Hiscox has consistently proven itself to be at the forefront of product development. Ralph Savage reports on how this year's winner has maintained its discipline while constantly innovating
The past 12 months have been an eventful period for Hiscox Insurance Company, with it launching into the mainstream as recently as May through its first TV advertising campaign. As the insurer's entry to the 2006 British Insurance Awards revealed, Hiscox has backed up its words with a raft of new underwriting initiatives, including new product lines, enhanced covers and an investment in front-line staff to carry the products forward to the broker and direct market.
On the subject of the insurer's overall strategy, Robert Hiscox, chairman, said: "Any insurer can issue a standard policy but we want to be trusted to provide superior service around our policies; flexible underwriting giving policyholders the cover they need rather than the cover we want to give them; flexible, rapid and fair settlement of claims and cracking good service to all who come into contact with Hiscox."
Hiscox's performance figures for 2005 revealed the non-Lloyd's operation had improved performance across the board, while actually reducing its premium income slightly. Gross written premiums of £274.9m in 2005 were £13.1m lower than the previous year but a pre-tax profit of £45.8m and a combined operating ratio of 86.9% represented a marked improvement on the 98% figure for 2004.
"Underwriting, throughout Hiscox, is to write for profit, not for volume," explained Gary Head, underwriting director for professions and speciality. "Where our bottom line is threatened, we seek redress in correct rating even if that means losing tranches of business. We know when to walk away."
Mr Head's comments play out in terms of one of Hiscox's best-established lines - solicitors' professional indemnity. With limits of indemnity doubling, competitors' rates reducing and claims rising, he commented: "We took a sanguine approach and raised premium to realistic levels. The result? The PI portfolio reduced by £14m."
The same applies to its architects' PI account, where the insurer recognised the opportunity to 'mend the book' by applying selective rating, resulting in a smaller but more profitable account.
In terms of new underwriting initiatives, Hiscox's 2005 professional insurance portfolio was enhanced into an 'unbundled' commercial insurance product for small to medium-sized enterprises comprising a menu of 12 optional modules of traditional and new needs. These included internet and e-mail insurance for protection against hacking, fraud and business interruption, as well as employment practices liability.
In April 2005, Hiscox launched its emerging markets PI direct lines aimed specifically at professions such as IT, marketing, communications/PR and business or management consultancies. "Our research demonstrated that there are in excess of 250,000 smaller firms with an annual turnover of less than £200,000 in this sector," said Mr Head. "It was a market with huge opportunity, with our research revealing - for example - that 52% of IT and 72% of PR consultants had no cover at all largely because it was too expensive and not seen as relevant."
He added that this segment was already accustomed to shopping online: "Our approach is simple. Quote and buy online, dispense with forms, a 'one size fits all' philosophy." The proof, Hiscox said, is in its business figures for 2005 where £508,000 in premium is already set to be beaten, with the insurer writing £401,000 in new business during the first quarter of 2006 alone.
In personal lines, Hiscox is perhaps best known for its high net worth business where the 2005/6 period has seen a number of enhancements. Identity theft protection was introduced, which now includes access to a personal security caseworker in the event of an incident. It also claims to be the first to offer fine art cleaning and restoration cover, as well as fine art valuation tools to help prevent under-insurance. Hiscox is also set to launch further into the mid net worth market, and both its policies have been rated 'best in class' by independent ratings agency Defaqto.
Finally, Hiscox increased its underwriting staff numbers by 23% in 2005. The insurer's system requires each underwriter to develop technical and personal skills. Achievements are logged in their underwriting passport - alongside continuing professional development points - for compulsory Chartered Insurance Institute accreditation with increased authority once the training modules have been achieved.
With Hiscox adverts currently being seen regularly on national television, Mr Hiscox said the insurer is investing in its brand for the future: "We are selling good products at fair prices, so we intend to increase our marketing substantially in 2006 to sell more and accelerate our growth. We want to be chosen because we offer quality, not the cheapest price."
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Consistency is the key to success - being the best from the start to the end of the year, asserts David Sweeney.
David Sweeney, business development director at Hiscox Insurance, said his firm was delighted to accept the British Insurance Award for underwriting: "It's a testament to the team I have at Hiscox and all members deserve a lot of credit for the hard work they have put in over the past year. We have invested a great deal in staff and training, as well marketing, so that we can offer more quality to our customers."
He added that much of the achievement had been about consistency: "It's about being the best underwriter from the start to the end of the year and then repeating it and improving year on year. Then there is the whole Hiscox value proposition, servicing the market well and making sure our customers have a productive relationship with us. I think we have proved by the results of the company and our underwriting in the past year that it is possible to be consistent with your products, your customers and the service you provide, which has given us a significant edge in the market."
Mr Sweeney added that new product lines had also had an impact: "We have diversified and offered new product lines and solutions and where we've seen markets racing away we've known when to cut down on a line and apply selective ratings rather than withdraw completely."
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