Freecovered taking on the insurance sector
When sizing up a new business venture shaking up an established multi-billion pound industry wouldn't be everyone's idea of fun.
Yet Martin Haggarty is not afraid of bruising a few egos in the car insurance sector to try and get consumers a better deal.
The experienced businessman's latest venture is called Freecovered and is offering free legal protection cover to drivers.
Although he cheerfully admits the odds are stacked against him Haggarty isn't taking on this herculean task without having first done his homework.
He believes the key will be convincing people there is such a thing as a free lunch and competing with the big players on service.
He said: "The legal protection industry grew out of a general lack of efficiency from the insurance industry in dealing with a claim when it is first presented.
"That has allowed the lawyers to double their money by playing the system and that is why premiums have gone up.
"It is nothing to do with a rise in claims, because two thirds of people involved in an accident don't make a claim for a variety of reasons.
"If you're a direct insurer making even £20 on average from a legal cover add-on and you're taking that cover from a million of your million and a half customers then then the revenue from that, which is largely pure profit, gives them no incentive to offer the service for free.
"We reckon a major insurer would lose on average £25 million in income if they lost that arm of their insurance cover and at least double that from the loss in selling claims on to credit hire firms and personal injury lawyers.
"The disadvantage for us of course is taking on the huge marketing might of the direct insurers.
"What we are hoping to do is debunk some of the myths the insurance industry propagate on legal cover premiums and get consumers to question why those premiums appear so high."
The colourful Haggarty, who writes a blog on prog rock music and is an enthusiastic guitar player, argues the rise of the no win no fee legal firms has helped push up insurance premiums.
He also believes many people were paying for legal cover for several years without even knowing about it.
He said: "If you are a direct insurer, you take a premium from someone for insuring their car.
"Over the years that has come to include an additional cost for a legal expenses policy, before the event of an accident, which is usually sold along with your car insurance.
"Until recently a lot of insurance brokers weren't telling the customer they were paying an additional premium for legal cover - which can be as much as s37 a year - automatically."
Freecovered is not the first time Haggarty has spotted a niche in the insurance industry.
Previously he worked for two Scottish law firms building up an expertise in injury claims management.
Strict rules governing the advertising of legal services meant it was difficult to grow business.
So Haggarty set up Accident Claims Scotland as a way to circumvent those regulations with the company, which offers an accident management service, soon racking up six figure profits.
He said: "Around 1999 or 2000 I met an English solicitor called Lloyd Green at a conference.
"We discussed the potential of creating a cross border law firm specialising in personal injury claims which covered all jurisdictions.
"Lloyd and I discussed the idea at length, and we agreed to open a Lloyd Green solicitors in Scotland. The firm was already well established in England dealing solely with motor claims.
"As a solicitor working in Scotland, you are very constrained in what you can do in terms of advertising to get people to come to you with a claim.
"It could be done, but to get around it you had to have an accident management company or a personal injury management company, and that's when you started to see firms such as Claims Direct popping up.
"They were advertising for people to come to them with their personal insurance claims.
"So we thought it would be a good idea to set up a claims company in Scotland, that was there purely to market for injury claims for Lloyd Green, Scotland.
"That went spectacularly well. So well in fact we had to feed a couple of other firms with work."
Haggarty saw an opportunity to further expand Accident Claims Scotland by offering another service be thought the insurance companies were doing poorly car hire for claimants while their own vehicle is off the road.
He said: "The whole reason a fleet hire industry exists is because the insurance industry had the opportunity to do this themselves and treat customers properly but they never did.
"They just left people to get on with it. Even when people have paid a premium for risk, the insurance company is still not interested in going out of its way to help them.
"When we decided to get into vehicle hire the only operators were big English-based firms leasing vehicles to credit hire firms who were hiring vehicles after accidents.
"But none of them were doing it very well.
"You would get a vehicle, but there was no access to niche vehicles, like refrigeration units.
"So getting a Smart Car as a replacement vehicle when you're a window cleaner or delivery driver is not really helping.
"We decided to buy some vehicles and become our own hire firm. That continues to do very well and we have roughly 50 vehicles of our own now."
Since then Haggarty has been investigating what other services he could do cheaper than the biggest insurers.
With legal cover he hopes he is on to another potential money maker.
He said: "We took a look at why people were paying so much for legal expenses but not using it?
"The mechanism exists for lawyers to make money anyway if it's done the right way. Namely you underwrite it with the ethos the losses of the few are paid for by the many successes. That's the principle of insurance in the first place.
"We know there is a big difference between the cost of providing that cover compared to how much is sold. For a direct insurance provider it is almost entirely profit.
"To a broker, there is profit by placing it with an insurer which is not necessarily the same one the car is insured with.
"We thought if we offer legal cover as a stand alone product and strip the profit the insurers and brokers make out of selling that cover we will still make enough money from the people who claim from it to make it viable as long as the people who have the cover know they have it and know to make their claim using the cover provided.
"It also saves the person the premium at the front end, because we can offer this as a free service, compared to the thirty odd quid you might pay for it as part of your policy cover."
Haggarty is already looking towards the next stage of expansion and hopes to offer roadside assistance for less than £20 a year.
He said: "If we can convince the public we can offer not just a comparable service, but a better service for a lot less that the insurance companies can, then we can start to break down the dominance and bring some competition back into the industry.
"As it stands, the insurers have it all their own way, and 30 per cent premium hikes of late are less to do with the volume of claims they receive and more to do with paying lawyers in both sides of a claim."
Except two weeks working as a motorcycle courier Martin Haggarty has spent his working career working in the insurance industry.
Life as a biker didn't suit him so the offer of a job indoors in the Glasgow office of Sun Alliance Insurance in 1979 was where he started his real career.
He spent nine years at Sun Alliance before moving across town to Royal Insurance to head up its fleet claims division.
In 1992 he moved over to law firm Henderson, Boyd, Jackson, as part of its new office in Glasgow.
Haggarty's success soon saw him headhunted by rival insurance defence firm, Anderson Partnership. While there he grew the injury claims division to become one of the firm's most profitable sections.
A chance meeting with an English personal injury lawyer in 2000 gave Haggarty the opportunity to open his own business by marketing personal injury claims to sell on to law firms which were constrained from advertising for business.
He opened a division of Lloyd Green personal injury lawyers in Glasgow in 2000, a first of its kind firm in Scotland, covering accident injury claims across all UK jurisdictions.
Next up was Accident Claims Scotland which is a marketing vehicle used to advertise for injury claims work which it then sells on to Scottish law firms.
Haggarty then added vehicle hire services to the Accident Claims Scotland offering, and is expanding again by offering free legal cover through freecovered.com.
Away from work Haggarty play guitar in a rock band, and writes music reviews for magazines.
He is also accomplished in mixed marshal arts.
Haggarty is married with two sons and lives on the outskirts of Glasgow.