Homes away from home

It’s no secret that Towergate chairman Peter Cullum has a knack for spotting and acquiring niche businesses and turning them into success stories.

When Cullum resigned from Hiscox in 1997 to create consolidator Towergate, his first acquisition was Holiday Homes Insurance Services based in Hornchurch. He saw its potential, having watched it perform consistently over a number of years – and because he knew the people in it, says Towergate Underwriting household managing director Scott Banks.

“The owner knew Peter well and was happy for his business to join Towergate, as he recognised the potential for extra growth this would bring. Peter, meanwhile, recognised that the business was operating in an extremely profitable sector and it was an area in which general insurers did not have experience, knowledge or appetite to underwrite themselves,” he says.

Towergate Holiday Homes was born. Now, more than 13 years on, the business is still going strong, providing cover for holiday homes in the UK and Europe.

The company offers policyholders cover for accidental damage caused by tenants, emergency travel costs to the property in the event of a major claim, and the risk of failing to let the property for up to 60 days a year. The policy also offers £5m property owners’ liability and £5m personal legal liability. Many enhancements have been made over the years including, in 2007, the Globelink translation service. “The language barrier can make it difficult for clients who are abroad and in need of help,” Banks says. “Globelink can be invaluable, particularly in an emergency.”

Risks are also reviewed. For instance, the potential risks meant subsidence cover was not offered in France. But it’s been recently introduced following customer research. Customer demand also prompted the company last year to introduce accidental damage by tenants.

European expansion

Towergate has expanded its product offering geographically too. “Over the past three years, more holiday homes have been purchased in Bulgaria … so we extended our territories to include this country in our offering,” Banks says.

Besides the UK and Bulgaria, Towergate covers homes in France, Greece, Italy, Portugal, southern Cyprus, and southern Ireland. Banks admits that the company is keen to roll out the product to more European countries – but stops short of saying where.

He says that it is unlikely it will expand outside Europe in the near future. “You must understand the environment that you are writing in and have a service chain in place to deal with any losses that occur within the territories you are writing.”

He says that the loss patterns involved in covering holiday homes are generally the same as standard household risks. Fire is historically the main peril, but it’s been surpassed by the damage from frozen pipes. “The losses are greater during periods of unoccupancy, as the damage goes undetected for some time,” Banks says.

Towergate sells the product directly, but it also markets the scheme to thousands of intermediaries, including Staysure, AA, Swinton and high street names such as Lloyds TSB. While Towergate regularly arranges own-brand schemes for brokerages specialising in this niche industry, Banks says that the business also supports brokers with a handful of cases each year. “We market on the basis that you don’t need to understand all the issues. ‘Let us be the experts for you’ is the effective slogan,” he says.

Product literature is easily accessible too. “Our marketing materials and product benefit analysis show brokers what the client needs,” Banks explains. “This is especially true for overseas holiday homes, where we offer features such as ‘pass the phone’. This provides interpreting services for clients and claims handling in the UK.”

He won’t give exact figures, but says Towergate has enjoyed strong and steady growth since embarking in this niche area. He also expects holiday homes insurance to boost development and growth within the company this year. “We believe the largest opportunities will come from Towergate Connect, which picks up a large volume of business via direct marketing,” he says.

With this in mind, Towergate plans to focus on marketing the specialist home insurance product throughout its distribution networks: through the Towergate Risk Solution broking division, external brokers and affinity groups such as travel operators and letting agents.

Towergate’s claimed success makes it surprising that competitors haven’t given them any real cause for concern. Banks admits that this market segment is very competitive, but that it is not yet overcrowded. But you get the feeling that if more companies were join it to make a quick buck or two, he would remain unfazed. “The knowledge we have within this sector is very hard to replicate, which is a barrier for new entrants and competitors.

“There will always be others who are cheaper and offer inferior products at certain points in the cycle. But we believe in the dictum that ‘you get what you pay for’, and so maintain our product and service to provide the highest of standards.”

Effects of the downturn

What about the product’s viability? Surely the downturn in the economy has had some effect on the numbers buying second homes? “Our typical clients are from a distinct profile and age,” Banks says. “They have not been hit as hard by the recession and purchasing a holiday home is high on their agenda. Once they have acquired such a valuable asset or investment, they are unlikely to leave it uninsured; they want peace of mind – which is where we come in.”

Banks believes that Towergate’s success in this market is down to three key factors: distribution, expertise and service. But it is distribution that is its strength. “This runs through the blood of the organisation and we focus on tailoring products, service and delivery mechanisms to suit each distribution channel.” It’s a tough act to follow. IT