Insurance business process services (BPS) provider The Innovation Group (TIG) is looking to capitalise on the introduction of new legislation in the UK, acquiring motor claims handler Gemini Vehicle Solutions Ltd (GVS). TIG will pay £4.5m in cash, with £3m upfront, and a further £1.5m over the next 12 months if GVS hits its volume targets.
The deal will see TIG take on GVS' 45 employees based in Kidderminster. Founder brothers Andy and Tim Hopkins will resign as directors, but Tim Hopkins will stay on in a business development and client support role. TIG is paying a premium of almost 2x net revenue of £2.3m. This figure excludes revenue derived from pass through business to third parties such as car repair shops and vehicle hire firms. GVS made a PBT of £800k in FY12, giving GVS a very healthy margin on net revenue of 35%.
GVS provides some 20,000 motor rental and repair transactions annually, so it should help boost TIG's addressable opportunity considerably. GVS' sweet spot is apparently in third party intervention where it aims to also take on the insurance claim of the non-fault driver in situations where their own clients are actually at fault. By managing both the non-fault and at-fault claims, third party intervention aims to drive down overall costs for the insurer client.
TIG points out that GVS’ approach is 'a fully transparent and ethical revenue source, and is safeguarded from changes to referral fees and other related legislation’.
Nonetheless, GVS operates in a market which is facing unprecedented change as a result of the introduction of LASPO (Legal Aid, Sentencing and Punishment of Offenders), which came into force on 1 April 2013. GVS is what we refer to as a claims management company (CMC) in our recently published report General insurance BPS: opportunities in rapidly changing market, which examines the UK insurance supplier ecosystem in detail. Both CMCs and personal injury lawyers in the UK are now under intense pressure as a result of LASPO.
LASPO's introduction means that referral fees between lawyers and their intermediary partners are now banned in an insurance claim. The intention behind this is to crack down on bogus claims and the ever rising cost for insurers and policyholders. Rival Quindell Portfolio has been buying into this space for the past year or so, and the approach has helped it win some significant business (see here and work back). This move by TIG shows it is keen not to get left behind.