Well-established principals

Dating back to 1894, EH Ranson & Co is not quite as old as the 18th century grandfather clock chiming in the background of the office. There is no doubting the sense of history, tradition and longevity that seeps through the firm's West End base in the Scottish capital, though. The broker is a fourth-generation family business that is today headed by chairman Simon Bolam MBE and run by chief executive officer Valerie McIntee.

From the shop counter in the reception area to the solid wooden desks and polished brass nameplates, EH Ranson is a traditional firm through and through. It has also developed a fierce sense of self that keeps it relevant in a changing environment and makes its future an exciting prospect.

Bolam is a former president of the Chartered Insurance Institute and a past chairman of the British Insurance Brokers' Association and his firm, EH Ranson - with two offices in Edinburgh and another in Whitburn, West Lothian and 16 staff altogether - has a very strong pedigree in the broking community. This was not always so, though, as he explains: "If you look at the history and the culture of the business, the firm was founded in Edinburgh in 1894 and it originally started as a credit drapery business dealing with the supply of household goods to people within Edinburgh who wanted the facility to pay for their purchases on a weekly basis."

Adaptive thinking

Over the course of the 1950s and 1960s, the appetite for this sort of payment method eroded with the arrival of credit cards; the firm realised that its days were numbered unless it was prepared to take a new direction.

At this point, Bolam's father-in-law took the firm into insurance broking by starting to sell motor policies. The move was not an easy one and had a serious impact on his health, as Bolam explains: "My father-in-law was a credit draper and he found making the transition to insurance broking in his mid-fifties was not easy. His health failed. I was working for the Royal Insurance at that point and, having started in Edinburgh, I then moved to Liverpool. We received a phone call from my mother-in-law to say the whole thing was going to be packed-in and so we took on the challenge and moved back to Edinburgh in 1970."

Once Bolam took up the baton, he went on to develop EH Ranson into a 100%-personal lines broker and, over the next 25 years, the business established itself as a leading player in the local market, further developing the reputation it had held in the preceding years.

This is not the only metamorphosis the business has been through: in the last 15 years it has seen direct writers, aggregators and online distributors eat into its personal lines business, forcing the broker to reassess its operations.

As McIntee explains: "The split between personal lines and commercial is now 60-40 and that developed from 100% personal lines 15 years ago. As the direct writers came in on the personal side, it was natural that we had to look for new markets."

EH Ranson was clever enough to use its existing customer base to launch into the small commercial arena rather than trying to find a whole set of new customers in the larger-ticket commercial market.

McIntee says: "We had the client base in place and what we started off doing was targeting the small shopkeepers, joiners and builders that we already had on the books through their commercial vehicles policies. We started building the commercial business by speaking to them about their needs. It worked very well and we have grown the business from there."

While EH Ranson has sought to reinvent itself where necessary and proved flexible enough to succeed, the last 20 years in the UK broking market have been characterised by a perceived need for volume. Size, scale and market share have been everything although, as the world has turned, it seems these goals may not be quite the golden eggs that so many had at first thought.

Size matters

The firm has a stable annual gross written premium of £5m and, while some might say EH Ranson has lacked ambition in its desire to remain small, Bolam believes the strategy has been more astute than people give it credit for.

"We know our position in the food chain and we do not mind saying so," he says. "Our roots are in Edinburgh. We do not seek to be a Giles or anybody else and we are happy to trade to very high standards, with a good branding in Edinburgh where people like to deal with us. We are happy to stick to our roots in personal lines and small commercial business."

This approach has helped to outline a very strong future for the broker. In the local market, there have been a number of competitors that have sought to grow in size and stature; by buying other businesses or accepting offers for their own, they have bent their knee at the altar of scale.

This has not proved a successful move for all that have tried and so has removed many rivals from EH Ranson's path in the small commercial market.

Bolam says: "A great number of local brokers have become part of bigger groups. As they have done this they have dealt with larger ticket business and the smaller customers have fallen out of the bottom of their businesses."

Commenting specifically on the scale issue, he adds: "If you have people wanting 35%-plus commission then that has to impact on premiums and insurers' profitability. I like it when I read that some large broker has been told to get on its bike by some major insurer, as it is extremely good news for the smaller broker."

Bolam also feels that, with bigger overheads to service and less favourable margins from insurers, there may be awkward times for the big brokers to contend with: "I think that some of the larger outfits may actually start falling to pieces and I think, in practice, there are indications that that is happening now."

These factors have clearly played into EH Ranson's hands and have come at a time when other issues are also buoying its expectations for the future.

Cleaning up

In the first instance, many firms have reduced their headcounts and as they have done this they have fallen into the SME category that EH Ranson targets. This has more than made up for the number of businesses that have stopped trading or the number of sole traders that have sought employment with larger firms and so left the market as potential customers.

The property market has also begun to stabilise in Edinburgh and, for commercial and personal lines clients alike, this has generated a certain amount of confidence. There is a feeling that the worst of the recession might be over and, while difficult times still lie ahead, there is not quite the same fevered panic that had been present earlier in the year.

"From our point of view," says McIntee, "the effect of the recession was most keenly felt in the first half of this year. The second half seems to be slightly less challenging."

McIntee is also pleased that EH Ranson's belief in service, quality and professionalism is now being greeted by a more favourable response from insurers that are increasingly keen to establish stronger relationships with the broker and others in its class.

McIntee says: "The insurance companies are now very much more interested in building relationships with us and have moved away from only wanting to deal with the bigger people. The relationships we have with our top 10 insurers is very strong and that is something we try to nurture."

In turn, this improves EH Ranson's ability to trade effectively. McIntee continues: "This helps with pricing, service and ongoing commitment. There have been times in the past when insurance companies have withdrawn products but we speak to the insurers on a regular basis so they know what we are looking for and they understand what we need and they support us with an ongoing level of consistency."

Illustrating the firm's effectiveness, EH Ranson enjoys a retention rate of 90% in its personal lines business, something that has improved over the years as the broker has moved into the small commercial arena and a growing number of customers have begun to hold more than one policy through the firm.

Bolam is set to formally exit from the business in 2010 once his role as chairman of the Smaller Businesses Practitioner's Panel comes to an end. His involvement with industry bodies and regulators throughout his career has given EH Ranson valuable insights into the challenges that the market has had to deal with over the years, although in the months ahead Bolam says that things on the regulatory scene are relatively quiet.

Political warning

He is keen to point out one potential hiccup that may lie ahead under the Conservatives' Crisis to Confidence plans. Presupposing that the Tories form the next government, Bolam says their ideas on scrapping the Financial Services Authority and establishing a Consumer Protection Agency could create a regulatory system operating from different levels and with awkward overlaps.

He says: "The proposals state that the prudential regulation of banks, building societies and insurance companies will come under the Bank of England, but their conduct of business will fall under the umbrella of the Consumer Protection Agency. The prudential supervision of smaller firms will also be dealt with by the Consumer Protection Agency and therefore you are going to get, based upon the current proposals, a very fragmented market with two lots of regulators trying to regulate the same body of people.

"Where I see the big issue is where you have insurance companies being regulated prudentially by the Bank of England and insurance brokers being regulated by the Consumer Protection Agency that the Tories want to bring in. Insurance companies and brokers are symbiotic, insofar as what happens here with insurance companies affects insurance brokers there. I could see this increasing cost and bureaucracy horribly and it creates problems with consistency with people operating off different platforms."

Bolam will be handing over the responsibility to McIntee to steer the firm through potential hazards ahead.

The firm's history and experience suggest that it should be more than capable of modernising and adapting its approach where necessary while remaining true to its customer base and its regional position in the broking market. Perhaps we may even see a revival of SME family-run brokers that seek consistency rather than scale; brokers that build businesses on old-fashioned standards tailored for trading in the modern world.

SIMON BOLAM MBE

Simon Bolam, 67, joined Royal Insurance in Edinburgh in 1961 from school. In 1966, he was transferred to the company’s head office in Liverpool. In 1970, he moved back to Edinburgh and joined EH Ranson, becoming a partner in 1971 then owner in 1972. Bolam has been president of the Insurance Society of Edinburgh (1989-1990) and, in 1994, he was appointed vice-president for life. In 1989, he was elected to the council of the Chartered Insurance Institute and after a year as deputy president (1993-1994) he was elected president for 1994-1995. For four years from 2000, he was chairman of the CII’s audit committee.

Bolam served on the Scottish Committee of the British Insurance Brokers’ Association and was elected Scottish regional chairman (1983). He subsequently served as chairman of the General Insurance Brokers Committee (1997-1998) and chairman of the British Insurance Brokers’ Association (1998-2000). In December 2002, he was appointed by the Financial Services Authority to represent general insurance intermediation on its Smaller Businesses Practitioner Panel, becoming deputy chairman in June 2007 then chairman in June 2008. In July 2000 at the Royal Albert Hall, Bolam received the British Insurance Industry’s Annual Achievement Award for outstanding contribution to the insurance industry. In 2009’s New Year’s Honours list he was awarded an MBE for services to insurance.