Premium finance firm says working in partnership has delivered better outcomes for customers.
An event such as the collapse of unrated Alpha Insurance is where “relationships come to the fore”, according to Close Brothers Premium Finance chief executive Sharon Bishop.
Alpha was declared bankrupt on 8 May having gone into liquidation at the start of March.
The premium finance house had time to monitor the situation between the original orderly-run off plans and when Alpha’s policies were abruptly cancelled leaving people left without cover.
“It doesn’t happen very often but when it does you have to be all over it,” confirmed Bishop.
Commenting on the response in May, she added: “It is very [much about] teamwork and where the relationship really works.
“You can pick up the phone [to brokers] and say ‘how do you want to do this, how do we make sure the customer isn’t disadvantaged at all?’
“It is where you need the specialist knowledge in the market.”
Named
Insurance Age revealed last month that telematics specialists Carrot had moved clients from Alpha to Aviva.
And revealed that Cover My Cab was stepping in with Gefion policies for affected Alpha customers.
In both instances Close Brothers was involved as premium finance provider to policyholders and name-checked by the brokers.
“Having been through the process in the last couple of years we have a very robust insurer failure process and procedure,” explained Jon Howells, commercial director at Close Brothers citing Enterprise and Gable as examples of where these had been called on previously.
“We knew which of our brokers had exposure. We had had a number of conversations with them on their thoughts.”
Working group
He detailed the company had “in the region of 17,000 customers” affected at the point of failure with “a handful of brokers” accounting for 90% of the total.
A first step was to form a working group which Close Brothers did involving the heads of each department within the organisation.
It is still meeting daily to monitor progress for the company, customers and brokers.
“We liaise closely with the brokers to make sure we have a coordinated approach,” stressed Mark D’Ambrosio, personal lines collections manager.
With its history and current involvement the business says it is ideally placed to assess the overall situation across the market.
D’Ambrosio noted there were some brokers who had also experienced an insurer failure before but there were plenty who had not.
“In terms of smaller brokers who may not have been through this before they are able to lean on us and get some of the experience we have gathered over the years,” he detailed.
Adding: “It was about filling in the blanks and sharing as much knowledge as possible.”
FAQs
Part of the process has been producing a full set of FAQs covering topics ranging from what brokers can do to advise customers on compensation, suggested direct contact with the Financial Services Compensation Scheme (FSCS) and guidance on the fact customers need to pay and honour credit agreements.
According to the three spokespeople, an outcome of customers panicking and cancelling premium finance policies would be the worst outcome for all and cause difficulties down the line.
The situation has been particularly complicated by the fact Alpha was based in Denmark. The FSCS is yet to issue a formal ruling – indeed it has called on the market for ideas.
The current advice from all experts is to contact the Danish Financial Supervisory Authority (FSA).
Nothing is set in stone – and in theory there could yet be nasty twist – but there is a unanimous belief across the general insurance market that policyholders will ultimately receive the compensation they are due.
Then there is the problem that in some cases, such as with Carrot, insurance policies have switched directly between insurers whereas other former-Alpha clients may have had to buy a second policy.
Cancellations
Again, all three spokespeople were adamant that all being equal then via the routes explained above - the FSCS or the Danish FSA - Close Brothers’ clients would either receive a refund, have payments offset against future policies or transferred
So has there been that moment of panic with Close Brothers’ seeing a spike in cancellations?
“You would expect a slight uptick,” accepted Howells, “but it has been nothing that alarms us.”
And the company is already gearing up for the “operational impact” at the point where the compensation starts coming through and the need to reconcile accounts truly kicks in.
D’Ambrosio concluded: “We have a team to make sure we can facilitate the brokers and support them as much as we can through this.”
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