The Health Insurance Group has grown to become one of the most successful PMI brokerages in the country since it was founded in 2003 but is now undergoing a major shift in direction. Health Insurance editor David Sawers asks two of the organisation’s senior management team how they plan to keep it on course.
Iain McMillan (pictured) and Brett Hill were under no illusion about the task that lay ahead of them when they took the reins at the Health Insurance Group (THIG), the specialist intermediary, back in 2009.
After all, THIG was – and remains – one of the big success stories in the world of UK health insurance broking. Established in 2003, under the stewardship of Richard Brewster and Jim McEwan it had grown to develop a formidable – some might say fearsome – reputation as one of the major broking powerhouses in the sector.
Today it remains one of the biggest intermediaries operating in the UK individual and SME markets and so when McMillan and Hill came in to run the show when the business was sold to Venture Preference, a private equity subsidiary of AXA, they knew that keeping up the pace would take some doing.
Equally, though, there was little doubt that there were some reputational issues around the business that needed to be addressed. At the time, the sales tactics of some, but by no means all, THIG advisers were the subject of intense criticism across the sector. Inherent in that was talk of unusually high lapse and rebroking rates.
There remains no suggestion that the organisation had been managed inappropriately and business was – and remains – undeniably good. So good in fact, that THIG now has 60 staff across offices in Sheffield and Southampton, eight employed advisers “on the road” plus 70 self-employed appointed representatives. And with some 27,000 customers at present, Hill and McMillan are aiming to build THIG into a £100m business by the end of next year.
However, some things had to change, and while the pair refuse absolutely to criticise the way the business was run in the past, they do concede at least that the organisation’s IT systems and administration procedures were in need of an overhaul.
THE PATH TO THIG
But how do Hill and McMillan come to find themselves in such a position? Spells at Prime Health, prior to its acquisition by Standard Life Healthcare, and then AXA PPP healthcare, saw Hill and McMillan cross paths in a number of intermediary development and relationship roles before they were tempted to jump the fence to join a brokerage themselves.
In many respects, their careers to this point have not been unusual ones in an industry that is well populated with poachers and gamekeepers. But it is an undeniably bold move.
“We both came into it knowing that it wouldn’t be an easy, overnight job,” Hill explains. “When you’re coming into a business that’s been founded by two people from day one and has grown to a certain size, there’s a lot of embedded culture within that business that you will walk into on day one.”
Sometimes businesses – even successful ones – benefit from somebody with a fresh perspective taking a look at how the organisation does things, McMillan adds.
“A lot of the processes that they were using and the way that they looked after customers and communicated with customers were exactly the same as they had been the day the business started,” he says. “We know we’ve not all the answers, but you can just come in with a fresh pair of eyes.”
Fundamental to that review has been the introduction of a new IT platform and systems which has just been completed in the past few weeks. In fact, 2011 has been a busy one in terms of operational procedures, with THIG moving into new offices in its bases of Sheffield and Southampton in addition to the introduction of the new system.
A CHANGE IN PROCESS
McMillan concedes, though, that there were some sales processes that needed to be tightened up too.
“The amount of rebroking that was going on was just absolutely horrendous,” he says. “It was for a variety of reasons, one of which was just that many of the salesforce didn’t actually think that they were doing anything wrong, because that’s what they thought brokers did every year.”
Today, there is a process in place at THIG which means that at renewal, advisers must include the holding insurer in any conversation.
“Now we always give the holding insurer the last opportunity to retain the case,” he says. “That alone has halved our clients changing insurers.”
Hill, too, stresses that it was not the integrity of most advisers within THIG which has proved to be a cause for concern since he and McMillan joined the organisation, but rather the fact that protocols and processes needed to be improved.
“Since we’ve come in, we’ve been hugely impressed by the integrity of the vast majority of the agents within the salesforce,” Hill says. “It was very small pockets that were giving the rest a bad name.”
With those “small pockets” now gone and with changes to THIG’s sales protocols at renewal in place, THIG’s relationship with insurers and competitor intermediaries alike is on the up.
“Other intermediaries I speak to nowadays don’t have any issues with THIG,” Hill says. “They accept we are competition but we compete with them on a professional basis.”
What THIG’s competitors might not be so keen to hear, though, is the fact that the organisation has made huge strides in terms of customer retention. Hill says that there were months last year where he was seeing £1.3m in new client annual premium income come on the books, but the net growth of the portfolio was “nothing like that”.
“It was flying out the back as fast as we could get in the front,” Hill continues, adding that it has been a “different story” in 2011.
“So far this year we’re tracking at [ie growing by] a big six figure number annual premium income, net worth per month after lapses,” he explains. “And that’s with a lot of disruption in the first half of the year with office moves and new systems.”
That type of turnaround will, of course, be welcomed by insurers who have expressed concern that retention rates across the individual and SME sectors of the PMI industry have become unsustainably poor. In fact, McMillan goes as far as to say that he belives THIG “probably” has a closer and better relationship with insurers at the moment than many other intermediaries in the market.
“They [insurers] seem happy with the direction our business and relationships are progressing,” he says. “We work really closely with them.”
THE BROADER MARKET
There are some areas, however, where Hill suggests insurers could play their part in making the PMI industry more sustainable for all. In fact, while some insurers have been quick to point the finger at intermediaries with high rebroking rates, they would do well to look at their own business strategies too.
“It would be refreshing not to have conversations with insurers where they will start the conversation by complaining about how much of your business they’re cancelling to move to other insurers and then in the same breath, without a trace of irony, ask what can they do to encourage you to cancel your business from other insurers and move it all to them,” Hill says.
Hill would also like to see insurers come to the table with something “genuinely new that is going to help reinflate the SME market”. He believes that for too long traditional corporate PMI has been positioned as an employee benefit as opposed to one that benefits a company’s bottom line.
“If you’re going to start getting businesses to start investing in healthcare again, there have to be products out there that are much more heavily geared towards being a tangible benefit for the employer,” he argues. “If the employee gets a benefit out of that as a by-product, that’s great, but the thrust of the product is something that delivers a tangible return on investment for the employer.”
In terms of the individual market, Hill warns that industrywide the perspective is “dire”. But he remains confident that in spite of the withdrawal of some insurers from the PMI market, the situation could be turned around, if providers work in partnership with forward-thinking intermediary organisations.
“With the contraction of providers, there desperately needs to be some innovation out there,” he says. “If insurers are looking for intermediaries with proven distribution capacity to trial things, then we’re here and happy to talk.”
While challenges do remain in the PMI sector, there are undeniable opportunities too. In fact, Brewster and McEwan, the management team which had run THIG prior to its sale, have recently set up a new PMI brokerage called Insured Health, based in Hampshire, like THIG itself.
But what next for THIG? How do McMillan and Hill see the organisation evolve still further? For a start, it’s not all going to be about price, Hill claims.
“If that’s your only proposition to the customer, you’re only as good as the next £5 you saved them,” he says. “You’re always exposed to someone else coming in and by hook or by crook getting it a few quid cheaper. There’s no value in the client’s relationship if your stuff is only about the price of PMI.”
THIG’s ambitious growth plans also mean that there could be opportunities out there for health insurance specialists in need of a new challenge – but, Hill stresses, on the right terms.
“If you start to say ‘our growth strategy is that we want X many sales people’, it’s the wrong starting point, because you’re just focusing on the wrong things,” Hill explains. “If you make sure you’ve got the right culture and the right proposition and the right client servicing support, then you will attract the right salespeople. It’s a cliché, but it’s about quality rather than quantity.”
It’s clear that McMillan and Hill are acutely aware of the task that lies ahead of them and they know that the health insurance landscape is one of twists and turns. But they seem prepared.
“If the general market changes, obviously we’ll change with it,” McMillan says. “But we’ve got the right structure, the infrastructure in place now so that we can start really driving this business forward.”