Out of the frying pan

Last week another corporate shock rocked the City. The share price of construction services supplier Amey lost half its value following the sudden resignation of its finance director. The City feared another black hole in group accounts.

The stock market was understandably nervous. In March, Amey's expected £55m profits turned into an £18m loss amid fears of accounting irregularities. Interesting, but what's that got to do with insurance you may ask? Well, enter Richard Webster, the new chief executive of credit insurer Euler. Until just a couple of months ago, Webster was director of Amey's rail infrastructure support services division - one of the rare people to jump from support services into financial services.

So does he feel tainted by the Amey connection? Not at all. He laughs when asked about Amey. "It has good basic fundamentals," he says. He's even bullish about its prospects. "It's a bargain now," he adds.

Webster joined Euler in August, replacing Russell Benzies.

"I like orchestrating change," he says. "It's dynamic."

And now he has made a big change by moving to the financial services industry. An unusual move?

"I was attracted to the opportunity of doing something completely new. The group wanted someone to lead and manage change, which is something I had done in the previous sectors in which I had worked. I was keen to apply these skills to a completely different industry," he says.

"Russell had taken the business as far as he could. He had been with the company for about ten years. What was needed was a fresh pair of eyes - with no baggage, not from insurance - to provide new solutions and a new approach."

Too true. One broker remarks that Euler "needs to wake up and take action, rather than sitting in its ivory tower".

So when Webster cast fresh eyes over the business, what did he find? "A business that hadn't performed financially," he says.

"A beast that has been knocked off its seat" is the more poetic description of Euler given by a broker.

Part of the problem was the fact that the credit insurance market, like other sectors of the industry, had being going through difficult times. The flagging UK and global economies have increased the number of corporate insolvencies and therefore claims. And substantial premium hikes in other classes of insurance meant that companies were less keen buy credit insurance which was seen as an expensive luxury.

As a consequence, in recent years, Euler's claims ratio had been taking a battering. In 2001, claims increased by 20%; and in the first quarter of 2002 business failures reported to Euler reached 953, the highest since 1994, representing a year-on-year increase of 7.3%.

Increased losses and pressure from reinsurers had forced Euler to increase it rates and take a harder stance on underwriting, leaving companies feeling that they were not getting value for money from the product.

The company had also been criticised for flagging service standards. One broker, who recently received a customer satisfaction questionnaire, says that she would not be providing a positive response: "A year ago I would have said I was satisfied, but not now. You just can't get through to an underwriter."

Another broker makes a similar complaint, but adds: "Once you do get through to someone, the decision is usually wrong." Webster clearly has a lot to do.

His most important task is to persuade clients that there is value in Euler's products. "If we can't [do this], then we have a real difficulty. It is our raison d'etre," says Webster.

"There has been a misunderstanding between what we offer as a service and how that helps clients, and what they think they've bought," he says. "It needs clarity at both ends."

So what does Euler offer? Webster describes the company as providing a "recoverables management service to help businesses grow and trade... safe in the knowledge that they are dealing with the right buyer... and that they will be paid".

To help get his message across, Webster is investing more in direct contact with clients.

"We have a good relationship with the broking community... but direct business allows us to offer more advanced solutions to clients. We can talk more holistically about receivables management. The broking community is not necessarily interested in providing the full package that we have to offer."

So he's turning his back on brokers then?

"It doesn't mean we don't want to work with brokers," Webster is quick to point out. "At the high end of the market, that is where brokers are strong; they have a much broader relationship with the client. We see ourselves as supporting that."

The fact that Euler is part of the Allianz-owned Euler & Hermes group means that Webster does not have a completely free hand in what he does. In fact, it has been rumoured that the parent company is pushing for premium increases.

And rate increase could be a problem. "The difficulty is getting the balance between the service provision and what the client will pay for and the benefits they see," says Webster.

Also high on Webster's agenda is better underwriting, one aspect of which is getting rid of unprofitable business.

Webster is also focused on improving underwriters' ability to make informed risk decisions. Over the next 18 months Euler will be setting up regional risk offices throughout the UK.

"We want to move our risk analysis teams out to the regions, so that they can do more client visits, have more involvement in the local business community," he says.

How does Webster intend to address the problems of customer service and ensure that his clients tick the box mark `very satisfied' on the customer feedback questionnaires?

"We need to offer a faster response to any customer request, whether it be a quote or otherwise. Time is of the essence. But we don't want to compromise quality of decisions; we must enhance quality."

Webster says that part of the solution will be IT-based, but he warns against viewing it as a panacea.