Outsourcing broker Q&A

Outsourcing is becoming increasingly attractive to brokers, especially in personal lines where direc...

Outsourcing is becoming increasingly attractive to brokers, especially in personal lines where direct writers have become dominant in recent years. Delegating certain calls for products can allow brokers to effectively act as a direct writer, but without the massive investment in resources. In March last year broker RK Harrison began channelling personal lines enquiries from two affinity schemes for motor, household and travel products to Outright. Peter Currell, director of RK Harrison's home and contents division tells Insurance Age about his experiences of outsourcing.

Why did you decide to try outsourcing?

RK Harrison started its outsourcing for its new affinity arrangements, but not for our own business, as we needed to provide our affinity partners with a total solution. This was because our main business is primarily as a high net worth house insurer, and we concentrate on services where we personally visit the client. However, there were elements where the clients often just want a telesales service to deal with their insurance, and with such clients, all it's about is the price of the premium. Basically we needed to compete with direct writers on house and motor insurance.

We went through outsourcing with Outright because it would allow us to let them deal with the clients in that particular area, and keep the clients we handle here at RK Harrison's offices. Almost all calls are kept with Outright, and I believe they are mostly on motor.

What were your first thoughts on outsourcing before you tried it?

I had no preconceptions on the concept before we started outsourcing as we've always concentrated on high net worth, and had never gone for smaller business. In the past, if our clients were looking for smaller items of business we would just refer them to another broker who could deal with it. This was almost outsourcing anyway, but when we looked at affinity schemes, they wanted the full package, which RK Harrison is not set up for. Outright are the ones who deal with the low end of the market, such as household, which most brokers are unable to handle, and so they need someone to deal with telesales. Brokers need to buy into a centre that's already there, and which can generate additional income for clients who need to be serviced.

How did you proceed and choose the right outsourcing firm? Talk us through the process.

We were aware of two outsourcing firms, both of whom were introduced to us by insurers and premium finance companies. Having looked at both firms, I couldn't see any real difference between them, and in the end it came down to the time-frame they were offering.

One company said it would be able to set up with our business in six months time, whereas Outright was able to do it almost instantly. If we had received no recommendations on which outsourcer to go for, we may have had to look further afield. I believe one of our competitors already uses Outright, and among the outsourcer's clients are Npower and Matalan.

What were the challenges along the way?

We didn't have many challenges from the outsourcer's perspective - the main challenges came from the broking end. RK Harrison needed to let its clients know how to do business using the set-up, so it was more in terms of strategic planning.

You've got to provide the outsourcer with letterheads and compliance material; they're very good at handling the calls, but they are reliant on you making the phones ring. So obviously there is an investment in marketing the scheme to generate those calls, but there is also an investment in time - it's the initial set-up you have to get right, after which it runs smoothly. It took us about two months to get everything set up, and once we had supplied everything it was all finished. Some of the material was Financial Services Authority-related, as two years ago we were moving towards that regulation. It would take any broker a while to get it all up and running as it really does need to be right, especially regarding compliance.

Did anything about the outsourcing process surprise you?

Going and seeing the operation at Outright for the first time was the big surprise. It was quite astonishing to see how effectively the whole telesales service was set up, especially considering they take calls for a number of different companies, not just RK Harrison's. They have got banks of new business staff who are fed with affinity calls, and the company's staff have got the capacity between times to assist each other.

The call centre operators deal with calls as quick as they can and have a certain time limit by which they must answer calls - we haven't yet had a client complain that they've been left on hold. In effect, they're the equivalent of Direct Line's business.

Facilities at Outright are set up in a certain way so that clients go through to us if they don't press a certain button for household, motor or travel insurance, and so that way it doesn't waste our time on insurance we don't deal with directly. If a customer has a certain query, then that is also directed back to us by Outright. In outsourcing, the broker needs to set parameters, because it's not a case of them dictating to you.

Outright don't get a huge number of clients calling for our business as it takes a while to set up affinity schemes. I think they probably get about ten calls for us every day, but it all depends on the renewal dates and other factors.

We've gradually seen an increase in the number of calls Outright receives however. It is the same with any affinity scheme - it takes time, because people need to see the adverts about six to eight times to decide to call it, so repetition is the key. I know of one broker who had very slow business on their scheme for two years, and then it just went into meltdown - the number of calls can suddenly shoot up.

It's not just what the outsourcing company can do for the broker, because how many people call, and what the marketing strategy will be for the affinity schemes are dependent on the broker. In a way, we dovetail into each other. One of the plusses with Outright is they are proactive, and do cross-selling amongst our clients, so if they are talking to someone about their home insurance, they will ask them about their motor renewal; that way there is more income for both of us.

Are you happy that your company is getting the same level of service that you would personally give?

I'm happy and satisfied that it provides our clients with a very good service and a number of competitive products in the arena we're looking to cover. Brokers are finding that the smaller end of the market, such as household or motor, is increasingly a direct operation, so outsourcing gives us that chance to compete. Whether or not it suits the broker, outsourcing can be an answer to allowing them to provide a facility. On motor, large volumes are needed to compete, and outsourcing allows a broker the chance to do that, even when there is less to play with when they may not have thousands of calls every day.

Is there any process that should never be outsourced?

We have gone down the route of household and motor products, but it depends on each broker and what their requirements are, because some may not want to outsource certain parts of their business.

Can you offer any hints or tips to other brokers?

I think that brokers should realise that if you're outsourcing, you need time to plan the operation and get things up and running, because it doesn't happen overnight. With compliance you need to cross the Ts and dot the Is, so you need a realistic timeframe and a broker really should not rush through it.

Outsourcing has been profitable for RK Harrison in as much as we have derived an income without having to spend a huge amount of money or employ a lot more staff, which is what we may have had to do if we had not gone down that route.

If brokers have a lot of business and can't afford the overheads, it's the right route to go for; it's been a win-win situation for us because we have the extra income without the extra costs. However, it could be different for another broker; it's horses for courses. If it was the key for everyone we would all be doing it, but I would recommend brokers consider it.

Name: RK Harrison Insurance Brokers

Number of branches: Five - in London, Bedford, Bermuda, Chester and Salisbury

Established: 1882

Company history: Originally founded as a Lloyd's Names Agency, RK Harrison now operates as an independent insurance and reinsurance broker. In May 2005 its Taunton-based operation was acquired by the Jelf Group

Company ethos: Since its inception, R K Harrison Insurance Brokers has adhered to one simple principle, namely to provide the best service it can to every client. This commitment and belief in traditional ways of working have earned it a good reputation for its personal service levels. RK Harrison believes it is well-positioned to respond to changes in an increasingly globalised market and continue to offer its clients appropriate protection and financial security

Lines of business: RK Harrison brokers personal lines for high net worth clients while also dealing in corporate insurance. The brokerage is a wholesaler for high net worth and commercial schemes and provides bespoke insurance schemes designed and administered for associations or membership organisations.

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