Regional review: Newcastle and the North East

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Talk of the Toon: The economy in the North East has been on the up, but how will the broking community and their clients fare after the Brexit vote?

You can see St James’ Park, home of Newcastle United Football Club, from the window of Henry F Dodds. The two are barely a goal kick apart.

“It is an amazing stadium,” says Ian Henderson, director at the firm.

The club is a symbol of, and focal point for, the community. As Henderson points out, on match days you can see the floodlights lit up and hear the oohs and aahs of the crowd for miles around.

And community is a word that occurs throughout the insurance-focused interviews with experts in the region.

Henry F Dodds was formed in 1934 by Mr Dodds who ran the business with his wife. She was key in keeping the firm going during the Second World War while he served in the Merchant Navy surviving being torpedoed twice.

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Henderson’s father joined the business in the late 1950s taking over when Mr Dodds retired. Having started in insurance at General Accident in 1980, Henderson came on board in 1985. “We are a good all-round insurance broker,” is how he describes the business, which has £3m of gross written premium (GWP) is 85% commercial and focuses on SME business. The vast majority of clients are within 30 miles of the office as the crow flies. It is involved in most sectors without being heavily dependent on one.

The local broker market has seen changes over the years with plenty of consolidation and Henderson admits to having received calls but is “happy staying independent”. He adds that among the brokers there is a “healthy respect” for each other but plenty of competition. In his view local expertise has huge importance: “If there are brokers attacking our account we know the area and the businesses. We are on site.”

Competitive market

One such competitor is Bluefin. The office was started in the 1970s as a part of Willis, was sold to Smart & Cook around 2000 and thus ultimately became Bluefin. It boasts £4m in premium working across both the private and public sector.

Mark Daley, divisional director at Bluefin with responsibility for the area including Newcastle, highlights that the office’s retention rate north of 90% is built on servicing clients properly. “There is lots of competition and options for people,” he notes.

While price has always been a factor in any relationship, he also believes that Bluefin is poised for further growth and will benefit from regulatory changes. “The Insurance Act is an opportunity to get back to talking about the risks a business faces rather than purely the price element,” he suggests.

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According to branch director Mark Taylor this growth will come from both sides of its 100% commercial offering. “The private economy is fairly buoyant in a lot of sectors,” he reports. Although the old traditional heavy industries of the region may have gone, in his view many manufacturing and service industries are growing and thriving locally.

The public side of the equation – the office has a long standing heritage in further education and colleges for instance – is more complicated. “A lot of central government austerity measures in recent years have filtered their way down to public sector education,” he accepts, noting it is driving change. This could be seen as an opportunity or threat depending on your viewpoint. Taylor’s is upbeat. “We are looking to grow that part of our account rather than reduce it,” he reports. “Mergers and acquisitions give us some opportunity to do that.”

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Hiring problems

JM Glendinning’s Newcastle office only started trading in 2013. Managing director Neil Forrest set up the business, which is owned by him, a partner and the group, having spent 17 years with Allianz and more recently as Towergate’s MD for Newcastle and then the whole region.

It has already grown from the two founders to 15 members of staff with £4m GWP.

“Recruiting is probably our biggest challenge,” he says. “Insurance in Newcastle is not as strong as it used to be.” Forrest recalls that when he started every insurer had a full branch with 30 people or more. “There was a ready pool of well-trained insurance people to take and that is not there as much now.”

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The business is targeting and on track for £10m of GWP within 10 years and will have to increase the headcount further. Initially it was not a huge issue. A round of redundancies at Towergate created a “pool of people looking for jobs” but he accepts that “it is becoming more challenging now”.

With the likes of More Than and Tesco Underwriting and other call centres having a presence in the region he finds that potential recruits with elements of relevant insurance knowledge are available but stresses that they have to be developed. “You have to grow your own,” he states.

The broker is somewhat different to others in the regional review. It only has a small client base in Newcastle as 70% of its business is non-standard SME. “We have probably got more accounts in London,” he reveals. It leaves him in a strong position to compare Newcastle with the rest of the country.

He believes that it has “done okay” noting: “The more you move away from the centre into the wider region in smaller towns and rural areas the more it has been hurt by the economic conditions of the last few years.

“The North East has had to move on and reinvent itself.”

Michael Farrell, partner at Lockton in Newcastle is also able to give a country wide and indeed international perspective. Albeit one from the other end of the broker-size spectrum. He has spent years working in the city, five at Aon and 11 with Lockton. The broker tends to work with businesses with a minimum of £15m-£20m turnover and some 60-70% of clients are North East based.

“We look for clients who have larger, more complex risk and insurance requirements who value the expertise we bring and look to work with us on a long-term basis,” he reports, adding: “It is strategic risk advice rather than sector specific.”

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His overall impression of the local economy is positive. “Everybody seems to be doing a bit better than a few years ago but some sectors are finding it harder than others. There is a lot more work around. Growth is steady and going in the right direction but wouldn’t be back to pre-recession highs.”

For years Lockton has achieved double digit annual organic growth and Farrell is confident it will continue over the next 12 months. In terms of servicing the new clients who will make up the bulk of the growth he accepts that insurer representation has decreased over the years but is adamant that local brokers can still get business done.

“We have relationships all over the UK with insurers. To some extent we don’t mind where insurer service is delivered from as long as we are getting the best of what they have to offer.

“Our raison d’être is to get the best for our clients. If that comes from Newcastle great, if it comes from London it doesn’t matter.”

Hive of industry

NC Insurance’s managing director Philip Belgian came into the business in 2000 after trying to pursue a professional rugby career. It was supposed to be on a temporary basis but he enjoyed it so much he never left. It has been family owned and operated since the 1970s.

“The approach we take is that we try to educate clients about the importance of their insurance programmes,” he recounts. Around 95% of the client book is within 50 miles of the office and 85% is SME coming in all different shapes and sizes, from one man bands to those with 60 employees.

“The vast majority of the businesses we see tend to be manual trades but the service sectors are rising,” says Belgian. “More of our client base tends to be businesses making something or selling something. You do see more of an industrial bias within this area.”

The company made five acquisitions between 2004 and 2009 taking it to £8m of GWP. 

“We tried to make sure we have quality rather than quantity,” he details. “When we are dealing with businesses and looking after their insurance arrangements and risk programmes they need to have somebody they can trust who can give them good advice rather than a call centre mentality.”

Recruitment is a recurrent theme for the region. Belgian, who became MD in 2009, reveals that 20% of its 25 people started with the business on its apprenticeship programme.

Like all the leaders, he knows and respects most of the brokers in the area. A difference though is where he spots competition coming from: “We are seeing out of area competition with schemes providers,” he details.

However, the community angle returns again in his response to just how he deals with threats to client accounts. “We try and counter it with our local presence and having regular visits,” he says. “We also have claim reviews to identify patterns where claims might be arising affecting the insurance cost in the future and to manage those costs going forward.”

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Keeping in touch with people and relationships is a key theme for Todd and Cue director Chris Scott. He joined the business in 1981 two years after it was set up. It has now grown to 26 people and £17m of GWP working across areas including transport and logistics, IT, professions and the leisure market such as pubs and restaurants. All told, 85% of its business comes from within 30 miles.

Robust region

“The North East has probably been hammered more by recessions than anywhere else,” he suggests. “A lot of businesses here are quite robust.” When it comes to recessions: “People battened down the hatches and tightened their belts.”

Like many brokers he was surprised by the outcome of the Brexit vote. In his view it has introduced uncertainty to the market but he believes that the people in the region will either grab any opportunities or cope with any setbacks. “The more progressive business people are saying it is done and we’ll make the best of it. I am anticipating a six to 12 month degree of stability, let’s not rush at anything,” he notes.

Adding: “The worst thing anyone can do now is whinge and moan about it. We have to get on with it. We will survive.”

The positivity is backed with pride: “Newcastle has always been considered a fun city, a party city. There has been a plethora of new hotels going up, construction has been doing okay. Lots of new bars have opened up,” he lists.

So what then of the prospects of that other pride of the Newcastle, the football team under the relatively new boss Rafael Benitez? Toon supporter Henderson concludes: “I’d like to see them get out the Championship with ease like they did last time.”

The insurer point of view

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Les Archibald, branch manager for Axa Insurance in Newcastle formerly led the team at Allianz before switching across in July 2014.

“I take a lot of personal pride in persuading Allianz to come to the city. I was heavily involved,” he remembers. “It is a great company with great people but for a number reasons it didn’t quite go as planned.”

Archibald’s main frustration was that the offering was limited to new business rather than being a full standalone unit.

His kind reflections on his previous employer are part of a wider, considerate viewpoint. He describes Zurich pulling from the region earlier this year as “really disappointing”, a mind-set he maintains was true among brokers and insurers alike.

“Being part of the community up here and having spent most of my working life up here it is important to most of us that we keep the insurance industry thriving and strong,” he says.

Clearly a competitor leaving is also an opportunity and one Archibald is keen to grab.

In two years the branch has nearly doubled its GWP to £18m writing business from £10,000 upwards. According to him it can deal with 95% of cases, only the extra-large really complex risks are sent elsewhere.

“The brokers up here are straightforward people. If you are honest with them they respond well,” he says.

It is an attitude that has served the provider well as brokers forgave an earlier faux-pas. When Axa tried to pull back from its regional presence it made, in Archibald’s words, a “pretty quick u-turn”. It re-opened in November 2011 after having “haemorrhaged” business, ironically plenty of it to him at Allianz.

But his target now is to grow Axa. His 

office has nine staff with over 100 years’ experience: “We have grown up largely with most of the brokers that we deal with. Sitting with a broker and their client – there is no substitute for that.”

He concludes: “Most of the businesses up here would have retention above 90% and we are mirroring that. There is a lot of loyalty between the clients and their brokers and in turn between the brokers and their insurers. It lends itself to building high levels of trust.”

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