Marr, Conference Host

are subjects to suit everyone, no matter what their specialisms or experience over the two days.

Business trends to get you thinking, how to make money out of motor insurance, the future of broking, opportunities in healthcare, getting to grips with cyber risks, understanding trade credit, the latest on regulation and what future customers will demand are among the topics.

The exhibition – grab a slice of the actionThe exhibition is the heart of the event and where a huge amount of networking – and deals – are done. As ever, there will be stands of every description from the major insurers to small niche providers’ – many of which exhibit only at one event each year and that is BIBA, simply because of the quality and number of delegates it attracts.

Laughter is compulsoryEveryone deserves some fun and this is in abundance at our relaxed Comedy Store night, which takes place on Wednesday evening. This features some of the UK’s top up and coming comics and looks set to be another sell out. Feedback last year was superb and the location is just a few minutes walk from Manchester Central. The event includes drinks and a complimentary buffet.

Download our Gizmo We will be providing brokers with the facility to download our free BIBA ShowGizmo app to their iPhone, iPad, BlackBerry or Android device. This gives profiles of exhibitors, access to downloadable brochures and a display of all #BIBA2012 tweets along with an attendee list. It is also an ideal networking tool to make the most of your time at BIBA 2012 by connecting with other attendees and exhibitors and using it to plan your meetings and stand visits. We’ll have helpful people on hand to show you exactly how to make the most of this tool.

Members attend for freeShaping our Futures is free to BIBA members – and of course former IIB members. We are also able to provide you with a hotel room booking service. To book your place and to find out more, visit our website at www.biba.org.uk and click on to the conference link.

The BIBA team looks forward to welcoming you to Manchester.

Lindsay Campbell is BIBA’s Conference Organiser

Sponsored by

Stuart Reid, BluefinDavid Ross, Arthur J Gallagher

Julie Meyer , Founder and CEO of Ariadne Capital and online Dragon


Above, left to right:

Daniel Finkelstein OBE, Executive Editor, The Times and former political adviser to William Hague

Shami Chakrabarti CBE, Director of Liberty and Chancellor of Oxford Brookes University

Andrew Rawnsley, Chief Political Commentator, The Observer

Industry benchmarking

16 The Broker

Since the global financial crisis, businesses, industry bodies, government and households have faced unprecedented challenges. The UK has been through one of the longest and deepest economic downturns of modern times and insurance markets remain soft for the sixth successive year. Uncertainty persists around global economies and it remains to be seen what impact the European debt crisis will have on the UK.

Against this backdrop of uncertainty, Macquarie Relationship Banking undertook its inaugural benchmarking survey of more than 100 UK insurance broking businesses, finding that despite an understandable level of concern about the economic outlook, brokers have set their sights firmly on growth, with 79 per cent expecting an increase in revenue in the next 12 months.

In the past year, almost 60 per cent of all brokers surveyed grew their revenue, with the majority attributing this growth first and foremost to their sales and marketing efforts, followed by enhanced insurer remuneration deals.

See Fig 1

Approximately two thirds of brokers derive non-insurance broking revenue from financial services, most commonly life/risk and investment/pensions, while one third derive non-insurance broking revenue from mortgage broking.

In terms of profit (measured as EBITDAE 1), the average across the UK is 40.1 per cent, with brokers in Greater London, the South East and East Anglia reporting a slightly lower average of 37 per cent, in comparison to their counterparts in the rest of the UK who report an average profit of 43 per cent. This reflects

Macquarie Relationship Banking’s 2011 Insurance Broking Benchmarking Report shows the depth of resilience in the sector and that an appetite for acquisitions remains, says Gary Moore

Set your sights on growth

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3%1% 1% 2%

23%

12%

32%

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Fig 1:Change in revenue experienced during the last financial year (all respondents)

Almost one in every three brokerages experienced a decrease in revenue during their past financial year

1 E

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3%0% 0%

2%1% 1%3% 3%

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15%12%

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Fig 2: Change in revenue expected next financial year

Anticipated next year

Actual last year

Increased 58%


the higher costs involved in running a business near the capital and the higher percentage of broking businesses in the rest of the UK that experienced revenue growth in the past 12 months.

Looking to the futureIn the next 12 months, more than 40 per cent of brokers surveyed expect revenue growth of up to nine per cent, with a further 38 per cent anticipating growth in excess of 10 per cent.

See Fig 2

More than three quarters of those surveyed are expecting new client acquisition to drive future profit growth. This perhaps sets the scene for the strong focus on new business that is becoming increasingly evident across the industry, with 16 per cent of revenue coming from new business as opposed to 84 per cent coming from renewals.

This higher than expected proportion of total income emanating from new business may be attributed to the nature of the current market where businesses are tending to look for lower premiums, better cover or access to markets that smaller brokers find difficult to compete against.

Fewer than one in five brokers have been prompted by the global financial crisis to spend more time with their clients, which may have loosened the ties between broker and client, perhaps making clients slightly less loyal.

People watchingMore than 60 per cent of the workforce of a broking business is in client facing or revenue generating roles. While new business is increasingly making up a larger proportion of revenue, business development staff make up the smallest percentage of the client facing workforce, at less than five per cent. More than 50 per cent of brokers surveyed are, however, intending to grow their teams, with the recruitment focus firmly on revenue generating roles, in particular business development.

See Fig 3

As salary overheads (excluding directors) is the largest expense for a broking business, accounting for 33 per cent of its expenses, it’s critical to make sure the staffing mix within a team adequately supports the strategy of the business, be it a focus on new client acquisition, improving systems and back office efficiencies or relationship management.

Mergers and acquisitionsDespite the M&A market being previously dominated by the consolidators, growth focussed independent brokers have been nearly as active as the consolidators in approaching other brokers to sell their business in the last 12 months. While only six per cent of all brokers surveyed said they are a willing seller, a further 19 per cent consider themselves either a willing buyer or willing seller suggesting that if the price was right, they would consider selling.

When asked who they would sell to, overwhelmingly brokers said it would be to the highest bidder. Having said that, they are far more likely to sell to another broker than to

a consolidator, which suggests that if acquisitive brokers are willing and able to make a competitive offer, they are in a good position to compete against offers made by consolidators.

See Fig 4

• For a full copy of the Macquarie Relationship Banking 2011 Insurance Broking Benchmarking Report, please visit www.macquarie.co.uk/insurance-broking or call +44 20 3037 5645 and speak to Gary Moore

Gary Moore is Associate Director with Macquarie Relationship Banking

Fig 3:Staffing profile

Staff type All respondents GWP £10m+

Owners, directors, shareholders 15.1% 10.6%

Business development 5.6% 6.3%

Brokers 22.7% 25.4%

Commercial account exec 13.0% 14.2%

Personal account exec 5.9% 4.4%

Subtotal 62.3% 60.9%

Claims 5.2% 6.3%

Support/Admin/Other 32.5% 32.8%

Total 100% 100%

All client facing 62.3% 60.8%

All non-client facing 37.7% 39.2%

Total 100% 100%

Percentage of overall staff

Fig 4:Willingness to buy or sell

Who would you sell to?Buyer or seller?

Willing buyer Highest bidder

Neither Internal management

Willing buyer or seller Regional broker

Willing seller Consolidator

49%

26% 14%

14%19%

6% 4%

57%

Buyers: How would you fund it?

Bank 49%Own cash 28%

Private equity 4%Other 8%

Insurer (advanced commission) 8%Insurer (loan) 4%

and productive. Academic research* has found that businesses gained a 34 per cent increase in their efficiency in their first year of trading internationally, while those that exported were 11.4 per cent more likely to stay in business,” she says.

Ross is a member of BIBA’s Trade Risk Focus Group which was born out of the banking crisis of 2008/09. The group acts as the voice of the trade credit insurance broker community and promotes the benefits of credit insurance and related products.

It hasn’t always been easy. The demise of Lehman Brothers and the rescue of the major banks in late 2008,

Trade credit

The arrival of UK Export Finance to ease finance for exporters is welcome news when there are so many economic pressures – and access to trade credit insurance has also been a focus for BIBA. Vannessa Young looks at recent developments and opportunities for brokers

Opening the doors

The prospect of prolonged recession at home coupled with the threat of Eurozone debt crisis contagion has meant that the UK’s businesses are looking at markets further afield for growth. However, with challenging conditions for even the most experienced exporter, the prospects for small to medium sized enterprises (SMEs) can appear daunting.

The Government’s recently launched National Export Challenge introduced measures to help Britain’s SMEs prosper and create jobs, export to new markets, secure finance and reduce red tape. Part of those measures will see the Export Credits Guarantee Department (ECGD) adopting the name of UK Export Finance, to more clearly describe its role as a Government department in making access to finance easier for exporters by giving insurance and guarantees against payment risks.

The ECGD will also be introducing new products, placing trade finance experts regionally and developing new routes to markets in an effort to boost exports.

Susan Ross, Account Director, trade credit, at brokers Aon, welcomes the Government’s newfound enthusiasm for exports. As Chairman of the British Exporters Association, Ross understands the challenges in exporting and has been lobbying for the Government to give businesses more support.

Why exporting is so necessary“Exporting can bring enormous benefits to a business making it more innovative

18 The Broker

created some very uncomfortable years in the credit insurance market.

According to Sally Del Principe, Credit Team Manager and Associate Director at brokers Perkins Slade: “We started to see wholesale withdrawals in our clients’ cover, which resulted in much of the UK industry losing confidence in the benefits of the credit insurance product during that time. This created a great deal of negative press and blame being focused on the insurer, especially as some of this action

to a secure marketwas not communicated in a positive way. A lot of businesses believed their insurer had turned their back on them.”

BIBA appointed Perkins Slade to run its Credit Management and Bonds suite of products. This provides non-specialist

members the ability to offer their customers through the BIBA scheme a credit insurance policy at an affordable price with bespoke unique selling points which would not otherwise be available in the open market. The suite also offers finance, collection of overdue debts, credit report information on the financial worth of their customers, and bonds.

Del Principe says that given the harsh economic environment is likely to continue for several more years yet, it is important that businesses maintain confidence and work closely with their broker and their insurer going forward.

Part of those efforts have been the focus group’s discussions with the ECGD to fill the gap caused by the downturn to help UK businesses on an international stage and encourage business overseas. As Ms Ross explains: “BIBA was absolutely the right organisation for the ECGD to speak to.” It encouraged the ECGD to use the broker distribution channel to publicise the existence of trade credit insurance. In turn the ECGD was encouraged by the diversity and expertise of the focus group and the market penetration that insurance brokers had as professional, independent advisers in the wider business community.

A signposting servicePatrick Crawford, Chief Executive, ECGD, says: “BIBA and the broking community are uniquely placed to help address these challenges because they know the exporting community and the private market insurance players. They have the means to help spread knowledge of UK Export Finance’s offering and can signpost exporters to it when other sources of support are unavailable.”

Earlier this year, the ECGD extended its existing short-term insurance product, the Export Insurance Policy (EXIP), to provide support to a wider group of exporters. Significantly, BIBA also formed

“Academic research has found that businesses gained a 34 per cent increase in their efficiency in their first year of trading internationally”

Continued on page 20


“Businesses who credit insure not only obtain protection against bad debt, but the real value is it is a working policy ”

Trade credit

20 The Broker

an agreement with the ECGD to provide general insurance brokers with indirect access to EXIP for their clients via a number of specialist credit insurance brokers.

The agreement meant that brokers were able to access the scheme to insure UK exporters against non-payment by their overseas buyers. Access to this Government – backed insurance scheme had, hitherto, only been available direct from the Government to businesses. Brokers were also able to receive brokerage on the scheme of 10 per cent.

Ross is enthusiastic about the relationship that BIBA has built with UK Export Finance. That relationship has seen a sub-group of the BIBA Trade Risk Focus Group engage with senior executives of ECGD to ‘finesse’ the EXIP wording so that it provides adequate support for exporters and can also be used to obtain finance.

The UK Department for Business, Innovation and Skills has estimated that there are approximately 10,000 mid-size businesses which have the biggest potential to grow through exports, according to Ms Ross.

Determining which businesses could benefit from export assistance or already have trade credit insurance is a big task. One, it is hoped, that will fall to BIBA’s specialist trade credit broker members to assess and to help those businesses tap into export opportunities. “Insurance brokers can get the message out to firms that there

is the capability to offer good commercial terms and thereby be competitive,” she notes.

Lynn Mildner, Business Manager – Credit, T L Risk Solutions, who is also a member of BIBA’s Trade Risk Focus Group, agrees. Specialist credit insurance offers a good alternative to the more traditional means used by importers and exporters to protect themselves through letters of credit (LOC) as an example. “If someone goes to the bank, they will be pointed in the direction of a letter of credit. As a means of protection they are seen as being very secure, but in a lot of cases the most competitive, flexible and secure terms will be open account with credit insurance.”

Mildner says LOCs have pitfalls and can be a costly way of ensuring that sellers get paid. Nor are they straightforward, for example all the documents required by the LOC must match exactly the LOC down to the smallest detail, or they are invalid.

According to Del Principe: “Businesses who credit insure not only obtain protection against bad debt, but

the real value is it is a working policy, providing ongoing positive information on the creditworthiness (or lack of) of the customers they are trading with, thus constantly monitoring the financial performance of their customers. The policy instils disciplines and procedures into the credit management practice and function of the businesses which enables business to pick up early warning signs of potential problems their customers may run into in the future.”

Lessons have been learnt since the 2008/09 fallout and insurers have changed their underwriting models for assessing risk, says Del Principe: “Since 2008, latest filed accounts are considered too out of date. Businesses have now got used to supplying up-to-date financial information to insurers and therefore, while premiums may rise again due to an increase in insolvencies, and while risk will be considered carefully, insurers advise we should not see a return of the wholesale withdrawals of cover as experienced in previous years.”

Harris, R. and Q. Cher Li (2007), Firm Level Empirical Study of the Contribution of Exporting to UK Productivity Growth of UK companies

Vannessa Young is BIBA’s London Market Secretariat and Compliance Co-ordinator

It’s in Your Inbox

Don’t miss the latest news and information

• Updates on police and DVLA enforcement activity to reduce uninsured driving

• Tackling fraud – operational updates from the IFB

• Broker support materials such as ELTO guides and FAQ downloads

• Insights into ‘A Day in the Life’ of industry stakeholders

Graeme Trudgill, Head of Corporate Affairs at BIBA says:

“The Road Ahead newsletter is an informative read covering a wide range of industry news as well as important updates about MIB activities. The new electronic format is a welcome move that I’m sure will facilitate some interesting use of digital media.”

The Road Ahead is now Online

Latest news, industry-stakeholder views and snippets of insider updates: the Motor Insurers’ Bureau (MIB) quarterly newsletter has been redesigned to be with you wherever you are – whether you’re at home, at work or mobile.

Make sure you’ve signed up to receive your copy by subscribing at http://roadahead.mib.org.uk

MIB_TRA_Advert 210x303.indd 1 19/12/2011 12:45

Professional indemnity

BIBA’s latest addition to its PI Initiative library is a valuable aide-mémoire written primarily to help new or less experienced staff appreciate the risks faced in day-to-day business transactions. It is also a helpful refresher for all staff in avoiding the more common errors and omissions claims.

The guide covers areas including:

– What is the most common cause of E&O claims against brokers?

– What do you do if a client instructs you to do something you believe is wrong?

– What practical steps are open to brokers looking to reduce the risk of claims?

Policyholders have an expectation of

their insurance purchase. But, when it is not met, there exists the potential for a claim against the broker.

One of the most vexing problems in the modern insurance transactional process is getting essential information to the client and explaining what it means. More than 80 per cent of the errors made by broking personnel are errors of communication.

BIBA has launched the fifth guide in its professional indemnity initiative, with the new guide focusing on how general insurance staff can avoid PI-related risks. Graeme Trudgill reports

Spotting the risks…

Towergate adds: “Remember, the broker’s PI policy does not cover the substantial hidden costs of lost time, personal reputation and interruption to the business in preparing a defence to a claim. Brokers

cannot afford a claim.”Meanwhile, Lance Rigby of

fellow BIBA accredited Howden Insurance Brokers continues: “Broker

professionalism is currently under the microscope of the regulators and the courts. As an accredited BIBA PI broker we helped produce this guide in order to promote these issues to our clients and so this excellent publication is a timely and essential read for every broker.”

Neville Miles of BIBA accredited

Lockton Professions concludes: “In our highly litigious environment we need all the latest help and support we can get to reduce the risk of broker negligence. BIBA’s booklet no. 5 provides an excellent, concise overview of common causes of claims and offers some great tips to help mitigate these risks.”

Copies of the guide are available from the member line on 0844 7700266 or in the PI Initiative section of the BIBA website.

Graeme Trudgill is BIBA’s Head of Corporate Affairs

Warranties, Claim Notification Conditions, the effects of Conditions Precedent and the problem of Material Information are all communication matters that brokers could fall foul of without realising an error has been made.

Indeed, policyholders may point to recent case law to support a claim of broker negligence where they did not understand something about the policy which turns out to be crucial to the payment of a claim. This new BIBA booklet provides some more detail around these risks and some of the recent case law in this area.

Roger Flaxman, Managing Director of Flaxman Partners, the consultants to BIBA, has helped produce the guide. Roger comments: “This is what the members have asked for. It is an informal guide designed to create an awareness of some of the wide spectrum of pitfalls and potential liability risks of everyday business dealings that have long faced all brokers, BIBA members and non-members alike.

“While it is neither an exhaustive description of everything that can befall a broker in modern practice nor a definitive statement of industry practice, the guide should serve to highlight, by examples of recent PI issues and case law, the role that reliable PI cover can play for brokers who are challenged over the advice or service they have given or not.”

Alan Eyre from BIBA accredited PI broker

22 The Broker


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Your business

Are you in the know?

Brokers are being reminded to tell fleet clients that notification is needed of any temporary vehicles being added to fleets, to avoid policies being declared void in the event of a road crash.

Vehicle management company Fleet Support Group has said it is aware of two companies that were forced to pay vehicle repair bills running close to £3,000 each after short-term hire vehicles were involved in road crashes.

Fleet Support Group Chief Operating Officer Richard Minshull said: “In each case the insurance companies told the fleets that they had not been notified that the rental vehicles were in use and refused to pay out. There was no third party involved and no personal injuries so the bill was for repair of the hire car. Had other vehicles and people

Notification of temporary fleet vehicles, regulations surrounding agency staff and public liability cases which have challenged the compensation culture are under the spotlight

been involved then the cost to the fleets could have been massive.”

He added there is a growing trend for some organisations to use temporary vehicles for a variety of interim fleet solutions including: for use by short-term staff, for short-term contract work and while awaiting the delivery of new company cars and vans.

Mr Minshull continued: “Historically, insurance companies accepted that the temporary use of a vehicle by a fleet was covered under the terms of the policy. However, it now seems that tougher rules are being applied and insurers require notification so they can keep a check on how many temporary vehicles are on a particular fleet.”

Insurers should be questioned as to how they want to be notified of temporary vehicles being added to the fleet, whether

immediately, weekly or via a monthly report.Mr Minshull said: “This will enable the

insurer to estimate the fleet risk and adjust the insurance premium accordingly. The use of daily rental vehicles for a variety of business requirements is increasing and insurers want to cushion themselves against claims.”

Fleets that have temporary vehicles for a period not exceeding 14 days are not obliged to report such to the Motor Insurance Database (MID). However, it is strongly recommended that ALL vehicles, whether one day or more, are actually reported to the MID. (By applying a system of reporting ALL vehicles then there is less likelihood of oversight and the reassurance that there will be no risk of seizure at time of police spot checks etc.)

The MID rules aside ALL temporary vehicles MUST be reported to the insurer in compliance with policy conditions.

Safety first while cold weather remainsMeanwhile, the Fleet Safety Forum – part of road safety charity Brake – has published new guidance for fleet managers on the topic of ‘driver safety in bad weather’, and has stated that in the UK in 2010, 33 per cent of all fatal road crashes occurred when roads were wet, flooded, icy or snowy.

The guidance provides practical advice for fleet managers on how to approach this topic in terms of journey planning, communication with drivers, and equipping fleet vehicles appropriately. There is an ‘advice for drivers’ section that can be provided as a separate document to circulate to staff or post on intranet sites.

24 The Broker

Temporary fleet vehicles could pose a hazard

“Historically, insurance companies accepted that the temporary use of a vehicle by a fleet was covered under the terms of the policy.”

Any business which is at risk of public liability claims is likely to have seen sharp rises in premiums as a result of the compensation culture, leading to difficulties for brokers trying to place the risks.

Activity centres involving sports such as climbing and riding and trekking centres have been among the businesses hardest hit. But, it seems a number of court cases suggest the tide may be changing.

Louise Abbott, Partner with solicitors Berrymans, is part of a team at the firm that defends equine related claims and says that in recent years, there has been a shift in attitude.

Two recent cases in point include a claim against Richmond Park Riding School, when the claimant, Dr Patricia Seyf, fell off and injured her arm. She had signed a consent form, but claimed her horse was more skittish than the one she had ridden before. The judge agreed with the riding school which said she had simply lost her balance and fallen off.

Meanwhile, Beoley Equestrian Centre in Worcestershire defended a claim after a four-year-old child fell off a pony in 2006. The judge again rejected the claim that there was negligence.

Looking at the wider leisure market,


There are many reasons why brokers might take on a temporary member of staff from an agency, from helping out at a busy renewal time, to filling in when someone is off sick or on maternity leave or when several employees are away on holiday.

But, employers also need to be aware of the Agency Workers Regulations which include a number of requirements, including the 12 week rule which mean that equal treatment with regard to access to collective facilities and job vacancy information should be provided.

The regulations came into force last October and the 12 week rule means that after this time in an assignment, an agency worker is entitled to the same pay and conditions as a permanent employee doing comparable work.

It is important to understand exactly what equal treatment means to avoid falling

into the trap of providing a more enhanced kind of equal treatment than is necessary, says Peter Done, Managing Director of employment law specialist Peninsula.

He emphasises the regulations do not mean an employer has to provide agency workers with identical pay. Permanent members of staff may have been in a role for a long time and have consequently built up a package of long-term benefits. The agency worker is, after 12 weeks, not entitled to that same package because they do not have the length of service that permanent staff may have. The agency worker must simply receive the level of pay that you would offer a new permanent employee carrying out that role at the same level.

Where a pay scale exists which awards a higher level of pay in return for more experience on the job, the agency worker

should be paid according to the level of experience they have. It is not a breach of the equal treatment provisions if the agency worker is paid at the bottom of the scale, and a comparable permanent employee is paid higher up the scale. If the agency worker has less experience that places them at the bottom end.

Employers can avoid the regulations by employing someone for less than12 weeks. Genuinely self-employed people who provide business or professional services to clients are also excluded.

If an employer regularly uses temporary staff through an agency, Mr Done recommends they create a communication channel with the recruitment agency to ensure they tell them how much they pay their employees who are doing the same job as the agency worker, and their annual leave entitlement.

Tomlinson v Congleton was viewed as the landmark case when an 18-year-old dived into a council owned lake and ended up a tetraplegic. However, the lake was out of bounds to visitors and it was ruled the local authority was not to blame.

And, in the case of Evans v Kosmar Villa Holidays, it was again found that a 17-year-old who dived into the shallow end of a pool in the early hours of the morning and was seriously injured, had to bear responsibility for the accident rather than the holiday company.

Ms Abbott commented: “We are finding

that where it is a well run establishment there is now a greater willingness to defend, rather than seek an immediate settlement, so-called ‘nuisance payments’. We are pleased to see more judges make commonsense decisions based on the fact that some pursuits are potentially dangerous and risk cannot be totally eradicated.”

She said brokers can play a role in advising any client who has public liability risks to set in place sound procedures. These involve properly drafted consent forms, risk assessments to determine someone’s ability and experience and whether they have health problems as well as ensuring staff training is compulsory with any teaching staff being appropriately qualified.

Ms Abbott added: “Just having strong admin procedures is not enough. If there is an accident, brokers should remind clients of the value of witness statements – these can make a big difference if someone who saw an incident explains what really happened.”

She added that over the years, a number of well run riding schools and other establishments have closed because of the trauma caused by ill-founded claims. “If there is liability then of course there is agreement that a settlement should be agreed as quickly as possible, but claimants bringing no-win, no-fee claims have nothing to lose, so may pursue a claim even if it is not justified. Our message is that we will fight cases where an establishment has taken reasonable precautions to minimise inherent risks.”

Agency staff need handling with care

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Schemes focus

Why avoiding buildings under-insurance can be pricelessThose of us working in the insurance industry are well aware of the consequences of under-insurance and yet it remains a major issue. Around three out of four properties that are professionally valued are found to be under-insured and in many cases by as much as 50 per cent. As a consequence many policyholders could find themselves funding a large proportion of repair costs themselves in the event of a claim.

How often do we hear from the client that the current value is sufficient because it has been index linked. But, what if the original sum insured was not adequate in the first place?

There are a variety of issues or circumstances that are unique to a particular property that can affect the cost of reinstatement and this is especially true of listed buildings. Owners are accustomed to the higher than average costs of maintaining their properties but when it comes to repairs, many are surprised by the increased cost of repairing damage caused by a flood, fire or a burst pipe.

The rebuilding costs for these types of properties can be significantly higher for a number of reasons. Replacement materials may need to be handmade, or specialist craftsmen may be required in order to carry out specialist repairs or to replicate a particular construction detail. Extra fees for professionals, such as architects and surveyors, will need to be included in the valuation.

Work carried out on listed buildings may be subject to very strict planning controls, and local authority approval for any repairs or alterations may need to be obtained. Additional costs will need to be included in the valuation for liaison with the heritage authority.

Cunningham Lindsey’s valuation services team have extensive experience in valuing

Valuations, private medical insurance and let property are under the spotlight as Steve Foulsham provides a round-up

Cream of the crop

had been accurately calculated ensuring both the cover sold and the premium being paid was adequate.

Using a combination of qualifications, skills and experience relating to both surveying and insurance Cunningham Lindsey were able to offer clients a unique perspective into reinstatement valuations. At Cunningham Lindsey they have developed a Valuation Scheme with BIBA that is exclusive to its members. As a BIBA member you can benefit from a tailored and discounted fee scale based on the existing sums insured. Where the building is complex or for large portfolios a bespoke quotation service is offered and they are always happy to discuss your particular requirements with you.

The cost of a professional valuation is relatively small but compared to the potential consequences of underinsurance it becomes almost insignificant.

For further information, contact Cunningham Lindsey at [email protected] or telephone 0845 641 4975

period properties and were recently instructed to carry out a valuation for an historic building in Warwickshire. Both the broker and client had concerns regarding the adequacy of the current sum insured which they were advised was £32,000,000. Following receipt of instructions the surveyor made arrangements to carry out a site survey.

The property is a Grade 1 listed Palladian house designed and built in 1680 and constructed of Oolite stone. The internal fixtures and fittings are of a high quality and include some of England’s finest Baroque plasterwork dating back to 1750.

Following assessment of the rebuilding costs they recommended revising the sum insured to £42,000,000. An increase of around £10,000,000 that could have resulted in a considerable under-insurance issue for the client in the event of a claim.

As a result of the valuation the client can now rest assured that should disaster strike they will be adequately insured and any claim will not be delayed as a result of under-insurance. The broker benefited from the knowledge that their client had been professionally advised and that the premium


MYWellbeing – because healthcare mattersBIBA launched a individual private medical insurance (PMI) scheme earlier in the year, with the scheme giving members access to a bespoke range of four PMI plans called MYWellbeing.

The NHS is doing “pretty damn well” despite “scary talk” from Health Secretary Andrew Lansley, according to Lord Winston, the Fellow of the Academy of Medical Sciences and presenter of many BBC medical series. “Compared to other countries we have a brilliant system at low cost,” he says.

Despite this, the number of hospital patients in England waiting beyond the 18-week guarantee has jumped by a third in the past year, figures show. PMI plans can work alongside the NHS and enable you to get the best of both worlds, so is this something you have considered for your clients before?

If speed of treatment is a major concern to clients, who still support the NHS, then one option available on all four core plans within the range which might be of interest is a ‘six-week option’.

A six-week option means that once you have privately had your initial consultation and tests to get a diagnosis and you require admission into hospital, if it can be done on

the NHS within six weeks then you use the NHS. If the wait will be more than six weeks then you would go privately and use your private medical insurance policy to cover the costs. This would attract a discount of approximately 20 per cent off the standard new business price, which already includes a specially enhanced ‘no claims discount’, and therefore helps make PMI more affordable.

MYWellbeing is a bespoke healthcare scheme which enables BIBA members to access a range of PMI plans and is only available to your clients via the BIBA scheme. It is administered and exclusively distributed via Jelf in partnership with BIBA via a ‘no cross sale’ Introducer Agreement. It is underwritten by one of the UK’s largest private medical insurance providers – AXA PPP healthcare.

For further information about the BIBA scheme and MYWellbeing private medical insurance scheme, contact Katie Cook at Jelf on 0800 116 4512 or email [email protected]

Why tenants on benefits could cause landlord problemsLet property insurance specialist BIBALet is warning that property owners are at risk of having invalid landlords’ policies as a result of tenants claiming benefits without their

Schemes focus

28 The Broker

knowledge and that they need to act positively to reduce their risk.

Private landlords’ insurance policies are rated based upon the status of the resident residing at the property, with some insurers declining to insure where the tenant is in receipt of benefits. As such, a tenant in receipt of benefits or becoming unemployed is a material fact which the policyholder is obliged to disclose. This could leave landlords at risk of having their insurance policy invalidated should a change in their tenant’s status not be reported to the insurer.

BIBALet says that including a ‘Duty of Disclosure Clause’ within the tenancy agreement means the tenant is legally obliged to divulge relevant information, and a good broker or insurer will advise their client to check the document for this clause.

A ‘Non-Invalidation’ clause within the insurance policy will provide further protection. For example, BIBALet’s policy wording states the following:

“Any act or omission by a tenant without your knowledge and outside your control will not affect your rights under this policy providing you: a) give notice to us in writing immediately you become aware of any such act or omission and b) agree to any terms and conditions and pay any additional premiums required by us.”

In the event of a claim an insurer should obtain all information from the client to prove they were unaware of the circumstances. The insurer would then verify the details before deciding whether to pay or repudiate the claim.

Amy Flintham, who heads up the BIBALet scheme, comments: “Our job as a broker is to protect the landlord and we would advise that a clause be added to the tenancy agreement. We would also sell them a policy with a non-invalidation clause in it, helping reduce upset or conflict in the event of a claim.”

BIBALet has been developed with the freeholder in mind and to reflect the unique risks involved in letting a property.

For further information, visit www.bibalet.co.uk or contact Amy Flintham on 01420 470509

Steve Foulsham is BIBA’s Head of Technical Services

Towergate Underwriting, Towergate Commercial Underwriting and Towergate Professional Indemnity are trading names of Towergate

Underwriting Group Limited. Registered in England No 4043759 Authorised and regulated by the Financial Services Authority

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Tel: 0844 892 0965 Email: [email protected]

Professional IndemnityTowergate Professional Indemnity are accredited by BIBA to offer PI cover to BIBA members. We provide specialist PI cover for a wide range of professions and businesses, including brokers own PI, with risk and claims management.

Tel: 0844 892 1789 Email: [email protected]

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Contact our Broker Support Unit for details of our full product range

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Leading the BIBA PI Initiative T: 0845 602 2579 W: www.lockton.comA division of Lockton Companies LLP. Authorised and regulated by the Financial Services Authority.

“Millions saw the apple fall, but Newton asked why.”

Bernard Baruch

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Your sanctions solution

The guide, called Financial Crime: a guide for firms, explains the FSA’s expectations in relation to firms’ financial crime systems and controls.

It does not introduce any new requirements for BIBA members and its contents are not binding, rather it consolidates existing FSA guidance on the following financial crime risks: money laundering and terrorist financing; fraud; data security; bribery and corruption; and sanctions. Members need to bear in mind that examples of good practice included in the guide provide ways, but not the only ways, of meeting the FSA’s requirements.

BIBA has been raising awareness about the importance of complying with the UK’s financial sanctions legislation for a number of years. Members should be aware that the UK financial sanctions regime lists individuals and entities that are subject to financial sanctions. These could be in the UK, Europe, or elsewhere in the world. HM Treasury maintains this list, known as the UK Consolidated Financial Sanctions List.

In general terms, the law requires firms not to provide funds or, in the case of the Terrorism Order, financial services, to those featured on the list, unless they have a licence from the Treasury’s Asset Freezing Unit.

Helping you screen correctly BIBA frequently receives calls from members telling us of the difficulties they are encountering when screening their client lists against the Consolidated List to ensure that their customers are not target names. To overcome this, BIBA has signed with Professional Office Ltd to provide a cost-effective, automated financial sanctions screening facility which will provide members with reassurance that their customers do not appear on the Consolidated List.

The new facility, which is called SanctionsSearch.com, will enable BIBA members to upload their client data and have it automatically checked against the Consolidated List. Through the facility members will be provided with a robust audit trail to allow them to ‘evidence’ and ‘demonstrate’ that they have initially checked that their clients are not on the Consolidated List. The SanctionsSearch.com facility will also ensure that when any changes are made to the Consolidated List, users’ client data will automatically be rescreened to ensure that this remains the case.

BIBA is part funding the facility as a member benefit and all members will be pre-registered. Registration will also include a number of “free” search credits and the member would then just need to activate

the facility and discuss the total credits required with SanctionsSearch.com in order to provide a more personal solution for their client banks. There is also an option to extend the facility to include checks of the International List if appropriate to the member’s business.

The cost for brokers under the facility is based upon blocks of search credits purchased (blocks of 125 boosted to 150 for an initial period) with the first 150 being free of charge to members. Most importantly all re-screening of data after HMT updates is completely free of charge.

BIBA has negotiated competitive rates from SanctionsSearch.com, although they are happy to discuss more bespoke arrangements for members with extensive client banks. For more information please contact: Steve Foulsham, head of technical services. t: 0207 397 0234 or email [email protected]

Vannessa Young is BIBA’s London Market Secretariat and Compliance Co-ordinator

* Members can access Financial crime: a guide for firms on the FSA’s website at: www.fsa.gov.uk/pubs/policy/ ps11_15.pdf

Regulation

30 The Broker

A new regulatory guide from the Financial Services Authority provides timely assistance to members about how they can mitigate their financial crime risks. Vannessa Young reports

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