After a bruising few months following the collapse of Alpha Insurance, structural home defects cover specialist CRL is entering a new era of market resilience and customer protection.
Following May’s shock collapse of Denmark’s Alpha Insurance A/S, the UK’s third largest structural home defects cover firm CRL is striving to protect customers and reinstate cover to thousands of properties in the UK.
The collapse of the Danish insurer plunged CRL, along with a slew of intermediaries whose policies had been underwritten by Alpha, into a crisis not of their own making, with tens of thousands of structural insurance policies declared invalid.
“The fallout of the Alpha bankruptcy has meant considerable reputational damage to the CRL brand,” admits the company’s chief executive Steve Mansour. “Many people assumed that it was CRL that had failed. Even when it was clear this wasn’t the case they quite reasonably said ‘We gave you the money so you’re responsible’. The truth is that it is Alpha that is liable, and their liabilities are being largely assumed by the Financial Services Compensation Scheme (FSCS), under the terms of their protection scheme for policyholders – but we still got caught up in the fallout.”
Six months later and the nearly 30,000 affected CRL customers are nearing a resolution. In the coming weeks the FSCS is likely to provide a solution in the form of a ‘portfolio transfer’ to another insurer that is prepared to adopt the affected policies, with the FSCS paying the premiums. “So, the vast majority of customers will be protected and experience no financial disadvantage from the Alpha collapse, and we are confident that if a portfolio transfer cannot be achieved, the FSCS will refund policyholders for premiums Alpha received,” says Mansour.
Real pain for customers
There has been financial pain for some, however, in the form of the approximately 3,500 customers who have built properties themselves, including developers, small contractors and self-builders. In some of these cases, the FSCS will not currently regard them as ‘consumers’, and may not therefore be protected by the scheme. With no cover in place and no avenue for compensation, these builders are left out of pocket.
“Not only do they have to buy additional retrospective cover, the cost of the new insurance is likely to be higher, as the risk profile has changed,” says Mansour. “This, quite understandably, is not a satisfactory situation, and we are working hard to lessen the impact, and while these customers can claim against Alpha’s bankruptcy estate for a refund of premiums paid, CRL and their Principals BCR Legal Group Limited are working hard to find better solutions to support customers’ projects.”
Dealing with the fallout has not only harmed its reputation but also cost CRL and BCR millions of pounds in additional costs, including notifying affected consumers, setting up a dedicated call centre, as well as legal and exceptional customer services costs.
“We are working tirelessly with the FSCS and the Trustees for Alpha’s bankruptcy estate to facilitate a satisfactory solution, as it’s not only in the consumers’ best interests but also in CRL’s,” states Mansour. “We are also endeavouring to be very competitive on requotes, because we understand the frustrations of the situation. Nobody is winning from this unfortunate affair. It’s been a bruising experience for everyone.”
“Alpha itself was essentially a sound business, when taken in the context of their filed accounts, and reports from the Danish regulator,” continues Mansour, “but found itself caught up in the collapse of New Zealand B++ rated insurer CBL. Although not rated, Alpha understood our business well and allowed us to be competitive in the market. It wasn’t an irresponsible choice for CRL to partner with Alpha. There aren’t that many insurers who understand the risk of a long-tail product like structural defects in construction and are prepared to cover 10-years of liability. Even big insurance companies tend to shy away from it. Alpha’s collapse was completely unexpected by the entire industry.”
He adds: “We have been in contact with the Danish regulatory authorities who have confirmed that those self-builders who took out Alpha polices do qualify for compensation under their rules. As such the Danish guarantee fund has been given the details of those self-build customers with Alpha policies. We expect that they would be due a full refund. From the DGF.”
Town hall meetings
As the customer base comes to understand the circumstances behind the crisis, CRL is actively engaging in dialogue with affected consumers. The company’s leadership team is conducting a series of town hall meetings across the country, where they can explain the situation and engage with customers’ concerns face-to-face. “These are not easy conversations, but we have learned how important it is to keep listening and engaging with our customers,” believes Mansour. “Customers are our best advocates, so every builder’s problem that we solve is a powerful supporter of our business long term.”
This experience has also prompted CRL to scrutinise all aspects of its business to minimise the possibility of an Alpha situation happening again; principally by looking to spread risks in future over a number of insurers.