Protect that client

It's perfectly natural - and indeed desirable - for a regional broker to be protective towards his or her clients. Protective in the sense that they want to guard the relationship with the client, and equally protective in wanting to ensure the client's best interests are properly looked after.

But

if a client comes to a regional broker with a risk that is either new to them in terms of their experience, or is much larger or more complex than has previously been dealt with, that broker faces a difficult decision. Personal lines brokers occasionally find themselves in this situation when they are presented with a commercial risk. And while the broker may wish to attempt to place the business, the fact that many Lloyd's underwriters for example, restrict the number of brokers they deal with, can be a deterrent.

I can certainly remember one case in which a personal lines broker was asked to arrange cover for a company renting microphones and other broadcast equipment to television companies such as the BBC and theatres. The client was frustrated by their previous insurer - a large composite household name - because of the company's lack of knowledge of the entertainment business and nature of the risk.

It was a daunting challenge for the personal lines broker. Their key problem was how to keep the client's new business while really meeting their needs. The answer was to get help from another broker. In this case, the personal lines broker was able to link up with a Lloyd's broker with a specialist entertainment division that was able to provide a more bespoke policy and less onerous restrictions.

A Lloyd's broker is one that has been accredited by the Lloyd's market, thus giving brokers direct access to all underwriters trading on the Lloyd's market. At the last count, there were around 150 firms, predominately in London, that have been accredited. Accreditation is carried out by the Broker Services team, part of the Corporation of Lloyd's.

Lloyd's brokers were, until 2000, regulated by Lloyd's. But with the advent of the General Insurance Standards Council (GISC), Lloyd's took the opportunity to transfer its regulatory powers to the GISC, with the FSA's approval. However, this will be just a temporary state of affairs as, shortly after the move, the Government said the FSA would regulate all brokers from 2005 onwards.

Lloyd's brokers range in size from global operations such as Marsh and Willis to small, specialist players working in areas such as sports contingency or entertainment. While many regional brokers feel uncomfortable about taking their business to one of the very large firms, the smaller operations can present the prospect of an attractive and mutually helpful relationship.

Choosing the right broker to form the relationship with is obviously critical. Last month's article dealt with the specific issue of how to form partnerships, but at the risk of repeating, I think it's right to highlight a few of the key recommendations. In particular, the views of colleagues in the industry should be sought; the insurance trade press can be checked; service standards - if they exist - can be reviewed; and the quality of staff you deal with are all significant factors in determining whether this is a high quality operation or not. Choosing the right partner can boost your own reputation - choosing the wrong one can damage it badly.

A high degree of trust between you and a specialist broker is necessary because you may need to introduce the broker to your client particularly if the complex nature of their risk demands face-to-face contact in order to scope the risk fully. Clearly this could lead to a situation in which your client forms a relationship with the new broker, leaving you to be squeezed out of the picture. A Lloyd's or London broker with high standards would not allow this to happen and would ensure that the regional broker is seen as being the true owner of the relationship.

Two concerns that are often raised when distribution chains start to grow are cost and speed. The more brokers involved in placing a risk, the more commission to be paid, and the more paperwork to complete. The key here is that a good specialist broker will add plenty of value to the transaction and therefore earn commission - a bad one might not. Similarly, a good firm of brokers will have the new technology and the administrative processes needed to ensure rapid turnaround of business and accurate paperwork. This is why service standards can be an important check before engaging in the partnership.

Good specialist brokers should have the competence, the knowledge and the experience to place your risk -and to enhance your firm's reputation in the process. Choosing the right broker to deal with should not pose a risk to your continuing relationship with the client. It should be the move that secures it.

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by John Collier

Managing Director, Gresham Insurance Brokers