Broking success: North of the border

▶ What is your background before joining Clark Thomson in 2012?

The last 25 years has been spent in the national broker arena. Latterly I did a 14-year stint with Willis where I was the director for Scotland and Northern Ireland for their commercial division. The driver for making a change was that I could see there was an opportunity for regional brokers. This was by virtue of the fact that they were less distracted by the large corporate arena and they could actually create value by being more focused on the customer. That’s the key thing that attracted me. It’s been 18 months and it has been great and what I hoped it would be.

▶ What lines do you operate in?

The vast majority of our book is in the mid-market sector – companies with about £2m to £15m of annual turnover. The split in our book is probably about 20% private clients and 80% on the commercial side.

We have a couple of specialisms – agriculture and renewable energy. Actually our specialism is more about delivering for the needs and wants of the mid-market sector, whatever the type of business. That’s where our biggest opportunity is. If you look at some of our bigger competitors, it’s an area they can’t afford to ignore because of the size of the sector but the individual client size poses an issue. They don’t really get what the client needs are at that level.

▶ Clark Thomson was the first broker in Scotland to gain chartered status, how important is that to you?

It’s important to us to the extent that it differentiates us from competitors. I think there are 12 chartered insurance brokers in Scotland at the moment, so to be one of that number is good. I don’t think [being chartered] is the be all and end all. It doesn’t say much about how the business is structured and what it wants to do for clients.

If you outsource claims to a third party instead of handling them yourself you can still be a  chartered broker.

There are chartered brokers out there that behave quite differently to other chartered brokers. It doesn’t just give you five gold stars. I think most of the clients out there who don’t know the insurance industry probably think everybody is chartered anyway. They probably don’t appreciate that there is a difference between an accredited insurance broker and a chartered insurance broker.

▶ Who are your main competitors?

If you look at our regional distribution of offices, we’ve got eight offices across Scotland. In each case we are either the only broker in the community or the biggest. We have a real diversity of competition, everything from independents to the aggregators, less so the national brokers. Because of this spread I wouldn’t say there’s one business that particularly sticks out as being a main competitor.

▶ Some brokers have said that insurers have become tougher on paying out claims, do you agree?

I think when the recession started there was a fear that this would be the case. And I think we saw circumstances where we made the quantum leap and assumed that it was happening. But I actually don’t see that on a day-to-day basis.

As an industry we have had to become savvier about managing the claims process. It’s an area of the business that I really think is worth investing in and one that attracted me to the regional independent sector. Quite a lot of our competitors spend, I would say, around 80-90% of their focus on the insurance renewal season. Everything else is seen as an overhead that they can get done more cheaply on an outsourced basis.

I actually think it should be completely the reverse. I think the renewal season is an easy process if you’re delivering the service and claims are being settled fairly and promptly. It’s about treating your customers well.

▶ What difference have you noticed with the new regulator compared with its predecessor?

We have noticed that they’re more proactive than the Financial Services Authority. We’ve had quite a bit of form filling to do. I wouldn’t say that we’ve seen any more value from them yet.

For the broking industry there’s no doubt that there needs to be regulation and we’ve seen recently the consequences of flouting it. But the challenge for the Financial Conduct Authority is to be relevant and proportionate to the firms it is regulating. Those are two unfulfilled tests. The financial services industry has a multitude of different strands to it. We are simply a general insurance broker. We don’t sell policyholder protection, redundancy protection, income protection, any of those things that have caused such issues. Yet I feel we get regulated on the basis that we do all that stuff. The FCA needs to be more relevant to the market.

▶ Is the Scottish broking market very different to the rest of the UK?

It is different. If you speak to just about any insurer they’ll tell you that the profitability of their business in Scotland is ahead of the same profitability south of the border. In terms of where Clark Thomson is geographically, we’re not in Edinburgh, Aberdeen or Glasgow – we’re actually in places where the customer deals with things differently, probably a better risk profile, and we get recognition from that customer base.

▶ You’re the only insurance broker in Orkney – what’s it like there?

Orkney is a great business for us. We’ve got 12 or 13 staff there, it’s our fastest growing and most profitable branch. There’s a lot of business there – it’s a real centre for renewable energy, both wind and sea-related, so we’ve got good inroads to that market. There’s quite a big agricultural base, and tourism is the third sector, with hotels and leisure complexes. It’s quite difficult to get in [to the Orkney market] – we’ve had to grow our own talent there. There’s quite a lot of what I’d call cross-the-sea skirmishes where other brokers try to get involved in Orkney. But I think we benefit from having an established presence there in Kirkwall.

▶ How does the potential for Scottish independence affect the business?

It is a concern – there’s very little clarity coming out as to what exactly Scottish independence means. One minute it’s “we’re going to keep the Queen as a monarch”, the next it’s “we want to keep the currency the same”. There’s no clear picture emerging. It’s a risk when we’re thinking about what we do.

There are some investments that we are looking to make at the moment, around property for example. Do we spend in excess of £1m on a piece of property or do we wait until the independence process shakes up? And a lot of our clients have an international aspect to their businesses. They’re concerned about independence because of exchange rate risks, tax risks, so there’s unfortunately a lot more questions than answers.

I think everybody is in the same boat – it’s uncertain and uncertainty isn’t helpful for a business. We need to be aware of that and, I suppose, de-risk our plans until we’re clearer on where the debate is going.