AIS - Moving on apace

Motor insurers are experiencing difficult conditions, with low premiums and expensive claims compounded by the bleak economic outlook to leave many personal motor players struggling.

Yet, Academy Insurance Services demonstrates that it is not all doom and gloom for personal lines brokers. Since its foundation in 1996 with a strong emphasis on private motor, David Bard has seen his company grow from £9m to £35m gross written premium.

Bard has not always been a broker. In 1992, after leaving Bennetts Insurance, Bard became one of the founders of Penta, a software house that was then sold to Open GI - then known as Misys - in 1996. "We had to organise a company that could provide a high-quality service very quickly and our success was fast, growing to 70 staff by the time we sold in 1996," highlights Bard. "I was working with two programmers and a salesman, therefore I was the only one with managerial experience. My experiences of high-speed growth at Penta and the challenges it brought really helped me deal with what is a similar situation at Academy."

After the sale of Penta, Bard founded InsuranceMall in 1996, the same year that he became one of the founders of Academy. "For the first five years of Academy, I was essentially a non-executive director," he notes. "I was fully involved but not on a day-to-day basis, leaving me free to work on other projects. At InsuranceMall, we devised a broker comparison website; it was killed when the dotcom bubble burst. It was not viable at the time so we gave it over to Experian, which shelved it." At the time, the failure of InsuranceMall weighed heavily on Bard's mind but the success of Academy has helped ease the burden: "I can laugh about it now," he says.

Focus

After the failure of InsuranceMall in 2001, Bard decided to concentrate on Academy. His original partners, Marylin Anderson and Tony Chuter, had built the business up to approximately £9m GWP and developed a stable team. Bard believes that his timing was spot on: "Tony had always intended to retire at 60 and, in 2001, Marylin took the chance to pursue other projects herself. Until this point, the business had been split three ways but Kevin Munn, who had been the most senior manager behind them, bought Marylin and Tony out and is now my partner in the business."

Munn was first employed by Bard aged 18 and Bard believes that their long-standing relationship has helped them to develop a strong corporate credo. Bard says: "Our philosophy is threefold: customers, insurer partners and ourselves all need equal respect. Without any part of the triangle, it just doesn't work."

Taking all claims equally seriously, no matter what their size, is something that Bard believes helps the staff at Academy show customers that their needs are being met: "We had one burglary claim from a client of our Basingstoke office. The man was 86 years old and, among other things, was claiming for a jar of peanut butter. I thought 'good for him'.

"The single most important piece of advice I would give to a broker starting out would be that you can't have sales without service. Every communication is an opportunity to make sales and you should always deliver what you promise or your staff will be bogged down with complaints."

Bard believes his employees to be instrumental in implementing the client, insurer and Academy philosophy. "We try to instil a 'best-friend' approach in our staff in their dealings with clients, insurers and other staff," he says. "We like our employees to always show that they are trying to do their best for whoever they are dealing with. We don't over-promise and under-deliver. It helps our clients think well of us and maintain good relationships."

Supporting his staff members is important to Bard; he believes that listening to their requests has been key to the broker's success: "Every single day, staff ask for sponsorship for themselves or a member of their family. We tend to become involved in things that are important to them rather than general community badges."

Electronic trading plays an important role at Academy and Bard looks actively to choose insurer partners with these capabilities. "In personal lines, we have made sure that approximately 90% of business is translatable on an EDI basis," he says. "When a transaction cannot be completed electronically, it can be really frustrating if there is under-manning at the insurers' end or if the call centres are based far away in different time zones. There can be no breakdown in the chain in any customer service-oriented business."

Bard believes that the personal motor market is going through a period of change, with consolidation among insurers - such as that between LV= and Highway - causing upheaval: "Highway is known for high performance and is very different from LV=. However, once the deal has been done, it won't make a difference: Highway will essentially become an LV= scheme and I think capacity will change."

Insurer stability is identified as a concern, with the problems at AIG highlighting the insurance market's vulnerability to the current economic climate. "Asset-liability ratio has become really important now," he says. "If an asset base is reduced, capacity has to do so in line with it. Some insurers will have to make the choice between stopping writing new business or recapitalising to gain further assets. If insurers want to plug the hole, they will have to write for profit rather than writing capacity. Premiums will rise substantially."

Option

Bard believes that one alternative to raising premiums would be for the Financial Services Authority to relax ratio restrictions: "The UK is unfairly penalised by having higher ratios imposed and these could be reduced without breaking EU rules. The last thing we need at the moment is for an insurer to go under in the UK and erode customer confidence."

He believes that, while insurers are likely to suffer, not all brokers will lose out from the economic instability: "Things are really interesting at the moment. It's become all about value for money and, so long as a company is solid enough, customers will still be interested."

Fraud is also an area of increasing concern. "There is no doubt that there is going to be an increase in fraud," Bard says, noting that many of the insurers that Academy works with are seeing rising levels of fraud. He continues: "We have seen the insurance policy become an asset of last resort in previous downturns. When people cannot sell their car for the amount it is insured for, it will often be 'conveniently' stolen."

Despite the challenges faced by motor insurers, Bard remains confident about the future of Academy: "We are financially strong and will take any opportunities that come along, including acquisitions," he remarks. "We are serious about Academy and what we offer to our clients and our model is viable moving forward. We are still forecasting year-on-year double-digit growth."

ACADEMY INSURANCE SERVICES

Chairman: David Bard

Established: 1996

Locations: Avon, Berkshire, Buckinghamshire, Bristol, Essex, Hampshire, Middlesex and Wiltshire

Number of staff: 114

Main line of business: Personal lines

Gross written premium: £35m.