Addressing the crowds at the CFC Summit when the flagship broker event came to London for the first time, group CEO Dave Walsh (pictured) equated his role to being “the father of the bride” at a wedding. It’s a strong analogy for the business which found its genesis in the heat of the dotcom wave of the late 90s and for Walsh who has watched it go from strength to strength without losing sight of where it started and those tentative first steps.
Casting his mind back to those early days in a recent interview with Insurance Business, he noted that CFC’s ability to navigate the tumult of the current global landscape between COVID, the energy crisis, the situation in Ukraine and spiking inflation likely has some roots in the baptism of fire that was its entry to the market. The dot-com revolution was amazing, he said, because people recognised that the internet was about to change the way everybody lived and worked but they didn’t know what that change was going to look like.
“What became clear to me was that businesses were going have to start taking the risks of viruses and hackers and online crime very seriously because they were going to become bigger risks,” he said. “And there was this burgeoning class of insurance called ‘cyber’ that was purporting to cover businesses for those risks. And so the original idea behind ‘Click For Cover’ was to set up a business that sold cyber insurance online.
“It’s amazing, looking back at that time, because in 1999 we literally thought that most businesses would be buying cyber by 2002. And 20 years later, less than 10% of UK SMEs are buying this coverage. The lesson learned is that insurance classes take a hell of a long time to get to full adoption. And in hindsight, that makes sense, because D&O took 25 years to get to full adoption so why should cyber happen in two years?”
Of course, CFC wasn’t the only player in the market at the time, with AIG in the US and Hiscox in the UK marking themselves as cyber trailblazers. But as with all classes of insurance, he said, interest and uptake tend to start at the top with the big public companies before they trickle down. As a result, little consideration was being paid to the SME customer – a subset of the market that CFC is genetically predisposed to support and protect.
“And it feels like as an industry, when a new class of insurance starts to emerge, we make it hard for customers to get cover, we ask them lots of questions to make sure they’re doing the right things to ‘deserve’ the cover and then we charge high prices and give a small amount of cover,” Walsh said. “And our dream in 1999 was to fast-forward the market to the end game of providing really good cover at a really reasonable price – and making that as accessible as possible to SMEs so that lots of them buy, because if lots of them buy it, that’s how you create a market.”
In hindsight, CFC gave itself a tough gig with that ambition, he said, not least because shortly into its strategic journey, 9/11 happened and sent the whole insurance market into disarray. With customers’ insurance policies all going through the roof, buying a new type of cover was not top of the agenda for anybody outside of the ultra-high hazard space – a state of affairs that continued into the early-to-mid 2000s.
For CFC, the challenge presented the opportunity to diversify into the technology insurance space – which was Walsh’s own background – and from there to branch out into multiple other specialist classes.
It’s been an exciting road to date, he said, and one strewn with standout milestones – some of them bringing significant upheaval at the time. When the company first launched, its whole business model from day one was predicated on selling cyber through British Telecom as its distributor in order to reach SMEs. When the dot-com bubble burst in April 2000, BT reneged on the deal and its whole business model was thrown into disarray.
“So we changed our name from Click For Cover to CFC and we changed our business model from being dot com to being an MGA that is only open to brokers,” he said. “And the great thing is that we can proudly say from that day to this, that we’re 100% broker intermediated and we literally do not have a single direct policy. And the lesson there goes back to Darwin, it’s not about being the strongest or the most intelligent business, sometimes it’s all about being the one that’s receptive to change.”
From the beginning, CFC was agile enough not just to survive even the body blow that was BT effectively pulling the rug on its business model but to leverage that challenge to create new opportunities. Another milestone was the firm’s MBO from Hyperion in 2012. At its core, CFC had always been a very standalone business, even within Hyperion, Walsh said.
“Ultimately, we really wanted to be the masters of our own destiny,” he said. “So, in 2012, we did an MBO from them, which was a great step for us.”
The third major milestone marking the specialist insurer’s trajectory is the deal it completed in 2021, adding a new investor in EQT AB to join existing backers Vitruvian Partners. Through its investment journey to date, CFC has been able to increase its employee equity in the business dramatically, with nearly 400 staff now shareholders in its broad employee share ownership programme. And at the end of each financial year, he said, the up-and-coming new staff members who are part of the ongoing CFC story get the opportunity to join that shareholder register.
Similarly to a father of the bride, naming a single proudest moment is difficult for Walsh who highlighted that, “there are so many things I’m proud of”.
“I would say that I’ve always felt that growth is the oxygen of a healthy business,” he said. “A stagnating business creates stagnating people, and that becomes a vicious circle. A growing business allows people to personally grow which becomes the opposite – a virtuous circle. So, I am proud of our track record of growth. I’m proud we’ve been around for 23 years and our average compound growth rate of profit over that 23 years is 37%.
“We just recently became the biggest independent MGA in the world and that’s something I think we can be really proud of. But having said that, I don’t think we ever set out to become the biggest. Growth is the output of doing what we do well. But what we’ve always said is that we’d like to be the most highly regarded MGA in the world.”
Walsh noted only CFC’s brokers, partners, clients and staff can determine whether or not it is achieving that ambition but it remains the driving force behind everything the company does. And the independent validation that is winning awards is always a great feeling, he said, but what he’s proudest of is the team he has assembled and the business that has sprung up around them.
“When we set up, we were a bunch of gifted amateurs at best,” he said. “And here we are now – we’ve got over 700 fantastic people who are increasingly specialist in what they do and who come in with a great attitude every day, with the mentality of ‘let’s take on the world’. And I think, ultimately, that’s what I’m the proudest of at CFC.”
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