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News : Towergate Call Centre Move Could be Risky
May 6, 2014 -- It was a month of mixed news for Towergate. The consolidator announced that 750 roles were to go, as part of plans to move its personal lines and SME business to a call centre-based system, operating out of Manchester.
This was followed a few weeks later by Towergate buying Arista for an undisclosed amount. The purchase of the managing general agent was the more obviously positive story for the business. However, Mark Hodges, the broker’s CEO, managed to maintain an upbeat outlook on the situation around SME.
He told Insurance Age that the move was "all about servicing our customers better" – a sentiment that has been met with scepticism in the market.
One broker, who did not wish to be named, said that although they could see the decision making sense from a business finance point of view, they disagreed with the move.
"Centralising SME for very small business makes absolute sense, but the difficulty is how do you know a customer wants it?" asked the source. "Towergate has gone too hard and too fast."
According to the broker, local offices are important for numerous reasons – regional knowledge being one, as well as the fact that people like buying locally and receiving service on their doorstep.
It is also widely known that small pieces of SME business can turn into larger opportunities when a client remains loyal as they grow their company. "Can you really do that in a call centre?" questioned the source.
For some brokers, the news that Towergate will move business to a call centre has stoked up optimism. Simon Taylor, CEO at Manchester-based Reich Insurance, said: "From our perspective it gives us good opportunities.
"We find the personal lines and SME customers want to be handled locally."
While he stated that he was pleased that Towergate was establishing the contact centre in Manchester "because it’s good for the local insurance industry and it will create jobs in the area", he warned that firms have to be careful around call centres, "even when handling SME". He stated: "You jeopardise your contacts with the clients. Unless you are absolutely superb in your service, you risk losing clients.
"It’s not an option that I see as good long term."
Taylor conceded that for an organisation of Towergate’s size, it made some sense to go down their chosen route, but added: "I think they will need a lot of luck and very good management."
Hodges, however, was adamant that Towergate was making the right decision. "With any change you are always thoughtful about predicting the impact," he said. "We have really thought deeply about what we are doing, there are no knee-jerk reactions."
He pointed out: "This is business that’s being handled on the phone at the moment anyway.
"All we are doing is offering a better telephony service to customers who are already receiving a telephony service."
There are two major issues that could arise out of this strategy change. One is the aforementioned risk of losing business, given the off-putting nature of the call centre model. According to Hodges, while Towergate has been "cautious" about this risk, "we actually think we will keep more business and be able to attract more business".
The second potential pitfall is the damage this model could do to Towergate’s acquisition prospects. Will people still go to the firm when they want to sell their business if they know that chunks of it may be transferred to the contact centre in Manchester?
Again, Hodges countered: "This is something we have been thoughtful about and we think people will be happy to see business go into this model."
Posted by Veronica Silva Cusi, news correspondent
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Towergate Insurance was founded in 1997 and is Europe's largest independently owned insurance intermediary.
Published: Wednesday, May 7, 2014