Towergate - Cullum's influence remains strong

As PB celebrates its fifteenth anniversary (see pp.12-3), Peter Cullum, executive chairman and majority shareholder of the Towergate Partnership - voted the most influential person in broking over that time in our latest Sentiment Survey - still has a deeply ambitious streak. The economy has changed dramatically over the last year or so but his strong relationship with his lead bank, LloydsTSB, has served him well as it agreed with a consortium of 28 banks to renew his firm's debt terms.

Towergate has been known as a hungry acquirer but last year these acquisitions slowed to a crawl as it concentrated on renegotiating its debt obligations and took a harder look at its own business structure. Despite the integration of Broker Network and a 13% increase in revenues to over £300m, earnings before interest, tax, depreciation and amortisation remained relatively static at around £110m, although sister company Paymentshield has had a huge increase of profits to over £40m since being acquired. Cullum is wary about this year, as he remarked: "There is a tsunami out there; it is ugly and many of our clients will have problems with their banking facilities. We are looking more closely at expenses."

At Towergate, a pay freeze has been introduced and its Bournemouth office has closed, along with some mergers of smaller offices. However, the firm has also been hiring in its sales force, investing in e-trading, training and a customer relationship management system developed by Microsoft. The system aims to increase cross-selling - an area that the company has neglected - and Cullum wants its reach to extend to each customer from 1.2 products to 2.4.

Alliances

One Towergate-insurer relationship that has suffered is that with Norwich Union, which Cullum says has been adopting a take-it-or-leave-it approach to deals. Subsequently, relationships with the likes of Allianz have grown and Cullum says, surprisingly, that his placement with Zurich will be the same size as that with NU by the end of the year.

Cullum knows more about insurance than most given his 40-year track record and he said that his emphasis on distribution has served his firm well. Reflecting on the last 15 years, he cited the rise of the aggregators as one of the major shifts in personal lines and added that insurers are facing a massive problem with brand loyalty unless they become "brilliant commodity traders".

He commented: "In insurance, we have been hopeless in our relationships with clients and have much to learn from other businesses. We have been too introverted and there has been too much emphasis on developing systems for cost savings. Insurers have allowed aggregators to nick their breakfast." Cullum's business has always been about niches and Towergate has therefore managed to stay out of the traditional scramble for personal lines. One way in which he sees great opportunities to use the influence of aggregators is in niche lines, where smaller brokers can gain access to leads that insurers would not look to underwrite direct; already, he has said that many of Open GI's brokers use this to great effect.

Aspirations

Eyeing the future, Cullum sees brokers developing a more value-added approach, such as with a Towergate development called Smart landlords - a one-stop shop for landlords that includes energy saving certificates, access to plumbers, tenant referencing and rent guarantee insurance. He highlighted: "We need to develop more community, integrated sites for customers."

Cullum sees commercial online distribution through brokers as the next big market shift, though he recognises that this requires a behavioural change among account handlers. The development of Power Place, which now has 450 brokers on its books and gives an end-to-end electronic quote and document process is clearly at the forefront of where he thinks Towergate's future is heading. In fact, he is so confident in Power Place that he predicted it will write £1bn of business within the next three to five years, adding that there is a queue of insurers ready to come on board.

Although insurance rates are rising slowly, times are tough, yet Cullum is in it for the long haul and believes the investments his firm is making will place his firm in good shape. The banks appear to agree.