Direct Opposition

"We're more akin to Zurich than Direct Line." In one short sentence, Churchill Group managing director John O'Roarke has answered the question everyone has been asking since the Swiss-owned company bought Prudential's general insurance business last November.

But that can't be true. Churchill is all about nodding dogs and telephone quotes for car insurance, isn't it?

That's where the misconception lies, says O'Roarke. Direct car insurance isn't even number two in Churchill's ranking of premium earners. O'Roarke explains: "We have revenues of about £2bn per year. Of that, £750m to £800m is NIG business, £750m to £800m is through our partnerships and only £400m is direct."

So if Churchill writes over £750m in commercial lines through NIG and its brokers, and approximately the same amount through telebrokers like the AA and banks like Nationwide, how come everyone thinks Churchill is just a direct motor underwriter?

"The brand is the dog," says O'Roarke with a hint of frustration. "We need to raise corporate and industry awareness of the group and its business," he adds. It is easy to forget that Churchill is the direct motor business and is also the name of the group.

A great strategy?
So Churchill has become the victim of its own success. By developing one of the strongest brands in insurance, it now has to change perceptions to avoid confusing the industry. Perhaps it should try an Aviva-style name change for the group.

But why should Churchill worry? Keeping the industry in the dark could be a great strategy. It keeps rivals guessing. As one competitor exclaims, with a mischievous gleam in his eye: "Just what is Churchill's distribution policy?"

Churchill's problem is it wants to increase its size by 50% to become a £3.3bn gross written premium a year player. "This would give us the ideal scale for efficiency," says O'Roarke. But to do that it needs new channels to market. And that includes brokers. Not just the telebrokers it already sells through. It wants to sell Churchill motor policies through high street brokers.

O'Roarke explains that Churchill is in talks with Swinton about joining its panel. He adds that other deals will come. "There wouldn't be a problem dealing with Hill House Hammond, for instance," he says.

Brokers, who have fumed at the threat of direct selling for years, may take convincing. But with capacity tight, there is no better time for Churchill to start persuading. "Most people want access to capacity, so there is no problem getting into talks," says O'Roarke. And he realises this strong position cannot be abused. "We will take a softly, softly approach," he says.

For the moment, the broker market will be a key area of development, while the company takes stock of its 2001 spending spree on Prudential's non-life book and Pearl. Former head of Prudential general insurance Mike Quinton, who is now in charge of Churchill's partnership distribution, says there will be a period of taking stock, although he is keen to point out that it may not be too long before some more big deals are on the table.

As corporate partnerships executive director, Quinton will be responsible for administering the books of business that have been bought, including Pearl and the Prudential, as well as deals with banking partners such as Nationwide . This alone represents a third of Churchill Group's business.

Quinton explains that under new ownership, Prudential customers are likely to be sold Churchill motor products rebranded as Prudential but that Pru's household products will continue.

Challenge ahead
The Pru brings 300,000 motor policyholders to Churchill posing a serious challenge to the motor medal podium. While extra motor volume is welcome to improve economies of scale that are already impressive - the household book is the star. The Pru's 1.8 million policyholder building and contents book moves Churchill up to number three in that market, according to Quinton.

Quinton is delighted to be with Churchill. "At the Pru it is fair to say that the general business was not being invested in," he says.

Quinton admits there are some cultural differences to overcome - Churchill being evangelical compared to Prudential's more conservative feel. But, he adds, less than ten of the Pru's 1,300 general insurance staff have left because of the sale.

For now, Prudential's 800 regional staff will stay in their own offices. Not only does this keep the churn rate down, but O'Roarke claims that it gives the group good business continuity and disaster recovery options. The central London-based staff will eventually migrate to NIG's head office in Old Street, says Quinton.

Churchill, which prides itself on efficiency, is assessing the suppliers that the Pru brings with it. "It would be illogical not to concentrate our buying power," says O'Roarke.