It should come as no surprise that Richard Sear enjoys reading the diaries of James Lees-Milne, the colourful architecture writer and conservationist. Credited with saving countless English country houses from dilapidation, Lees-Milne was also instrumental in the early workings of the National Trust. His lively autobiographical diaries are worth a read too.
Like his literary hero, Sears is passionate about saving and maintaining long- established institutions for the benefit of future generations. Now, after spending the past decade overseeing the successful transformation of two century-old cash plan providers into modern, powerful brands – and driving up sales in the process – he is hoping to do a similar job in charge of another mutual organisation.
With 25 years experience in the financial services industry, Sear is well placed to do just that. He began his career as a civil servant before holding a number of roles at mutual and friendly organisations, including Royal Liver Assurance and the Co-operative Wholesale Society. But it was his ten years as chief executive of cash plan provider HealthSure, and his equally successful period in charge of sister brand LHF, that drew the attention of senior management at National Friendly.
Since joining 18 months ago, Sear has already overseen a major rebranding exercise in which National Deposit Friendly Society – an organisation formed in 1868 to offer a range of savings, investments and health insurance products – has been renamed National Friendly. Now, his task is to transform the rebranded organisation into a modern, competitive private medical insurance (PMI) provider for the 21st century, while still maintaining its 141 year-old friendly society ethos.
A LEAP OF FAITH
The territory isn’t new for Sear, who was responsible for the reinvention of Manchester Saturday Hospital Fund into one of the health insurance industry’s most well known brands – HealthSure – during his time there. And although that brand is set to be faded out as parent company Simplyhealth restructures this year, Sear’s impact in the cash plan market will be felt for some time still to come.
However, the territory is, in a sense, new for National Friendly. A static PMI market was just one of the reasons, Sear concedes, for some understandable scepticism among senior management at the organisation over the decision to concentrate on healthcare. While the company’s legacy products in the investments and savings arena will continue to be serviced by National Friendly, the new strategy means that the company is now “primarily focused” on health insurance. It was a big step for the organisation, Sear says.
“Yes, there was some scepticism among the senior management at the society,” he explains. “The move back into healthcare required a leap of faith and the move into a new sales channel required one too.”
Although some of the senior team at National Friendly had experience dealing in the IFA market before, there was little knowledge of the specialist healthcare broking market – a channel that will prove absolutely vital to the success of Sear’s vision.
“It was a new channel for the organisation,” he says. “It was untried and untested.”
As a result, Sear immediately drafted in a strong broker relations team to make sure the channel was well supported. Headed up by Ian Talbot, the broker team has already won plaudits from some intermediaries who have told Health Insurance that it has gone the extra mile to support the needs of the specialist healthcare adviser.
Those efforts mean that the broker channel has warmly embraced the arrival of the oldest new kid on the PMI block – although that could also be because, with the obvious exception of competitor PruHealth, intermediaries have long been starved of genuinely innovative new products and providers.
THE HEALTHCARE DEPOSIT ACCOUNT
However, the concept of the Healthcare Deposit Account – National Friendly’s flagship product – can seem complex at first glance. Designed to ease consumer concerns about rising premiums, members can set their own premium depending on their age and the level of cover they need. Premiums then remain fixed for life, with customers simply paying more towards each of their claims as they get older. Furthermore, as well as receiving cash if they claim, members can get money back if they don’t, because half of their premium is placed in a personal deposit account, where the money remains theirs.
There are few – if any – products like it in the PMI market. However, that distinctiveness has its drawbacks, Sear concedes.
“Some brokers do find it difficult to benchmark it or get their head around it,” he says. “It is a product that needs to be sold.”
One of those key selling points among brokers and their clients is the product’s apparent affordability.
Premiums start at just £40 per month – or at £60 for the over 50s – and the highest level of premium is £200. It is the fact that those premiums are fixed for life, though, that is most appealing, Sear suggests.
“There is almost a fear of premium rises out there,” Sear says. “Some people don’t want to take out PMI because they think it will just go up and up each year.”
However, by offering such low premiums, there are, of course, limitations. The highest level of cover – £200 – provides £100,000 worth of cover, a level which some competitors suggest is less than adequate. Sears, though, is unapologetic.
“The vast majority of people don’t need ‘unlimited’ PMI,” he says. “It’s only in the extreme cases that they would need cover beyond that.”
“We are a mutual organisation and we put the member first,” he adds. “With that in mind we don’t want to preclude people in terms of price.”
National Friendly’s managed care relationship with Healix Health Services is one way that the provider is able to keep a lid on premiums, with Healix helping to work with members to find the most suitable and cost-effective pathway for their care – and that, of course, can mean using the NHS.
“Healix can help to manage people into and through the NHS and as long as it is all explained to people, they’re happy with that,” Sear says.
The concept is now also beginning to appeal to companies and since 2008 National Friendly has been offering to businesses of up to 250 employees. A launch into the large corporate space is also on the cards and pilot schemes are well underway with a number of larger intermediaries.
According to Sear, the product is proving particularly attractive to employers as they grapple with increasingly cash-strapped benefits budgets.
“Premiums are fixed for life and companies can choose how much extra they want to spend,” he says. “It helps them to manage their budgets more easily.”
That type of appeal means that National Friendly is now the second biggest provider of PMI through one of the “biggest brokers in the UK”, Sear says. Although he declined to reveal the identity of that particular intermediary firm, Sear claims there is now a “hardcore” of brokers selling National Friendly across the country on a “week by week basis”.
A look at National Friendly’s annual report for 2008 appears to bear that confidence out, confirming that intermediated sales across the provider’s product portfolio was up 60% on the previous year, outstripping what were already ambitious targets.
It is not just in the intermediated sales channel, though, that Sear can see opportunities. The local government and housing association sectors will be an area of focus for National Friendly’s direct sales team over the next 12 months as the provider seeks to replicate its success in the broker market. However, Sear is keen to stress that intermediaries are absolutely integral to National Friendly’s success and direct sales are “never going to be as big for us” as the broker channel.
While the ambition is clear to see, it is measured too. Sear understands that the PMI market is dominated by a small number of very large insurers but he is determined, in the first instance at least, to make National Friendly’s presence felt among the smaller providers – “the likes of WPA and Exeter Friendly Society” – he says.
“We have very big ambitions but of course they are relative,” he explains, acknowledging the dominance of the big insurers in the sector. “Certainly we’ll be looking for year on year growth.”
Figures from the organisation’s 2008 annual report confirm that it is achieving just that, with new business growth across all product lines up 58% on 2007. Furthermore, according to Sear, National Friendly has now secured more healthcare business in the first half of 2009 than it did in the whole of 2008 and it “isn’t seeing any signs of dimunition”.
But it is important to note, Sear says, that the National Friendly renaissance is a good news story for the entire friendly society and mutual sector.
“Society needs organisations like this,” he explains. “The mutual ethos does resonate, it’s not just pie in the sky.”
While he declines to comment on other organisations’ strategies, it is clear that Sear is sad to see the imminent disappearance of the HealthSure and LHF brands as they are superceded by parent company Simplyhealth’s name this year. Those organisations were – and remain – close to Sear’s heart, but he is now totally committed to the success of National Friendly.
The organisation, Sear says, is well placed for the future, in spite of an expected dip in total assets that resulted from a fall in the equity and property market.
“Yes, we have slightly less assets than 12 months ago, but financially we are very strong,” Sear says.
And so, with a solid footing and a determination to reinvent itself for the 21st Century, National Friendly, Sear says, offers the perfect combination of heritage and innovation. But will he succeed?
“Of course National Friendly should succeed,” he says. It’s got the right pedigree. It’s got solid foundations.”