Two's company

If you believe the hype, the future of regional brokers hangs in the balance. The rise of the internet has meant direct writers like More Th>n, Direct Line and esure can undercut the average local broker without breaking a sweat.

People are more likely to pick up their home insurance while doing the weekly shop at Sainsbury's than pop into the broker's office and, so the argument goes, the outlook is bleak.

And yet, when I put the idea that regional brokers are a dying breed to Rod Lynn, joint-owner of Scullard & Prosser, he leans back in his chair and gives me a wry smile.

"It's a bit of a myth that brokers are falling by the wayside. I'm relaxed about the future. Regardless of all the changes over the years we're still providing the same quality service and that won't change."

Lynn looks like a man who knows. There is a touch of the everyman about him. Having joined the Hove-based firm in the late 1960s, he had worked his way up to office manager by the tail-end of the 1980s. In 1997 he and business partner Gillian Woodroffe finally stumped up the cash to buy the broker from founder Scullard's family.

Scullard & Prosser, nestling along one of Hove's busiest roads, would certainly be the S in SME. In fact, the company has just two full-time staff, packed into an office the size of Andy Homer's airing cupboard.

Remain competitive
The company dates back to 1945, when the venerable Scullard leased a property above the local tax office in Brighton. "He was a shrewd man. In those days, when people used to go downstairs to get their car taxed Scullard used to catch them on the way out. They needed insurance and that's how it all started."

Times change, though, and the company has had to alter its business model to remain competitive: "Fifteen years ago we would probably handle 15 or 20 new motor policies a week. Now, if we do 10 a month we've done well. But commercial lines have become much more important to us. I'd say it is probably a 50-50 split now."

"We've got a large scheme running with (Lloyd's broker) Holman's which caters for all types of non-standard property insurance like DHSS and unoccupied.

"We are also an NIG partner. Our lapse ratio with them is between 9% and11% a year, which demonstrates how well we look after our clients. We haven't got the resources to go looking for new business, so we have to make sure we look after our existing customers. From that comes the new business."

The telephone rings and Lynn excuses himself. It's a client, but you wouldn't know it by the way they are talking. Lynn knows the customer personally - they are on first name terms and talk about one another's kids. The contrast with the call-centre culture of some the larger insurers is palpable.

In the aftermath of the January general insurance D-day, horror stories were abound about the crushing regulatory burden faced by small businesses. But what is the reality for the small broker?

"To be honest I don't mind it. Having been with the IBRC and GISC, the FSA is not much different. There is more paperwork now, but we've always been used to having separate accounts for our clients' money, auditing our accounts at 25 days, sending out renewal letters and telling our clients about rules and regulations."

So there has been no real change under the FSA? "I wouldn't go that far. The FSA needs to recognise that general insurance is different. When you're dealing with someone's pension or life insurance, it's their future.

"But nine times out of 10 we are dealing with a man that wants to insure his car, a woman that wants to insure a house or a firm that wants to insure a business. We are quite capable of giving them the advice they need without intervention. There definitely needs to be a lighter touch."

Lynn talks about IT the way most people talk about home contents insurance: it's expensive and at times you wonder why you shelled out in the first place, but deep down you know it essential.

"We have just spent £10,000 on a brand new Misys system. If I'm honest, it's as good as the old system but they stopped doing the old line so we had to fork out. What amazed me is that, in this day and age, it couldn't transfer our old files onto the new one so we have had to do it all manually.

"When I was made general manager in the 1980s we tried to change an old firm into a modern company. We had to gradually introduce computers because the sales girls were so used to doing everything in the books, so we did it bit by bit. We've been with Misys for years but we still only really use it for motor quotes."

One of the most commonly-cited advantages of IT is that it brings brokers, insurers and customers together. As a small, provincial broker based on the south coast, does Lynn ever feel out of the loop?

"I guess that's true. We're members of Biba, the IIB and the CII and we have a good relationship with all of them. I'm a big fan of Andrew Paddick in particular. I believe in people speaking straight, so when he took on the GISC it was great.

"I do have one complaint. We'd love to do some of the training courses, but you are expected to travel to London every time. There are just two full-time staff here, so if we go to London then we lose a whole day's business."

And what about relations with insurers?

"Insurance companies sometimes forget they've got brokers at all. The service we receive has gone down drastically. It's either because they are under-staffed or they are inundated with business. If it's the latter they're making a profit and they need to employ more people. Brokers are left waiting 20 to 30 minutes to get through on the phone. That just didn't use to happen."

Aggressive consolidators
As Towergate announces its 102nd acquisition this week, the threat of being swallowed up by aggressive consolidators could not be more pronounced. How has the firm lasted so long?

"As a small broker you're always getting approached. We get letters through the post and we just send them back saying: 'How about we buy you out?' Budget writes to us every other week, but we're just not interested. When the time comes and we want to sell then we'll look into it but we won't be bullied.

"We've got clients with us who have been with Scullard for 50 years because we treat them as human beings. We've got some customers that come in who are on their own and we're happy to sit and talk to them for 10 minutes. We give a personal service and we treat everybody in the same way - a £100 motor-cycle policy gets the same service as a £10,000 property insurance."

If Lynn is concerned about the future of the small broker, he does a good job of hiding it. Whether he is right to be so upbeat or is being overly optimistic remains to be seen.

However, it is clear that the emphasis on service and on retaining individual customers is a lesson some of the larger insurers and brokers would do well to learn. As the interview draws to a close I ask Lynn how he feels about the future.

"We make a good living, but we're not looking to make vast sums of money. It's just business as usual." IT