There's no exiting Exeter

In a bid to delve deeper into the regions, Insurance Age heads to Exeter to glean an understanding of how the market operates. Sarah Hills finds that, despite a small insurer presence, local brokers are determined to hold their ground

The South-west has always had its own unique appeal. Dealing predominantly with the small to medium-sized enterprise (SME) sector, it enjoys the benefits of a loyal client base, boasts a host of independent brokers and intermediaries and has always managed to turn a healthy profit. Much of this is down to the type of business being written in the area, often at the smaller end of the scale, producing a lower claims ratio - all of which hints at an optimistic future for a region that seems unfazed by a tough insurance market.

Although there is a lack of insurers in Exeter, this has not dampened the spirit of the area's independent brokers. While consolidation is present - mainly driven by the Jelf Group - the likes of Oval and Giles Insurance Brokers have started scouring the region, although they have not managed to, or perhaps not wanted to, dominate a healthy broker market. Meanwhile, Westinsure stands out as the network of choice, joined by Cobra and Willis, which have also started to make an impact.

Exeter has worked hard to raise its profile as a business centre that is not purely reliant on tourism, the service industry and agriculture. The Princess Bay development has seen the city's shopping centre undergo a face-lift, while, more recently, the Met Office relocated there from Bracknell. In addition, Exeter's airport has gained international status, which has prompted trading estates to sprout up around the city.

Despite this aim to transform Exeter into the business hub of the South-west, Norwich Union (NU) and NIG are the only underwriters left in the city - a surprisingly small representation considering the potential for profitable business and a local preference for face-to-face relationships.

"It is surprising that other insurers decided to leave the region," says Paul Charlton, head of trading at NU. "However, this has given us an advantage in that we are an underwriter close to local brokers. We know the businesses in Exeter, their history and their customers."

The insurer has had a presence in Exeter in some form or another since 1807. It first appeared under the guise of West of England Insurance Company, before becoming Commercial Union, which subsequently transformed into NU. Now, all that remains is a small business unit with business managers and commercial underwriters to service the broking community. "We believe it is well worth the cost of having underwriters in the region," Mr Charlton adds.

This view is reinforced by David Turner, manager at SLS, a Crawford Company, the only loss adjuster based in the region. "Crawford takes the view that you cannot run business relating to complex technical issues effectively on a remote basis," he explains. "We made a strategic decision to have offices based in regional centres so that we could serve our business partners on the spot. From Exeter, we cover the whole of the South-west - that is a big area and we couldn't service it from Bristol."

He adds: "Two decades ago, the centre of Exeter had about six mainstream insurance companies with claims departments, but those days are long gone. We work closely with brokers in the area but, as there are no insurers with a claims department in the South-west, it's a unique selling point for us to be located here."

Good intentions

It seems, however, that some underwriters have woken up to the importance of face-to-face relationships. For example, Dual Corporate Risks has recently targeted the South-west as an area of potential, appointing John Stagg as business development manager for the South in April.

He says: "Each region has a preferred way of dealing with underwriters and brokers that Dual has recognised and acted upon. It seems that many insurers are going in the opposite direction and have centralised their operations, but we prefer being in the area and building relationships."

Mr Stagg also believes that the South-west - and Exeter in particular - has a host of broking talent and experience, as there are a number of quality regional brokers in the area.

What insurers and underwriters claim they can deliver to brokers, however, often differs from what the market experiences. In Exeter, for example, the future of its two remaining underwriters is open to debate, with NIG's position uncertain until RBS can find a buyer for its insurance arm.

Indeed, the brokers that Insurance Age spoke to in Exeter believe the city's NIG office will eventually close. In addition, NU's claims processing base in the city has been hit by the insurer's recent job cuts - although Mr Charlton maintains that this will not adversely affect the trading centre.

Despite this, Jamie Milne, a partner at independent broker Milne Friend and Partners, says: "We will never have the luxury of a group of insurers on our doorstep. However, this is not a problem as long as you have the support of insurers in terms of regular visits and dedicated representatives - although this is not always the case.

He cites the example of Primary General, which had two staff in Bristol: "Since it closed this office, it has gone very quiet. We now have to deal with Birmingham, which feels like a whole world away."

Andrew Parker, senior manager at broking firm Parkers, says such movements have made the local market insecure: "NIG has recently lost another business manager to a broker - its third in two years. Now, we are dealing with people who are not streetwise and don't know enough about the local area."

He maintains that this results in a lack of continuity and so every time someone leaves an insurer, a broker will lose its personal account executive: "We can still visit insurers, but we have to pick the dates and times and wait our turn."

Maintaining contact

Paul Smale, director at the Pavey Group, asks how long it will be before the South-west is left without any insurer presence? "Regional brokers have got used to dealing with offices that are further away, but this is still a people business and trying to keep personal contact with insurers and clients is very important," he adds.

He admits that it must be an annual struggle for the insurers to justify staying in the regions, but says he does not see the lack of presence as a hindrance. "We don't know what is going to happen with NIG and NU, and need to keep our options open. We work closely with the likes of Arista because of the personalities within the business and its business model," he explains.

This view is reinforced by John Foster, chairman at Foster Leighton and Company, who has slowly been moving away from the local markets as a way of dealing with the lack of insurer presence. "Many brokers are now going down the managing general agent route, and are increasingly dealing with the likes of Fusion, Evolution and Primary."

He adds: "We deal with NU in Birmingham, Allianz in Southampton and RSA in Manchester - we made the decision to cease trading in the local market, which was not a pleasant experience. We were a pretty major player, and there was a fair amount of resentment at the time, but all the companies that wanted us to stay and support them, or said they would support us, have gone."

Mr Foster also admits that consolidation in the region added to the decision to branch out. "At the time, I thought that brokers would have trouble surviving, which is why I signed up as one of the founding members of the Willis Commercial Network; it's one of the best business decisions I ever made," he claims.

Exeter accommodates a variety of brokers of varying sizes, with many dealing predominantly in the SME market - such as Milne Friend, Parkers and Foster Leighton. However, the Pavey Group controls many large corporate accounts. The broker already has four offices in the South-west, and set up in Exeter three years ago on the back of the local demise of Marsh - picking up 12 former Marsh staff and taking over many large accounts, such as the National Trust.

Meanwhile, Foster Leighton took the network route - an option chosen by many in the region - but there is still an opportunity to operate independently, such as in the case of Milne Friend and Parkers. Other brokers have inevitably sold up to consolidators.

Despite these acquisitions by external players, Mr Milne stresses the importance of being an independent broker: "I am dismayed with the fact that all you hear about is turnover, size and distribution - never about customer service. Many of the smaller brokers that have been bought by a certain consolidator are now dealing with a call centre in another city, and are not happy with the situation. We are hopefully filling that gap again."

He adds: "The company is holding its own with the large consolidators, and there is no need to sell or join a network at the moment. We have the support of a number of composites and are not being unduly squeezed. If we can hold out in this market, we should be safe in others."

However, for brokers, the topical issue of consolidation has had its impact - not necessarily on their business relationships, but in terms of reducing any local acquisition opportunities. "We are an active broker and want to grow, and one of the ways to do that is through acquisitions. However, when you have the big players offering big money, it makes it more difficult," Mr Parker comments.

In addition, Pavey Group's Mr Smale has had similar problems, but for different reasons. "We will look at any opportunities for acquisitions, but they do not seem to have arisen," he says. "Even the smaller brokers are not for sale - they have good retention of clients and believe they can carry on. The perceived problems that were predicted to hit smaller brokers don't seem to have made an impact."

Despite the lack of insurers in the city, it seems that the future for Exeter is fairly bright - especially if Mr Charlton is to be believed: "Of the independent brokers in Exeter, there is enough young blood in order for the market to carry on and extinguish any fears that it will disappear."

Fact box - Exeter

- Exeter is located on the River Exe, about 40 miles north-east of Plymouth and 70 miles south-west of Bristol. According to the 2001 census, it has a population of 111,076.

- The city has been identified as one of the top ten most profitable locations for a business to be based, and has a sizable service economy, with a catchment workforce of 300,000 people located within a 45 minute drive.

- Exeter has good transport links, with the M5 motorway, Exeter Central and Exeter St Davids railway stations and Exeter International Airport connecting the city both nationally and internationally.