Ian Gosden, Higos

No comments

'The industry is not about selling people a piece of paper as cheaply as possible, it’s about educating clients'

Higos Insurance Services managing director Ian Gosden started in business as an independent financial adviser, branching out into general insurance broking in 1990. For over a decade, he distributed exclusively via profit sharing arrangements with IFAs, which provided Higos with leads.

From 2002 onwards, he branched out into buying books of business from other brokers before opening up Higos’ first high street branch in 2006. Since then Higos has built up to a network of 16 branches with further acquisitions in the pipeline: Gosden has set a target of 20 over the next year and 35 by the end of 2013. The company also has a central underwriting office in Somerton, which handles the business referred by IFAs, its original distribution channel.

The firm’s £9.1m annual income is divided roughly 50/50 between personal and commercial lines, which is concentrated at what he describes as “very much the S end of SME”.

Gosden himself owns 44% of Higos with the balance of the company divided equally between its own staff and Zurich.

?How did you break into broking?

I went into general insurance because one of my life clients asked me to provide some cover and nobody would help me. It was ridiculous. I got one of the last agencies from Norwich Union that you could operate from a home address. I had 1000 clients and asked them if they had PA (personal accident) cover and of course they didn’t. I realised there was a serious need to give advice about insurance

Why is Higos expanding its branch network when insurance distribution has become increasingly internet based?

Our strategy has been to not follow the crowd, and I do feel that a lot of what goes is just blindly following the crowd. Everybody thought I was a nutter when I started opening in high streets, but they don’t think that way now. We grew last year in an environment which is as tough as it’s ever been. I’m still improving my service and growing my client income.

It’s fortunate; when the mortgage brokers disappeared we would have been in serious trouble if we hadn’t had the branches, because the volume of leads from them disappeared overnight.

I feel that our business strategy, which is to have proper high street brokers, enables us to give proper advice to clients and the opportunity to talk to somebody, which doesn’t exist in many towns these days.

Do you agree with predictions that aggregators will take over the SME market?

I think you’re right, but I also think that insurance is too technical a subject for people to buy it without guidance. I’m sure a lot of people think they can, but if everybody did the right job, we wouldn’t need an ombudsman.

I accept that aggregators have 40% of distribution in personal lines, but nobody’s making any money, clients aren’t having a wonderful experience and when it goes wrong, it goes wrong. Insurers are not thrilled with the result, so why is everybody doing it?

People are going on the internet because of the lack of local brokers and they are buying online because they don’t understand what a broker does.

What has been the feedback following your recent attacks on insurers, particularly Zurich, over the quality of their claims service?

I got a quite a bit of stick. Zurich has improved and focused on its claims service, but we should be slating the insurers if their claims service is rubbish. I object to having my reputation put on the line because they’re spending nothing. In what other industry would you allow somebody else to put your reputation in the dustbin because [the customers] don’t blame the insurers, they blame us.

We have nine staff who are helping clients claims out of 190. That’s 5% of our staff.

Does Zurich’s investment in the firm throw up conflict of interest issues?

The two aren’t linked. They have no involvement in my day to day business. I won’t compromise my principles and if people don’t see it the way I see it, I am not worried.

What kind of clientele does Higos target?

We don’t turn clients away and we are extremely competitive on price but if you’re only interested in price don’t come to us.

We’ve got 356 clients with a motor policy with a premium of less than £120, and we’re going to talk to those clients and ask them where the rest of their business is. They need to be a client and not just somebody that buys some insurance from us. Our ideal client is a Middle England individual who is interested in service.

You’ve heard of ambulance chasers? Well, we’re Waitrose chasers, because wherever Waitrose open a branch, it’s got the right clientele. They’ve done the demographic work. We are the Marks & Spencer’s of insurance broking. If you want quality service, we will do it, but I am sure there are other people doing it their own way, like Lidl.

This approach may work in the South West, where local ties are strong, but would it be as successful elsewhere?

I am sure you could go to Norfolk or the Peak District and it would work just as well. We avoid the cities, but I am sure that if you go to the suburbs of the city, there’s an equally strong sense of community and value in local service. I don’t ever see us in a city centre, it doesn’t make any sense.

I feel that the industry needs to remember where it came form and what its job is. It’s not to sell people a piece of paper as cheaply as possible, it’s to educate clients. I wonder how many clients understand that if they buy without advice they are liable if they get it wrong. There’s no communication from the broker market to the public, other than word of mouth.

Do you have ambitions for Higos to become a national broker?

All of the branches must be within two hours of the centralised underwriting centre at Somerton where I live. If they are within that, it’s a reasonable management time so if we have a problem we can dispatch staff and it can be controlled.

You have to have some clear idea of where you want to be. I don’t want to be a national broker because I don’t think that I can cope with more than the South West in the next five years. If somebody wants to take it off me in five years' time and take it national then great, but I will have done 25 years and I’m not sure that I want to be doing this forever. So our five year plan is purely South West.

How much of a threat are the national consolidators?

They’re driven by the bottom line. You can’t argue that they are wrong because it’s the main reason for being in business, but it’s not my only reason for being in business.

We provide a service to the local community and we provide jobs to local people. While we make money it’s not the key focus whereas with the big brokers, they are looking to maximise their return and they sometimes don’t provide the service. It’s not a criticism, it’s an observation. When they are shutting branches and moving clients from one account manager to another, it’s not doing the client a favour. But when they close, like when Towergate moved out of Shepton Mallet, it means opportunities for us.