2004 Houston Marine Insurance Seminar Price or Service? A London Broker

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2004 HoustonMarine Insurance Seminar Price or
Service?A London Brokers ViewbyAlan
BrooksWillis Energy, London
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Price or Service?

• The Service record of the industry is awful
• The immediate conclusion therefore must be
• PRICE

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Notes for Alan

• Price or Service?
• The standard of service in the insurance industry
  generally is poor.
• In 2003 the average time taken from inception to
  sign a policy was estimated at 250 days.
• The source of the delay can be
• Brokers
• Lead Underwriters
• Bureaux
• Clients

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Price or Service?

• The specific question was from a London
  perspective.
• This causes me to ask the Mariners Committee
• Have you ever been to London?
• What were
• you thinking
• of?

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Price or Service?
Waiter, whats that fly doing in my
soup? Dont know Sir, but it looks like
breaststroke
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Price or Service?
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Price or Service?
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Price or Service?
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Price or Service?

• In order to answer the question we should ask
  ourselves
• What does Service entail and what does Price
  include?
• It is rarely (but increasingly) laid out in a
  Service Agreement.
• In the absence of an agreement the brokers own
  standards or market custom has applied.

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Price or Service?

• A London broker may be
• A Wholesaler
• A Retailer
• Both
• A Quasi-Retailer
• Different skills and services may be required but
  some common and fundamental principles should
  apply

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Price or Service?

• Global services delivered locally to the client
  (Insured, insurer or retailer)
• A Client Advocate approach
• Delivery of a Value Gap
• A Service Agreement or a Terms of Business
  Agreement must be in place.

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Price or Service?

• The broking industry has grown up with and is
  obsessed with the view that the transaction and
  therefore the price IS the service - BUT
• Premium variance is not the only exposure of the
  client
• Poor security
• Rogue traders
• Errors and omissions
• Poor advice
• Uninsured risk/perils
• Are just some of the exposures beyond the premium
  and any retention that a client is exposed to.
• N.B. Brokers EO may not be a safety net

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Price or Service?

• The Price of the Service is also a factor
• The broking community has not always been clear
• Are they commission based agents of the
  underwriters?
• Are they fee based agents of the Insured?
• Are they a hybrid of the above?
• Are they both?

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Price or Service?

• There is a fundamental difference between
  commission and fee based income
• Commission income should pay to service a
  policy for its life
• Fee income normally covers prescribed services
  and is for a specific period of time.
• But the edges have become blurred.

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Price or Service?

• We are in an era where contract certainty and
  clarity is more important than ever
• All parties in the transaction should
• Be clear what Service is expected
• Be clear what the Price is
• Be clear what the brokers remuneration is and
  what it is for

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Price or Service?

• Back to the question! Is it Price or Service?
• The question implies that separation is a
  choice.
• The broking community has grown up with an is
  obsessed with the view that the transaction is
  the Service.
• I believe this to be a fundamentally flawed view

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Price or Service?

• The transaction is an important part but only a
  part of the service.
• And anyway,
• even if I didnt
• hold this view.

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Price or Service?

• Are there any Clients out there that do not
  expect both?

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