The PB Interview: Cultivating a strong legacy

Bob Trott was brought to Oak in November 2004 by late founder of the business Tony Lumsden-Cook. After being in control of the southern region of Chubb, Trott was attracted to Oak, based in the Cotswolds market town of Moreton-in-Marsh, because he felt there was room for it to portray a brand image, and wanted to have a larger role. Trott had to try and persuade brokers that Oak was a real player in high net worth, and this is in part evidenced in his ethos that his staff should have an urgency and desire to do business.

Commenting on his former boss, Trott says: "He was gracious in not prevaricating, and said from day one I could act upon his position of MD, and in February 2005, Tony said he was ‘going upstairs’. Part of my job was to elevate Oak into a grander arena."

Lumsden-Cook became a member of the Somerville board, which owns Oak, and was involved with the MGA until the end of 2005, before severing ties with Somerville, based in historic Buzzards Hall in Sudbury, Suffolk, in 2008. Lumsden-Cook had originally set-up the broker-only insurer with the backing of the likes of Beazley Syndicate 623 and Tradex in 2000, after leaving Cox. Trott says Lumsden-Cook’s wife came up with the name, and Lumsden-Cook himself appeared in the May 2000 edition of Professional Broking with an oak tree sapling launching Oak despite being just two years off retirement age (PB, May 2000, p.24-25). Sadly, Lumsden-Cook died at the end of last year of throat cancer, a true character in the industry.

Over the last years Oak has evolved a great deal but its core raison-d’être is still very much providing high quality service to brokers and clients.

As other insurers have changed their approach to strategies around how best to reach clients, Oak has been consistent, and the philosophy appears to be paying off. Last year, despite the worst recession in the UK in 60 years, it achieved 22% growth in household, with motor achieving even more.

In part, Oak has benefited from Hiscox’s decision to go direct in the mid net worth area. The move has not only left some brokers questioning Hiscox’s future intentions in high net worth, but has also meant that sometimes the insurer has been competing with its brokers for the same clients.

Trott also believes another unnamed insurer’s service has become poor in the HNW area. In addition, Trott feels he has been able to capitalise more than others on years of hard work courting brokers. Undoubtedly, it is going to be a tough time when choosing who should be invited to Oak’s tenth anniversary evening to be held in central London in April.

Oak will control around £30m of gross written premium altogether by the end of this year, this figure having trebled in the past five years and represents well over 10,000 policies. The ambition is to become third in the HNW market place over the next three years, bringing in over £40m of premium, a long way from Lumsden-Cook’s original first year target of £2m.

However, it has not all been one-way traffic, as the 2007 floods had a dramatic impact on the industry’s loss ratios with Oak and high net worth accounts being no exception. The floods, hopefully no more than a 100 year event, have led to a rethink of which postcodes in the country are best to cover, and to therefore focus on the more profitable areas.

He is also keen to drop clients who might be using his company’s insurance as a "maintenance product", and is particularly focusing on trying to limit escape of water claims, such as from burst pipes, something he admits is very difficult to underwrite.

Protecting wealth

The recession has had an impact with some clients looking to increase excesses and reduce sums insured, but he maintains the “more affluent person is determined to protect their wealth” and it has on the whole been "a particular niche where the economic gloom hasn’t shown its face – certainly not at Oak".

Oak is in an enviable position where it does not have to raise rates as it is producing an underwriting profit.

The managing general agent, which has its household and travel underwritten by Brit and motor by Chaucer, has products with strong Defaqto ratings, but also covers risks such as guns, fine art and even identity theft. “By definition you have to have policy wordings as good as your well known competitors,” he says.

It has joined the motor market since September 2007, and now Trott describes it as a “portfolio insurer”. Although its preference is to cover all aspects of a high net worth individual’s possessions and requirements, it has a flexible approach.Trott says he is mindful of balancing the insurance requirements with the levels of service Oak can offer, however, with £1,250 a rough guide to the minimum level of premium he would want Oak to accept.

Oak works closely with sister group Plum which handles non-standard risks such as subsidence, non-standard homes and overseas holiday homes, and also has a mid net worth product. Plum is now looking to double new business and grow its agency base in 2010, with director David Whitaker saying: "There is naturally a lot of interest from brokers in being able to provide cover for existing and new clients who do not fit the narrow ‘tick box’ underwriting criteria that the market is awash with."

The broker base is large, partly because Trott does not go around setting them targets. A broker can place as little or as much business they like with them. He says: "There are a huge variety of brokers we deal with. Some are brokers with a 30% book of high net worth, while others are one-man bands with a 100% book. Others will have 10 to 20 clients, and you will be surprised by the quality of risk from the smaller broker."

He is looking for brokers willing to support the firm’s ethos, which prides itself on providing a quality service. There are around 750 brokers with Oak agencies, and Trott is serious when he says there are potentially 500 more in the pipeline. He adds: "We are looking for the brokers that respect affluent clients and want to give them client contact and to develop an understanding of their needs. Over the years there has been an apprehension of cross-selling HNW to commercial products as they didn’t want there to be a hiccup on the personal side. However, this has totally changed and we are looking to pay claims and satisfy clients – not run away. Brokers who place managing directors’ insurances with Oak can sleep at night."

Although the vast majority of Oak’s 42 staff are based in the Cotswolds, the company has created a regional structure with underwriters in Bristol, Manchester, Leeds and Scotland arguing in the latter local knowledge is particularly crucial. Trott is seeing growth in the West Country, the north and Scotland – including recently a £22,000 premium case.

He is more likely to recruit from brokers rather than rival insurers, and is keen to empower his underwriters with the authority to make decisions. "I enjoy seeing the relationship grow between the broker and underwriter," says Trott. "Our underwriters haven’t been born with a silver spoon in their mouths, but they understand the culture of high net worth."

Trott is also keen for brokers to start identifying mid net worth clients who may need an upgrade in policy as their sums insured grow and there is a facility through Plum to provide cover. He fundamentally believes that aggregators are not giving customers what they want, and there is a trust problem.

Time

He is keen to get quotes back to brokers within the same day. However, is this necessarily a good thing when dealing with such high value goods? He says: "Each quote is underwritten and we set our stall out to do this, although some of the larger cases may take longer. Our method of receiving information via our website speeds the process. The brokers who are more successful in high net worth will visit clients, have expertise to make them feel relaxed in their presence. If you spent a lot of time creating your material wealth why wouldn’t you want to spend the time with a broker, as you do with an accountant or solicitor, to protect it?"

Oak was independent until it was acquired by the Somerville Group in 2003, which is majority owned by its founder Andrew Cross. Somerville sold its broking division, Somerville Insurance Services, to Lark (now 60% owned by Groupama) in December 2006. Therefore Oak has become an even more important part of the group as a whole, and there are no plans to sell it.

Trott clearly enjoys the cut and thrust of talking to brokers, and has no intention of hanging up his boots and anticipates being at Oak for the foreseeable future. Somerville will be hoping that his forecast for similar growth this year, as achieved in 2009, will be fulfilled.

• For more on high net worth, see Market Watch, p.32-33

Oak through the decade

2009 Oak launches its new web quote facility and statement of fact for new policies. 2008 Third satellite office opens in Bristol. Revamped website is launched. Change of carrier from Beazley to Brit. 2007 Family motor fleet product is launched in association with Chaucer. Second satellite office opens in London. 2006 First satellite office opens in Manchester. 2005 Appraisal service launched. Logo and literature are modernised to reflect the group’s rebranding. Moves to new head office in Chipping Norton. 10,000th policy written. 2004 Bob Trott joins. 2003 The Somerville Group purchases Oak in November. 2001 1,000th policy written. 2000 Opens for business on 1 April and moves to new offices in Moreton-in-Marsh. Oak Underwriting is founded on 1 January, based in Stow-on-the-Wold.