Leeds is a vibrant and thriving market, reports Amy Ellis, with many insurers —and possibly too many brokers — setting up shop in the heart of west Yorkshire.
Leeds is at the cultural, financial and commercial heart of west Yorkshire, a county famed for producing the likes of Tetley Tea, Emmerdale, Alan Bennett, Yorkshire puddings and the Kaiser Chiefs.
A two-hour train journey from London King's Cross takes you right into the centre of Leeds, where many of the big insurance players have set up shop over the years. 'Thriving' seems to be the word of choice from most to describe the market and it is easy to see why.
This year alone, loss adjuster MYI has developed a presence in Leeds with the opening of its eleventh UK office, The Insurance Partnership continued its expansion with a move into the market there, GAB Robins reopened up after closing its hub in 2005, and Arista has said that it hopes to have an office presence in the city by the beginning of 2011.
The insurance job market is showing signs of recovery in the city with commercial underwriters and account handlers continuing to be in demand over the last six months, explains Jonathan Turner, manager at Hays Insurance: "There are more cases where employers are demonstrating the confidence and interest to recruit again. Currently, we are seeing a number of employers taking on new staff including professionals with experience in commercial insurance and business development. Companies are keen to recruit professionals who can win new business and add value. We are also seeing a demand for candidates with specialist claims experience."
It is undeniable that the Leeds market is heavily broked, a simple Google search brings up a list of more than 150 brokers available in the area, an issue that those in the market seem all too aware of. "It used to be said that Manchester was much more heavily broked and a more competitive market than Leeds," explains David Kelly, regional manager for the North-east at Brit Insurance. "Most people accept now that has switched round. It is a lot more of an aggressive and over-broked market in Leeds."
A seasoned profession when it comes to Leeds, Mr Kelly has worked in the market here for more than 25 years and has been at Brit in Leeds for almost seven since it opened in January 2004 as part of a launch into the UK regions. The saturation of brokers can have a negative effect on competition, but he explains that "it works both ways".
"It is very rare to see a piece of business now where you have one broker going round the market with it, it is even getting rarer to see just two. Most clients are getting calls now on almost a daily basis from brokers asking to quote on the business. The biggest number I heard was a client that got 69 calls in one year from different brokers," he explains. "From a clients' point of view it is good, as it demonstrates there is a lot of competition out there, but it can have a negative effect as well. Most insurers — if they see there are a number of competitors fighting over the same piece of business — will switch off and think 'what's the point'."
A short taxi ride away from the centre of Leeds to Horsforth, Romero Insurance Brokers provides a fitting illustration of this congested market, with three brokers in this small suburb of Leeds alone. Simon Mabb, who became managing director of Romero after moving to Leeds in 2006 with Axa, agrees with Mr Kelly that there is a "phenomenal" amount of choice for clients at the moment. "Clients we deal with are getting about 60 phone calls asking if brokers can come in and quote," he says.
"The difficulty is there are some brokers that set their stall out just to cut their margins completely out of it. It doesn't do us as an industry a fantastic justice when people are coming in and giving their services away for next to nothing. We have all got to be competitive on our margins, but I know economically when I see some of the stuff that goes on that they can't afford to do that and we know because we have dealt with that client," he adds.
The congestion of brokers in the market is clearly something that is of concern for Chris Dale, area director of Aon, who has held the position since the regional restructure designed to bring "decision-making and resources closer to its clients" was announced in February.
Mr Dale explains that competition is good and healthy, but that it also needs to be sensible and sustainable: "You find there are brokers out there that are challenging the sustainability. We have been in a soft market for a long time and we are all challenged around revenue, but we find that we are just getting some unsustainable activities out there in terms of people halving and slashing fair and competitive fees. What they fail to understand is that they are driving earnings out of the industry for the long term, which creates a double whammy as it takes away from the ability to invest in areas such as talent retention."
Gareth Hemmings, regional broker director at Aviva, feels that this competition means the brokers tend to do a good job in terms of risk understanding and what they present: "For us that means genuinely that the quality of people you have is really important, because the poorer ones get found out much quicker."
When Post visited Leeds in 2008, Yorkshire Forward had invested in a multi-million pound plan to transform the region into an economic powerhouse. Two years on and with the dust from the recession still settling, it is clear that some of these plans have taken a back seat.
"We are hoping that things are going to pick up soon," admits Mr Kelly. "A number of big building projects that were put on ice because of the recession, such as the redevelopment of part of the shopping centre, look as though they will be up and going again very soon. Hopefully that will bring a bit more work into the city and generate more revenue. It is tough out there at the moment, everybody you speak to, insurers, brokers and clients all say the same thing and everybody is fighting to keep their head above water," he adds.
Sitting in the Romero offices, which rents its premises off a client that went bust in the recession, unprompted Mr Mabb admits that it has been tough during the recession. "A lot of our business relates to construction, manufacturing and wholesaling, all the sectors that have been consistently hit. It has been a tough couple of years, we have had to work harder for less just to stand still. This business has pretty much grown year on year, so in the last couple of years it seems like we have been going backwards, even though we have still been managing to grow slightly. The downsizes in wage rolls and turnovers have subsided slightly, but rates are still very soft in the market, which has an effect on our earnings."
The recession has not necessarily been a negative for everyone in the Leeds market, however. The liability adjusting arena can often do well in times of recession, admits Kevin Foakes, deputy managing director at Argent, who says that Leeds has always very much been on the Argent map: "We can't be too churlish about that, however. We can do very well, particularly in the employer's liability arena if people have got reduced hours in a manufacturing environment, or if there are redundancies, people are more likely to make a claim against their employer and look for some supplementary cash by way of compensation claims. The flip side of the coin is that if the industry is suffering and one or two of them shed people through redundancies, the volume of people working and, therefore, the volume of people having accidents reduces. That means we don't rejoice too loudly."
With the cuts in public spending on the front of every newspaper, Mark Adderley, executive adjuster at MYI, adds that what is happening in the public sector is at the forefront of people's minds: "There has been a recession within the private sector over the past few years, which a lot of people are coming out of. This has affected the premiums within the broking market. Everyone is now concerned about what is going to happen in the public sector. Like all cities, Leeds has an enormous student population and housing association and the reach of the public purse is very widespread. That all sits within the general insurance market."
"They have to tender all their insurance every two or three years and they are provided incentives to use local suppliers in terms of loss adjusters and brokers, so if there is a restriction on the public spending that will affect the insurance market," he says.
In March this year, Post reported that several jobs were at risk as a result of a restructure of UK General's branch network. Bucking the trend of the current fashion to push back into regional offices, UK General has consolidated its finance, HR and IT teams into its Leeds headquarter building. It has also taken the decision to centralise underwriting for commercial products in England away from the regional offices "to give a tighter degree of control on the business being written".
Situated next to a canal a short distance from the centre of Leeds, what it lacks in location, UK General has made up for in style in a modern building it shares on an industrial estate with old derelict factories. It is a building UK General are clearly proud of, as a guided tour is offered of its own private gym and swish new interiors. But with former Primary chairman Jonathan Davey having admitted in 2007 that he did not want the underwriting agency to be an organisation that controls everything from the centre, have UK General made the right decision?
It made its decision and then suddenly everyone else was going out into the regions, admits Michael Warren, chief operating officer at UK General: "What's right for them is right for them, but to be absolutely honest there was nervousness around it. Anyone who has been in the commercial insurance world for any length of time was telling us predominantly from the schemes and personal lines backgrounds that the brokers wouldn't tolerate it. But we haven't lost local presence at all and that is the message we are giving to brokers. We are out there for work on a day-to-day basis, through the business development management network."
Karen Smith, technical underwriting director at UK General, adds that she feels that sometimes people "kid themselves" that where there is a regional presence it is "cosier": "That is not the case. A mile away from the broker can be as far as 20 miles if you are speaking to them over the phone rather than going to see them. Even if they are 20 miles away, you can still get in your car and drive to them if a face-to-face meeting is what is needed. Being based in Harrogate or Birmingham, for example, as opposed to Leeds, actually doesn't make that much difference."
There has, however, been a visible move away from the centralised model in the industry since the recession and a push back to the regional structure to give more of an 'on your doorstep approach'.
Mr Adderley believes that, "everything always just goes a bit too far." He explains: "There is consolidation, cost cutting, centralisation to single units and then they realise that they have centralised a lot of stuff that they did not need to. The days of having 120 people offices are probably gone, especially from the insurer's point of view. That is never going to happen again, those people were predominantly there to service personal lines and now you can do everything online."
Dave Parry, director of sales and distribution at NIG, who is filling the role in Leeds until Steve Scott joins as business development manager on 1 November (www.postonline.co.uk/1736091), says: "That was one of the main things out of the restructure last year, that there was more focus on underwriting experience, more authority and bigger branches that were more autonomous so that the knowledge is here, the work is here and it is all closer to the brokers with more broker contacts.
"An underwriter here now would have the authority to underwrite 90% of what we are shown, in the old days we probably would have had to refer half of the business we saw to head office, now it would be less than 10%."
Mr Dale admits that Leeds may have to concede that Manchester has a better football team currently, but the battle for the crown of the leading financial centre outside of London still rages on.
Mr Kelly supports this: "Leeds has a very proud heritage, it has always regarded itself as a major market and rightly so, we have constant arguments with Manchester and Birmingham as to which is the biggest market outside of London. Certainly before the recession hit, Manchester was undisputedly the largest growing economy outside of London, but that has stalled a bit. In reality, we are probably the second or third largest insurance market outside of London. Leeds is a very dynamic market, it has changed a lot over the years as a city and now competes in the global market. One of the major things from an insurance point in Leeds is that just about every insurer is here. All the major insurers and a lot of the niche players, you have got people like Giant, which is moving into Leeds, and quite a lot of the Lloyd's operations that are moving outside of London all look to set up here."
Although currently only in the Leeds office, which was consolidated from the previous office in Newcastle, one day a week, Mr Parry adds that what he sees as a difference in the Leeds market is that it is one that gets its sleeves rolled up in the traditional Yorkshire way and gets on with it: "Brokers are very straightforward and straight talking, there is a very clear understanding of what a risk is about when a broker presents it to you," he adds.
Ian Fox, regional manager north at Ace, who looks after one of its largest regional offices and the fastest growing one outside London, says that there seems to be more movement in the Yorkshire market than the Manchester one by comparison. "The Yorkshire broker base has been heavily influenced by the amount of consolidators and networks that have grown up in the Yorkshire area and that is not quite as prevalent in the Manchester market. Consolidators and networks have taken longer to get a foot hold into the North-west."
Mr Mabb recognises that one of the advantages in Leeds is its strong insurer market: "There is not a lot that you can't do in Leeds that you have to go to London for. A lot of the London-based markets have chosen to set up in Leeds. Having relationships with London isn't such a necessity when you have got people effectively on your doorstep that can make decisions. Being four and a half miles out of the city centre it is very easy to get in front of underwriters who have the power to make the decisions."
Former Henderson employee and current director and head of office at broker Heath Lambert, David Fryer, acknowledges that the insurers that are doing well at the moment in Leeds are the likes of QBE, Brit, Chubb, Travellers, Zurich and Chartis: "It is the insurers that have an appetite and want to come and write the business and trade with you. The advantage up here is that you have got so many developing companies. Food and drink is a big growth sector here, manufacturing has taken a hit, but there is still business to be done and support to be given. It is also quite a retail hotbed, there are a lot of retailers that headquarter in west Yorkshire.
"It is an exciting time up here, but we often get dragged down by the London attitude. There is still money here, there are people making money and there are opportunities up here that you often don't see in the South-east. Manchester is a media city with the BBC and you have got loads of technology companies. A lot of the people that come up to the universities here don't end up leaving the area. You have got York just down the road, easy access to London if you need it and lots of access to coastline."
These insurers were all on show the week Post visited Leeds, as Henderson Insurance Brokers attracted 35 companies to its inaugural conference, which it plans to make an annual event. "The best way I can describe the Henderson event was like a mini British Insurance Brokers' Association conference," explains Neil Wormald, broker development manager at Arista Insurance. "It was a simple idea, but it worked really well. It was a good reflection of how competitive the market is, the fact that there were 35 insurers there all wanting business."
Arista is a prime example of a player expanding in the Leeds market. Having been a one-man-band in Leeds for the first nine months following his appointment, Mr Wormald was joined by former NIG colleague Steve Ford on 27 September as a senior underwriter.
The duo will work from home until early next year, when Arista aims to open an office. It has set a target to underwrite £30m in gross written premium in Leeds within the next five years.
Mr Wormald concludes: "The Manchester office is two-and-a-half years old and it has made massive strides to achieve what it has done and I don't see any reason why Leeds won't do exactly the same, Leeds is a major insurance centre and well populated with quality brokers."
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