Management - Broking success: making the connection

How did you start out in insurance?
Like most people, straight from college. I responded to an advertisement which asked: “Do you want to work in insurance?” I thought – not really but I’ll give it a go. I ended up getting a trainee manager position earning less than £50 for six days a week but I really enjoyed the job and decided to pursue it.

What was the rationale behind establishing Autonet?
By 1999 I knew how to run a brokerage and wanted to take that knowledge and add a twist to it. My partner and I decided to create an audit process which was a lot more thorough than we’d seen anywhere else. We felt there was a clear way of being able to verify the client information more accurately and also to prevent certain members of staff making mistakes or manipulating the truth. Ultimately the aim was to get more accurate information to insurers and turn that into better loss ratios.

Why van insurance?
We were looking for a niche area so we set up as a general motor broker and pitched in with the likes of the usual competitors – all the online players, the direct writers and other traditional brokers. At the time business was moving away from the high street and going into call centres. Internet trading hadn’t quite taken off and our niche in the first two years was motorcycle insurance. It was only in 2002 that a successful marketing campaign made us realise there was much more opportunity in van insurance for us to try and really develop a competitive edge.

What are the main strengths of Autonet?
Understanding the marketplace. Marketing in the early days helped us outperform our competitors and we still have a very broad distribution strategy. We don’t rely on aggregators. Primarily it has been a partnership between us and the insurers. A lot of people talk about these relationships but don’t do anything about it.

We have always put a serious amount of investment in our audit process. We do 100% no claims bonus verification and check every single policy that ever goes on cover. We have a non incentivised member of staff double checking information and there is hardly anyone who has done this yet in the industry. It has taken a few years to see whether the process has had an impact but it is now clear that average loss ratios with this model are better than those of our competitors and therefore insurers are taking notice. Because we share management information they know we are going to give them quality business and on that basis we are starting to get not only price but product differentials too.

The majority of your business is conducted online. Why?
It is to do with client buying habits. Traditionally people bought via the telephone after sourcing from directories and we would still like to do it that way. We want to speak to our clients – we are not about buying online. Although a lot of our business starts online, only 50% comes from aggregators and just 15% of our total business is actually completed online. We are different to a typical call centre or an online broker – they probably don’t even want to speak to the customers because it slows the transaction process down. We see the internet as a lead generator. We then force the business back down our traditional call centre model and put it through our audit process.

Will all micro SME business be traded online in next three years?
It is going that way. When you look at van insurance the model of how our business is sourced has changed dramatically. But as I said, we don’t want to transact all of it online. In fact, we are in the process of developing our own SME aggregator solution. It stands to reason, as we have all our van clients and self employed people, that we should be moving into this arena – it seems to be a natural progression. We have got a £3m SME account at the moment purely from cross selling from our existing database. We have never conducted any marketing for SME so we could do a lot more. Because we have experienced so much growth with the van market we have not really had the time to be able to dedicate ourselves to another area. We have a team on it this year and certainly by the third quarter we will have an SME offering – an internet solution of comparable products and we will be cross selling to our existing database more as well as an outside marketing campaign.

Apart from SME what other growth ambitions do you have?
We always want to grow the van book. That is our main concern but the model that we have can be applied to other motor products. Car would be an obvious move for us and we will be approaching insurers to explain that we can use the van template and start progressing other books. Over the next couple of years there is no point in us looking at any other product types as there is only so much that we want to grow by and we cap that at 50% growth per year.

How did the recession affect you?
We first noticed it in May 2008 when there was quite a drop off in cases. We had a particular van dealer, one of the largest in the country, who had been selling 1,000 vans per month and we arranged the insurance. In what felt like overnight, sales dropped from 1,000 to 150. But where there is a problem you have to find a solution and we started marketing harder. Similarly the recession created more bad debt. We were taking on the same type of client but our bad debt losses were increasing – people obviously didn’t have the money anymore and we have had to find a way of analysing that.

Are you interested in acquisitions?
We are getting to a size now where we could easily take on a new addition but quite frankly we have enough ideas and aspirations to grow organically that it wouldn’t make any sense for us to go looking. However if the right fit came along then we would think about it. Sometimes these things drop into your lap.