Business Essentials: Can you cover 'high risk' drivers on the information superhighway?

Back in 1968, when Tony Allen became the first employee of his father's insurance broking business, he persuaded his school friends to get their sports cars insured through him. This set the company on a road it has followed ever since.

These days, while 1 to 2 per cent of the business is in commercial insurance, the rest is in motor cover for people who would normally attract an increased premium: young drivers; people with high-performance or modified vehicles; people who live in inner-city areas with a high crime rate; celebrities, and so on. "We act as a clearing house for people with problems in the insurance industry," says Mr Allen, who is now chief executive for the A&A Group.

Having grown organically, the company today employs 350 people in the UK and 100 in France, with a turnover of £80m and income of around £18m. But the dilemma it faces is how to keep delivering traditional broking values in a market that is now dominated by the internet.

"A vital part of our business is that we look at people individually, and that's very hard to do with a computer," Mr Allen explains. "The computer can do a certain amount but if you have someone, for example, who lives in an inner-city area who also has convictions and has a difficult occupation, the PC would probably throw out three or four quotations - and the cost of each would be out of all proportion to the actual risk. So the traditional broker side comes into play, as we need to talk to our customers and interrogate them beyond the obvious questions."

The general rule online, says Mr Allen, is for insurance intermediaries to ask 20 to 25 questions in order to provide a quote - too many more and people tend to leave the website. But A&A usually needs to ask extra questions - for instance, where is the car parked when the person is at work and how long have they had the car? "These sorts of thing affect the genuine risk and that's why we only use the internet to get an initial picture."

Prompt action is needed as A&A is now represented by two internet firms - quoteacar.co.uk and insureyourmotor.com - which together attract 45 per cent of new business.

"What I'd like to know is how to refine this internet approach without losing our underwriting profit," says Mr Allen. "After all, we have to deliver an underwriting profit to the insurers or we don't have a business."

In particular, he wonders how he can publish rates online that attract customers, without necessarily committing himself to wrecking the loss ratio, especially in a motor market where margins are dropping.

The other ways in which A&A tries to reach customers are through advertising and by working in partnership with other intermediaries - if they have leads they can't deal with, they pass the customer on.

WHAT THE EXPERTS SAY

Christine Cryne, Chief Executive, The Chartered Institute of Marketing

"You might think consumers resent being asked for information. But this is not necessarily the case: what they object to is providing information that serves the company's purpose and not their own. The needs of the customer and those of marketing should be carefully considered.

"Similarly, rather than apologising for a lengthy data-gathering process, A&A's marketing should focus on explaining how this process allows the company to provide the lowest possible quotes for those who would normally pay more. By demonstrating 'what's in it' for the customer from the outset, you will make a virtue out of something that is currently regarded as a problem.

"You will be able to tempt customers, without committing to an uneconomical rate, by using an average percentage saved in online advertising."

Stewart Masterton, Business Adviser, Business Link for London

"The web is more a part of the process of engaging with the customer, rather than an answer to all sales needs.

"Although A&A uses intermediaries to attract online customers, you make no mention of having your own website. This is crucial in ensuring that your key audience can pick up vital information that might otherwise be lost in a long questionnaire. The website could also be accessed via links on the intermediaries' sites.

"Alternatively, consider asking some (not all) questions on the intermediaries' sites. This would give a potentially positive response and invite applicants to 'opt in' to a broker contacting them, ensuring the underwriting risk can be more fully assessed."

Eric Galbraith, Chief Executive, The British Insurance Brokers' Association

"A&A's unique proposition is being able to deal with the specialist/difficult risks, and it should examine the exact needs of its potential customers before assuming that the internet is the total solution.

"Fifty-five per cent of new business comes from other sources, and as you refer to building a profitable account, you should check all the statistics to determine conversion rates and claims frequency. The key is attracting the 'right' prospective customer and then converting them. Ensuring that internet links are focused on this segment is one thing, winning their business is another, especially if they are reluctant to answer extra questions online.

"Publishing rates on the internet is not the answer. Promoting what makes you different and indicating the benefits (not just cost) are more important."