Think terrorism insurance and chances are you think about Pool Re and Lloyd’s of London as your only options. However that, according to Simon Lovat, director of Inperio, may be a costly mistake.
“Lots of brokers use terrorism insurance,” he said in an exclusive interview with Insurance Business UK
. “Anybody who’s selling property owner’s insurance, anyone who’s selling commercial insurance for offices, industrial estates, residential blocks – the banks require it, anyone with a mortgage for a commercial building is required to buy terrorism insurance. However, they are just clicking that button.
“The premiums aren’t great – they are not hundreds of thousands, they are £5,000 or £10,000. However, that is being lost by the broker because with Pool Re they are earning very little commission and it’s become just a facilitation of a requirement.”
Now, Lloyd’s coverholder Inperio, and Lloyd’s of London Syndicate Ark 4020 have teamed up to launch a new online UK Terrorism product. It is aimed specifically at brokers operating outside of the London market who are unable to easily access the Lloyd’s of London platform. It’s an online quote and bind product that has been released to allow retail brokers to give their clients an alternative to the historic Pool Re terrorism coverage – and it’s an alternative that Lovat believes is desperately needed.
“For a long time we worked within a Lloyd’s broking environment and we worked with people placing terrorism insurance into the market,” continued Lovat. “It became apparent to us that brokers outside of that Lloyd’s broker remit really have little access to terrorism products outside Pool Re.
“We looked at what people are doing and you can send your inquiry to a Lloyd’s broker and three or four days later they might come back saying ‘yes’, ‘no’ or ‘sorry, who are you?’ For a lot of the regional guys their only real option was Pool Re so they would do their composite quote with Aviva
or whoever and they’d just tick that box that says Pool Re. They wouldn’t really be paid any commission, they wouldn’t really have a choice on terms – it was just ‘yes’ or ‘no’.
“So we spoke with the syndicates we do a lot of work with and said ‘hey guys we know there’s a community out there who buy terrorism insurance, we know there’s a product that you want to sell, but we know that the distribution gap just isn’t working’.
“So we thought ‘let’s give them a product they can use in their office, let’s give them a product they can use in real time’.
“Now if you’re a broker in Manchester, or Sheffield, or Birmingham, or wherever, and you’ve got a client with whom you want to talk about terrorism insurance, you can get out your iPad or your laptop and you can give them a quote in real time and buy that product in real time. This is empowering brokers to quote terrorism insurance which they haven’t really been able to do before.”
Lovat also believes that there are serious financial opportunities being thrown away by brokers by following the tried-and-tested procedure – and that this new alternative can help boost their balance sheets.
“If you are a provincial broker, your route to these products is via a Lloyd’s broker and the frictional cost becomes a barrier to entry. Also the time it takes can be prohibitive. So what we’re doing is saying, this is real time and instant – a Lloyd’s broker can’t do that.
“Right now regional brokers don’t make a lot of money through terrorism insurance. If they go through Pool Re, it pays maybe 4-5% commission; and through a Lloyd’s breaker they might make 7-8% commission. By contrast the commissions we pay are more akin to what they expect to make – 15-25% commission. So now it can be a real revenue stream if they focus on it.”
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