Terry Wellard.

- Insurance Age staff
- 06 Oct 1999
- Indicative reading time: 2 minutes

Would a code of practice to regulate wholesale brokers be the best way to protect the introducer's business?

Over the last couple of months, an element of the insurance press has
taken up the cudgels of disenchanted brokers over their treatment by a few
maverick wholesalers. As a result, they appear to have stirred up our
trade association (see page 24) which now feels obliged to join the
crusade to protect its members from these unscrupulous people.

While I can understand the merits of a campaign, this is akin to taking a
sledgehammer to crack a nut. There is talk of imposing a code of practice
to regulate wholesalers. This is unlikely to stop those set on attacking
the introducer's business. Everyone nowadays is advocating a
"commercially-driven" self-regulating regime, in which environment a
wholesaler will not survive should they abuse the trust and comfort
factor. At Lloyd's, our whole new world has a bias towards this
"commercial" reality.

I have spent most of my working life in the wholesale arena and would not
dream of approaching our introducer's clients direct unless, of course, I
was obliged to protect the policyholder's interests under a servicing
agreement. We recognise that the ownership of the business lies with our
producer, and all respected wholesalers acknowledge these rights. Any such
broker who breaches this faith has no right to be in our business nor have
intermediaries who continue to support an abuser.

Ironically, this all comes at a time when I anticipate an increase in the
promotion of niche schemes as a direct result of the cancellation of
agencies and the accompanying reluctance of insurers to write one-off
risks on the open market. There is increasing evidence that insurers are
adopting a practice of writing specialist classes through a preferred
supplier only. We were recently asked to extend a scheme devised by a
major broker for an affinity group to our network to accommodate those
customers who preferred a local service. We, of course, obtained the
necessary confidentiality and ownership of business agreement, without
which we would not feel comfortable in introducing our agent's
business.

It makes sense that specialist classes are channelled through an expert
and underwriters benefit from the economies of scale limited access
provides.

Schemes are not the divine right of the major wholesalers, so in the event
that you conceive any bright new innovation, why not test market your idea
amongst your contemporaries.

With encouragement and help from your carrier, this can be quite
rewarding, but always remember when dealing with sub-agency business "you
cannot have your cake and eat it". At the first sign of attacking the
business direct, you will destroy your credibility. This whole subject
revolves around the "ownership of business" debate. In a nutshell, the
introducer's position is paramount and must be respected by whoever takes
the business, as without this introduction, the client may never have
known of their existence, let alone whether they would be the chosen
carrier.

Should our trade associations feel inclined to champion anything, then may
I suggest they start with client ownership. Maybe this vexed subject will
be resolved by the GISC and a clear definition established when the rules
governing the sales process are formulated.

- Terry Wellard is chairman of the Edgar Hamilton Group.

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@insuranceage.co.uk or view our subscription options here: https://subscriptions.insuranceage.co.uk/subscribe

You are currently unable to print this content. Please contact info@insuranceage.co.uk to find out more.

You are currently unable to copy this content. Please contact info@insuranceage.co.uk to find out more.

As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.

If you would like to purchase additional rights please email info@insuranceage.co.uk

You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.

If you would like to purchase additional rights please email info@insuranceage.co.uk