He thinks the insurance industry needs to ‘get more sense' into the way it does business and feels customers should not be treated as just a commodity. Alison Boyle meets Tim Ablett….
Not many insurance company managers will admit that no one wants to buy insurance and everyone hates it. But Tim Ablett, managing director of Groupama Insurances, believes that the industry would do a lot better if more managers were aware of this.
He is quick to point out, though, that what everyone does want is protection, both physical and financial. And everyone wants to know that if they need assistance, someone is there to help them. This is why he is keen for the industry to start selling insurance on value, instead of just on price.
Personal lines has long been Ablett's speciality. Training as an accountant, his induction into the insurance industry came when he joined brokers Wigham Poland as group financial controller. But it was only when he became managing director of International Assistance Services, part of the Legal Protection Group, in the late 1980s, that looking after the customer became his focus. It was then that he started reviewing how the industry actually provided help and assistance to customers, over and above their insurance products. This continued after he joined Sun Alliance in 1988 and by the time he joined Groupama in 1999 he had strong views on how the customer should be treated.
Making a name in the market
“Coming to Groupama, the brief was to help pull together the Gan and Lombard merger which was well underway when I arrived. My job was to focus on the personal lines business and create a strategy that was going to make us a name in the market over the next few years,” he says.
One of the first things Ablett and his team decided was that the creation of a retail brand was too expensive and probably futile. “There are very few strong personal lines financial services brands,” he explains. “Instead, we decided to create a niche and set ourselves up as a company that does not have this conflict with a retail brand. We wanted to be seen as a true intermediary insurer. We also saw opportunity in corporate partnerships and affinity groups.”
One of the most publicised partnerships that Groupama created last year was with the One-Stop Car Shop. This scheme was lauded because, for the first time, policyholders were being offered a replacement car after a total loss with the convenience of a hire car while the vehicle was being sourced.
“The one-stop scheme came about from us saying that we have to be more than just an insurer – we have to be a deliverer of protection solutions to customers. We have to have ways and means of satisfying the needs of customers when they have a problem with their car, house or well being. Not just how you can help them if the car has been stolen, but extend the whole thing out to ‘what if I need my car serviced?' and more.”
Technology, of course, has a role to play in the development of schemes like this and Ablett is the first to admit that as personal lines is a volumised business, good technology is essential. One of his pet hates, though, is the phrase that “the internet is going to take over the world”.
“It isn't. But technology is absolutely crucial on a business-to-business basis where you are making sure the car is being properly repaired in a garage, or checking which builder is going to be available to put the roof back on the house. Using technology within the business rather than for it to deliver the product is so important.
His other pet hate is the “over-used, abused and inappropriate phrase” of cross-selling. For, he says: “When did you last think about your motor insurance when you bought your household insurance? You don't. It's a different buying decision. However, when you last bought your car, did you think about insurance, did you wonder how you were going to service it, what you would do if it broke down?”
The essence to good practice, he believes, is treating customers as more than just a commodity and he insists he will only work with brokers and intermediaries who share that vision.
He adds: “In Groupama personal lines, we haven't gone down the club broker route because it is a much larger broker base than for our commercial business, and we believe that we should be able to trade with the small and large of that broker base. We are not looking to cull small agencies just because they are small agencies. We will cull agencies if we believe that we don't have mutuality of goals, mutuality of aim and of client base.”
One of the main problems in the personal lines sector, he says, is that too many products are sold on price, not on value.
He says: “The average motor premium is around £365 – one pound a day. God forbid we could drive out today and knock a girl down on a zebra crossing. She could be maimed for life and need care for the rest of her life – which could be 40 or 50 years. That would be a multi-million claim that was insured for one pound. That's how much protection we give motorists and when do we ever say that? We don't, because what we say instead is: ‘You don't like that £365, then we'll reduce the premiums to £355 – will that be alright?'
“That's the whole selling ethos. We commoditise the product and allow it to be all about the price. And because we were trying to sell it at £365 not £355 in the first place, the policyholder feels hard done by. Whereas what we should be saying is ‘this is cheap – dirt bloody cheap. On top of that you have the repair of your car, 24 hour legal advice and representation in the courts.' But products are sold on price because that is how we have educated the public.”
The curse of tradition
He believes a lot of things are done in the industry purely because that's the way they have always been done. For example, he doesn't understand the purpose of renewals
“There are not many industries where you sell a product, you take a great deal of time to woo a customer, discount the price to get him, and then within ten and half months you start to issue a renewal notice giving him an opportunity to go around the market again. It's a daft way of selling a product. We are looking at continuous products. This is slightly harder on motor because of the requirement for a certificate of insurance, but there is no reason why it can't be done on buildings and contents insurance.”
Another bugbear is brokers' commission as he believes it is a “totally inappropriate” way of rewarding intermediaries selling personal lines insurance. “In motor insurance,” he says, “a 55-year-old commands a much lower premium than a 17-year-old, yet a broker will do the same amount of work. However, for the 17-year-old he'll earn something about £200 in commission but for the 55-year-old he'll only earn about £20.
“What other market would have margins like that? It is no wonder it distorts the public's view. Dual pricing exists in the broker channel too – different brokers in the high street will charge a different fee for the same insurer. So why don't we start talking about cutting the commission and let it be fee-earned?
“We need to get more sense into the way we do business. These products are simple things. Insurance companies need to spend more time thinking about customers and communicate more with our brokers, intermediaries, and corporate partners – all of which have daily contact with customers.
“We're pretty arrogant individuals. We tend to sit in darkened rooms and come up with what we think are brilliant products and write it in tight print in policy booklets. We get it out into the market and sit back and think ‘why the hell is that not selling?'. Now isn't that strange.”
Tim started his career in the City training as a chartered accountant, rising to the position of partner in a London firm specialising in Lloyd's and Lloyd's brokers.
He used this experience in insurance to join Lloyd's brokers Wigham Poland as group financial controller, taking responsibility for worldwide financial reporting and mergers and acquisitions.
He joined Sun Alliance in 1988, becoming director of personal insurances and chief executive of subsidiary Bradford Pennine when the company merged with Royal Insurance.
He was director of Healthcare and Assistance at RSA before leaving to join Groupama Insurances in 1999.
He was appointed managing director, Groupama Insurance, in June 2000.