Royal London is pretty unique in the protection industry. A strong brand in its own right, it is also the parent company of two of the most recognisable brands – bright grey and Scottish Provident – for IFAs who deal in protection.
And while it could be tempting for some organisations to merge the two – you only need to think about the potential to save on marketing and personnel – it remains committed to a dual brand strategy.
It’s an issue that I can sense John Deane, the chief executive of intermediary business at Royal London, is getting tired talking about. But, like most journalists, I ask him to do just that. Why, I persist, doesn’t Royal London simply merge the two businesses?
“We are absolutely committed to the dual-brand structure, no question about it,” he tells me, arguing that speculation over the future of the brands has “died down”.
“The only thing that’s relevant is that both brands have a strong market share,” he continues. “It’s not for me to decide on whether or not there should be two separate brands. It’s for IFAs and their clients to decide – and the market share the brands have built up shows what they think.”
Royal London’s dual brand approach means that the two providers now command a significant share of the IFA protection market. bright grey covers 308,318 lives, while Scottish Provident’s longer history means it looks after the protection needs of 778,643 people. That gives them a similar share of the IFA market, at 8.5% and 9.0% respectively.
Figures released as Health Insurance went to press show that bright grey and Scottish Provident helped Royal London to increase total new life and pensions business in the first half of this year by 12%, on a Present Value of New Business Premiums basis, to stand at £1,194m.
The performance of bright grey, in particular, has been impressive, with new business jumping 20% to £96m, up from £80m in the same period in 2008. And while year-on-year figures are not available for Scottish Provident, which Royal London acquired in December 2008, that brand alone brought in new protection business of £114m during the period.
It’s a success story that Deane believes a newly appointed senior management team, responsible for the Scottish Provident and bright grey businesses and the bancassurance relationship with Abbey, will build on. Headed by Ross Ainslie, the management team comprises Steve Streak as sales director, Gordon Watson as operations director, Roger Edwards as proposition director and Susan Sneddon as retail director. Streak will work closely with Andy Peters, national partnerships director for Royal London’s intermediary division, while Edwards will oversee the pricing, product development and IFA marketing teams for both bright grey and Scottish Provident. Alison Turner-Holmes, previously marketing director with Scottish Provident, has decided to leave the Royal London Group to pursue other opportunities.
According to Deane, that team is now perfectly placed to exploit the dual brand strategy that Royal London is pursuing in the IFA protection market. So what are the different brands’ strengths?
“Scottish Provident has been around for a long time, it has a very strong heritage,” Deane says. “It’s seen in the market to be comprehensive, specifically on the critical illness side. It’s a strong, traditional player. bright grey’s branding reflects it as an organisation, in that it is younger. That’s not good or bad, it’s just different.” bright grey, Deane accepts, is very focused on the “practical side of things”, including its Helping Hand service, which offers counselling and other advice to claimants, regardless of whether or not a claim is paid.
“Branding is important,” Deane says. “There is a danger that organisations can think just about product. But there are softer issues about how people want to engage with that organisation.”
While he is passionate about maintain those brands’ identities, though, Deane’s position means he has to appreciate Royal London’s broader objectives too.
“As an organisation, sometimes people forget that Royal London itself has a number of different brands,” he says. “It’s an organisation that is used to running different brands.”
The trade press in particular, Deane says, often overlooks the bancassurance arrangement Royal London has with Abbey/Santander. That arrangement is an important one, Deane says, and IFAs should not feel threatened by it.
Neither should they feel threatened by bright grey’s recent foray into the direct market. The provider recently launched a product called Lifestyle Protection, which is only available through theidol.com, the internet intermediary site. According to Deane, advisers should accept that there is a section of society that will never ask for financial advice but still need protection.
“If people end up taking out protection, they are more likely to talk about it to friends and colleagues who are in turn more likely to take it out themselves,” Deane explains. “And while only a proportion of that number would go to see an adviser, it’s more than would have done so before.”
Clearly, growing the protection market is close to Deane’s heart. “We all know that as a nation, in general, people are underinsured and not saving enough,” he says. “The important thing is for the industry to find ways of selling more protection. There’s more than enough need out there.”
More than enough need, yes, but Deane accepts that the industry does face big challenges. He does not accept, for a start, suggestions that the Financial Services Authority’s Retail Distribution Review (for more see page 18) could see a wholesale move of investment advisers to the protection market.
“If an adviser was selling investments with commission, they’d have to sell an awful lot of protection to match it,” he says. “Maybe there will be some marginal increase in the amount of protection sold, but not much.”
A more likely way of growing the protection market, Deane argues, is by making products more accessible and simple for consumers to understand.
“The industry as a whole and indeed the regulator should push for a much simplified message,” Deane says. “We are hide-bound by paper and documentation and so on. We are moving to a world where information passes much more quickly between people and the industry needs to adapt to that. As an industry we need to explain things better and more quickly. People don’t want to have to wade through paper and paper.”
The so-called critical illness conditions race, where insurers add rare conditions onto CI contracts in a bid to appear to be more comprehensive, is one area where the industry is letting itself down on that front.
“The challenge isn’t adding the conditions on, it’s the making sure people understand them,” Deane says, suggesting that protection should be more about lifestyle aspirations than technical detail.
“You don’t sell a car in a car showroom by showing a consumer page 47 of the technical manual,” he continues. “It’s sold on what it can do for people and their lifestyle.”
There are, of course, issues outside of product design that pose challenges for the protection industry and Deane is of course attuned to those.
Providers will face challenges as they adapt to changes to accounting procedures brought about by a move towards market consistent embedded values. Solvency II, the updated set of regulatory requirements for insurance firms that operate in the European Union, will also impact them.
The impact in an already capital constrained industry, Deane says, will be a greater focus on the profitability of each product line and a reduction in cross subsidiary as higher risk or poor profit lines are examined for their return on capital. Deane also expects price changes to emerge to reflect the use of capital to support a product line, as well as possible reductions in commission on protection policies if a greater return on the capital is required across the market.
LOOKING TO THE FUTURE
In spite of those challenges, Deane believes Royal London’s position as the UK’s largest mutual life and pensions company in the UK puts it in an enviable position.
“We find ourselves in a reasonably unique position of being a financially strong mutual,” he says. “We have seen new entrants come into the market and we have seen some market shares change. It’s very hard to predict where shareholders are going to see value.”
Nevertheless, in challenging times the outlook for protection remains bright, Deane says, adding that IFAs are perfectly placed to help consumers protect their finances.
“Successful IFAs are the ones who are getting out there and having conversations with people,” Deane says. “When do people need advice? It’s when things are less predictable and when they are nervous. That’s now.”
As I close the interview, Deane admits to a touch of nervousness himself. Not about the interview, of course, nor the future of the protection market – and especially not about Royal London’s dual brand strategy.
Quite the opposite in fact. Next month Deane is embarking on a charity race from Land’s End to John O’Groats. He is a keen runner, but seems to be relatively new to long distance cycling. It’s a challenge, he admits, but one that he is prepared for.
“I’ll be wearing the Scottish Provident and bright grey brands on my shirt,” Deane laughs. “And both will be given equal prominence.”