Return To Autumn 1996 Index
Swanning around the web is one thing - evaluating the impact of information technology upon the hard world of commerce is quite another. So we recently visited the offices of HC Foreman, a small but rapidly growing firm of insurance brokers, based in Southampton, England. Director, and occasional Millennium contributor, Ian Ritchie has spearheaded the implementation of new technology in his small, but rapidly growing company....
Named HC Foreman, after its deceased owner Harry Foreman, the company which started in a tiny, out-of town office, now employs 36 people. Its client base consists of about 9000 customers, of which 1,000 are commercial clients. Approximately 80% of them are situated within the County of Hampshire. Its direct personal lines of business are local but the niche markets comprise of clients from all over the UK.
Following the recent merger with another local insurance brokerage, I quizzed Ian concerning the technical difficulties merging the two operations together, and how he felt information technology would influence the future for his company?
Ian explained...
"Technically we had two companies both with separate computer systems, both supplied by the market leaders. Unfortunately we were with one of the market leaders and Bassett were with the other. This meant some decisions. Either we had to go for a totally new system which was out of the question on terms of cost or evaluate very closely the other two systems. Not so much what they were doing at the moment because they both were perfectly adequate systems in terms of back office insurance broking .
What we were more concerned about were their future development. How they would move from character based screens to Windows and so on. Ultimately we decided we would go with Policy Master who are able to write some of the newer applications in a Windows environment. We are currently testing a document management system. They are an open system provider, quite happy for us to use whatever hardware we want to use on site. Whereas MYSYS is a closed system and are some way behind in moving into the technological areas which everyone is using.
I think (UK) insurance brokers tend to be conservative, and for a long time we have accepted what suppliers have said to us. Now we have a generation of people who are coming to us and saying 'Hang on a minute Computers are a way of doing this, this and this...' And that really is what influenced our decision as to which system to chose. We are gradually transferring dumb terminals to PCs. Ultimately within four years, we are going to be totally PC based. We will be ready for the future. Or the future as we see it now."
I asked Ian how he felt about the Internet, and whether Forman's planned to trade using the net?
Ian paused and said...
It's still very much in the seed setting stage. In the (insurance) market magazines - both weekly and monthly - both publish on the INTERNET. They give quite a lot of prominence within the paper magazine that they are there. They both update their information on a daily basis. Most insurance companies have at least a home page. There have already been some new developments whereby you fill in the form on screen and have further information sent to you. But its still very early days and its still the feeling within the industry that the people taking these policies are the 'Trekkies' of the Internet anyway and not part of a wider mass audience.
I'm looking at the way shopping trends are changing and - looking at the way they have changed in the States - probably in three to four years time it will be the norm - in addition to conventional sales techniques. I suspect it will creep up on us rather than be an overnight revolution of habit.
Insurance is a conservative business and I am not sure that everyone is ready to sit down to their PCs late at night to organise their insurance. So I think it will be 'as well as' rather than 'Instead of'. But ten years from now that cycle may be complete."
Presumably if the Internet is really taken up by the Insurance industry then its going to make the market very competitive?
Ian said...
"I think the great debate in our industry at the moment is the cost of delivering the product. If you take a premium of £100 if a product is delivered through a broker, probably the total cost to the Insurer is something like 30% which then gives something like 70% for them to pay the claims and hopefully make a bit of profit. A direct product such as Direct Line costs about 15% so there is a 15% gap in the cost. So you need to compete with that product without taking the money the Insurer needs to pay the claims. If the Internet is a tool to do that one would have to look as it as a tool that may accelerate delivery of that product through that network. But you still have got to get people actually to say they must go there to buy that insurance. So maybe using that particular medium it may be cheaper as you haven't tied up office time.
Recession is still a frequently discussed topic amongst business people. Despite the British Government crowing about 'The Green Shoots of Recovery', many UK businesses still feel they are merely bumping along the bottom. In that light, I asked Ian, "How do you rate your business chances over the next five to ten years?"
Ian explained...
"Our chances are very good. Fortunately we have very good management information systems. We are able to look at our income monthly. We chart annual budget projects, likewise we are able to see exactly on the great rollercoaster of the business year exactly where the business is. At the moment, the UK Insurance business is relatively profitable and we have a number of European and US companies which want to buy in.
There's a fair bit of inward investment, which means competition and that rates are being driven down. If the rate is down then our 10-15% is less. If we are aware of that we can take steps to look at other means of income. What concerns me is some of our brethren who grow by 5-10% each year and don't take a look during the year and then get a nasty shock when the accountants sit down at the year end. The good news for us is that if some of those people do get into a bit of trouble we would love to help them: in a commercial sense you understand!"
Foremans and many similar UK companies seem to be sitting on the fence, waiting to see how the technology develops, hoping to learn from the mistakes of others. It may be a few years yet before British business really wakes up to the net.
