Meeting Ian McMullan towards the end of last year, I ask him if, like other insurers I’ve spoken to, 2009 had been one of the most competitive periods he has experienced during his career in the group risk market. Yes, grins the managing director of Canada Life’s Group Insurance operations. It doesn’t seem to have phased him too much.
“Canada Life is very competitive across the marketplace,” McMullan says. “We have a reputation for it. We should be seen as the SME provider of choice. We write the most new policies by far.”
Bold words, but then again it’s obvious that McMullan has a competitive streak. A quick check of the CV speaks volumes. It shows that his competitive spirit almost took him to the Olympics in the early 1990s, when he competed in the official UK athletics trials for the Games. McMullan’s CV also shows that, an accountant by training, he spent several years in the financial services industry in New Zealand before taking up senior roles back in the UK. During his time down under, McMullan played rugby to a very high standard and while life in the middle of a Kiwi ruck might seem a world away from the more sedate one of group risk insurance, it perhaps stood him in good stead for today’s competitive recessionary environment. Not only have rates been pushed downward, but providers have also been locked in a battle over free cover levels, over add on benefits – in fact over just about anything – in an effort to hold on to market share.
Canada Life, as one of the UK’s largest providers of group risk insurance, covering almost three million individuals in the UK, McMullan explains, is no different. The insurer is the largest provider of group life assurance in the UK with a market share of almost 33% in 2008, while it is the second largest provider of group income protection (GIP) with a market share of almost 21%.
“At the end of the day, Canada Life is a price competitive player, there’s no doubt about it,” McMullan says. “We’re a competitively priced, high volume, high service level provider.”
The recession, of course, has much to do with this price war, although there have, McMullan says, been other factors at work. The departure of AEGON from an already limited group risk market last year tipped some £90m of premium into it, leading to a feeding frenzy among the remaining players.
“In a market where premium is scarce, providers are working hard to get their share of it,” McMullan explains. “Some of the deals out there are incredible. That will continue to stoke a price sensitive market for some time to come.
“The lack of salary inflation and the numbers of employees falling means that next year you’ll see a lot of renewal accounts being done where the premium will be at the same rate or will be less than the year before. Those hits are still to come to the marketplace.”
While he will not be drawn on exactly how long those hits will take to come, however, McMullan does accept that the price war can not continue forever.
“I do think group life is as competitive as it can be,” he says. “You do have to remember though that with mortality trends improving, pricing can withstand some reduction and providers can make margin out if it. But there is a heck of a lot of pricing activity now.”
In GIP, meanwhile, McMullan expects to see higher claims – and perhaps higher prices – due to the recession as extra stress is placed on employees, perhaps resulting in “market- wide” price rises.
There is another factor which could mean that prices are bottoming out, McMullan continues. Commission-based intermediaries, he suggests, are beginning to feel a squeeze on earnings as a result of the price war, while fee-based ones are also asking for insurers to take a longer term view.
“Intermediaries are asking providers to raise prices,” he says. “When you start hearing that enough, it will take place.”
MEETING EMPLOYER NEEDS
The market has bigger concerns than crude price wars, McMullan warns. Post-recession, some employers might not return to the market “unless we all do things differently,” he says, although he believes Canada Life is ahead of the game.
“There are revenue opportunities outside of pure insurance,” McMullan explains. “Insurers will become more than simple manufacturers of premiums. Certainly that’s where Canada Life wants to be.”
That could mean, for example, providers such as Canada Life supplying employers with propositions such as claims management services, as opposed to just being pure manufacturers of premium.
“A lot of employers are saying that they are happy to take on more of the financial risk but they don’t have the claims management expertise – that’s where we can come in,” he says.
That is good news for the market, McMullan suggests. During a career in which he has witnessed a small provider market focus on consolidation as the most obvious route to success, he stresses once again that he is convinced that things need to change.
“The reality is there are only five or six serious group risk players and none of us is going to make a big acquisition to catapult us to the next level and keep shareholders happy,” McMullan says. “We’re actually going to have to do different things, so really entertain the concept of shorter term payment periods for GIP, being flexible about the types of requests we’re getting from clients rather than forcing the standard stuff on them.”
Flexibility is one thing that McMullan believe he is helping to to instigate at Canada Life, which, he says, has not always had a reputation for being open to intermediaries’ needs. For the first few years after the integration of RSA and Canada Life in 2002, the organisation was seen as “an inflexible business”, he concedes.
While he promises “some new ways of working with us, particularly for consultant intermediaries” in the near future, McMullan is keen that more IFAs capitalise on the flexibility that he believes is inherent within CLASS (Canada Life Automated Self Service), the e-business system which the provider launched in 2007.
The system, which enables users to quote, place, renew and administer group risk business online for cases of between three and 100 lives in a matter of minutes, was originally targeted at those intermediaries who do not do group risk business as a matter of course in a bid to grow the market. It has gone down well with all kinds of advisers, helping Canada Life to scoop the Best Use of E-Business gong at the Health Insurance Awards for two years in a row. However, McMullan wants more IFAs to get involved.
“We’ve had some success, but we could do with a heck of a lot more,” he says. “The market is under a bit of a storm at the moment, with the recession, but what’s in our favour is that we can attract them [IFAs] into group risk by showing them that there is a way to earn commission, and here it is.”
While 1,500 organisations have signed up to use the system, 200 to 250 have actively used it and gone on risk. “We need to get that figure up to 500 to 700,” McMullan says, suggesting that CLASS has not yet achieved its full potential because the efficiencies of Canada Life’s “traditional” scheme underwriting and quotation procedure is holding intermediaries back from making the switch.
Nevertheless, around a quarter of sub-50 life new business is now written through CLASS, meaning that Canada Life writes some 400 policies each year through the system. As that number increases, McMullan believes that it will free up some of resources to help Canada Life target the larger end of the market.
“The efficiencies that we create through CLASS, we will just plough back into investing in the growth in the medium to large sector, whether that be sales, marketing or service,” he says.
Looking to the wider market, McMullan believes that the future is bright for the group risk market, as long as insurers continue to adapt to meet the needs of intermediaries and their clients.
Pensions reform will undoubtedly pose a challenge to the market and mean that employers have some difficult choices to make over how to spend their benefits. However, the group risk market is well placed to respond, McMullan suggests.
“In the run up to 2012, group risk benefits can get in among it and new opportunities will emerge,” he says.
Certainly, the market has already addressed one of the major concerns intermediaries were expressing when McMullan joined it – poor provider service levels.
“When I joined in 2005 intermediaries were all saying that service was awful,” he says. “Now, the key employee benefit consultants and specialists across the market all think service has improved; most providers have improved their own internal efficiencies.”
McMullan takes his responsibilities to the wider group risk market very seriously and is on the Steering Committee of GRiD (Group Risk Development), the industry body which aims to promote and enhance the status and uptake of corporate group protection benefits on behalf of its members within the UK insurance, reinsurance and intermediary markets – and beyond. He is bullish about the body’s renewed impetus over the past twelve months.
“You can either have an industry body that just sends out regulatory updates or you can have one that is busy raising the industry’s profile and lobbying on important issues,” he says, adding that it is crucial that more intermediaries help to bolster efforts to raise the awareness of group risk among employers, politicians and the media.
Nevertheless, McMullan’s foremost commitment, naturally, is to Canada Life and his decision to recruit Paul Avis from Ceridian as sales & marketing director towards the end of last year is evidence of just that.
“We are now ready to recognise not only the recessionary impact on us but also to do things differently for a market that’s coming at us in a different way than it has in the past 25 years,” he says. “And we can now think about that more strategically.”
More competitively, too, no doubt.
Ian McMullan BSc ACA joined Canada Life in 1998 and was made managing director – Group Insurance in 2006.
He represented the UK in a review of Canada Life’s world- wide Retirement Income strategy in Toronto in 2002, and led the integration programme following the purchase of Royal Sun Alliance Group Insurance by Canada Life. Ian qualified in 1993 as a chartered accountant with PricewaterhouseCoopers and spent two years working in its New Zealand office. He subsequently worked as project manager on the restructure of Prudential’s New Zealand group of companies.
LIFE OUTSIDE INSURANCE
Ian, who is married and has two children, considers himself a “professional park person” which he says is “basically because he lives in any park in Bristol at weekends with his family”. Ian is “very much” into sport and used to play rugby regularly. His claim to fame is that he competed in the 100 metres sprint at the AAAs UK athletics trials for the Olympic Games. Although he is still very much into sport it is now watching as opposed to playing, although he does play the “occasional” round of golf. Ian lived in New Zealand from 1995- 1998 working with PwC and playing rugby during his time there. He is an England rugby fan and a Liverpool football fan.