Grant Ellis

Grant Ellis should be taking life easy. With a holiday home in the Cape, where he is planning to spend the upcoming World Cup, and a new, slightly more back seat role as chairman of the Broker Network, that’s what most people would be doing.

But Ellis is not slowing down, at least not based on the evidence seen by Insurance Times on a visit to Broker Network’s Knaresborough HQ. It is clear he has not lost the restless energy that drove the growth of the UK’s biggest network of insurance intermediaries. In his first major interview since he took on his new role, Ellis talks about how life is panning out under the Towergate umbrella, his new role and his plans to mount a campaign for small brokers.

It is just over three months since Ellis handed over day-to-day management of Broker Network to Nick Houghton, who stepped up to become managing director. This roll call change followed the network’s £95m sale to Towergate three years ago. Ellis realised £12.25m from his 13.5% stake in the AIM-listed business, which, he chuckles, represented “quite a good rate of return” on an initial investment of £30,000 in the early 1980s.

Some saw that deal as a sell-out. But Ellis defends Towergate against what he sees as whispers put about by competitors that the consolidator would force Broker Network into its own mould.

“Their opening gambit was that we knew how to run a network. I was comfortable with the way Towergate approached it. They didn’t want to damage what they had bought.” Anyway, he adds, Broker Network had little choice but to sell. “We were a plc, which means that as soon as you list, you put a ‘for sale’ sign above your head. Whoever paid a price to the shareholders, we couldn’t object one way or the other.” He says that one member firm left the network because of a past disagreement with Towergate chief executive Andy Homer. But apart from that, the takeover has been a “non-event” for members. Overall, the process has gone “exceptionally well”, he insists.

But has the deal, concluded at the tail-end of the mid-noughties’ deal frenzy, worked as well from Towergate’s perspective? “Peter [Cullum, Towergate chairman] will always say he paid far too much for it and he’s not getting the return on it, but secretly I think they’re very pleased. They want us to really consolidate our number one position. There isn’t another network with a fraction of the resources that we’ve got, so it would be very difficult to replicate it,” he says. “We perform well in comparison with other parts of the [Towergate] business.”

It hasn’t been plain sailing, Ellis admits. A revamp of Broker Network’s sales and marketing operation took six months, during which time very little new business came through the door. But that situation has picked up now, he says. “The tough economic conditions mean that even more brokers have seen the advantage of being part of a bigger network. All networks have seen growth.”

Letting go

But how does it feel to let go of the day-to-day running of a business? “It was very easy to hand over the reins to Nick Houghton,” Ellis says. “I wouldn’t have done it if I hadn’t got that confidence in my successor. And I’m very happy for Nick to turn around and say ‘butt out’. Well, most of the time I am – more often, we debate things. It works very well.”

For his part, Houghton is happy to have Ellis’s experience on tap. “He’s a great sounding board; what he doesn’t know about the network market isn’t worth knowing,” Houghton says. “He’s a great coach and the good thing is he’s not going anywhere, which is important because, to a lot of our customers, Grant is the network.”

Ellis believes that having a more strategic role plays to his strengths, enabling him to spend more time talking to brokers and insurers about new business opportunities. It also gives him the opportunity to spend more time on industry issues.

One such issue is the prospect that the European Commission will introduce mandatory commission disclosure when it updates the Insurance Mediation Directive. Brussels doesn’t understand the broker business model because many European carriers work through tied agents, he argues. “Here, you can go elsewhere if an insurer tries to increase prices by 20%.”

Having mobilised a letter-writing campaign to MPs, which he says proved to the FSA “beyond any shadow of a doubt that mandating would create more problems than it was worth”, Ellis believes there is a “real danger” that mandatory commission disclosure will now be imposed via the Commission. When mandatory commission disclosure was mooted by the FSA, Broker Network drew up a three-page document outlining the services it offered. “Frankly, 99% of people would put it in the bin,” Ellis says. “The advantage of the system as it operates is that you can ask. SMEs just want to know what they get and how much it’s going to cost. It could be introduced and could become business as usual. I don’t think it would put brokers out of business, but I don’t think it’s necessary, and nobody wants to know.”

He adds that consumers could be provided with information that is “potentially quite misleading because it doesn’t reflect the value of what they are buying”.

As for the latest levy from the Financial Services Compensation Scheme (FSCS), Ellis believes it is “fundamentally wrong” that intermediaries are being asked to pick up the tab for mortgage payment protection insurance mis-selling.

“We just seem the whipping boy at every turn,” Ellis sighs. “I am so frustrated. We are a massive contributor to balance of payments, a big employer and we ain’t caused anybody any problems.”

Rallying the troops

But it’s time for the insurance industry, and the broking community in particular, to rise up, he says. “I want to see if we can get a groundswell of anger. I would like the worm to turn and I am prepared to be the one that starts to poke it.”

As a self-styled “gobby Yorkshireman”, he says he is in a good position to give a higher profile to issues like the FSCS. While paying tribute to Biba’s recent success in watering down changes to insurance premium tax, he says that the trade body cannot always speak loudly enough on behalf of its smaller members. And as a lobbying body, it must adopt a middle-of-the-road position, which does not reflect the depth of feeling among its members.

“Even within Biba, you have international and smaller brokers. We need somebody to champion the cause of the smaller broker exclusively. I’m not sure that Biba can do that, because they have members who don’t fall into that category. So, I’m going to do that and stand on my soap box and bang the drum because all Broker Network customers fall into that category.

“We should champion the cause of the small broker. We don’t have vested interest, we have that one absolute focus,” he says, though some might point out that the network has a strong interest in attracting smaller brokers.

Having helped to halt the FSA’s drive to introduce mandatory commissions, he believes there is scope for similar action around issues like the FSCS. And he is willing to take the small brokers’ case directly to Brussels. Meanwhile, the potential change of government provides a “fantastic opportunity” for campaigning, he says. “It’s time that we got a bit more belligerent.” IT