Y-fronts and socks, knickers and bras. These are the staples of Marks & Spencer. Almost everyone, at some point in their life, has bought their underwear from M&S. But now the high street retailer has decided to move from underwear to underwriting and has announced plans to branch out into general insurance.
It will begin in September with a high-class household product, and will roll out travel and motor within six months with add-ons, such as pet insurance, coming later. It hopes its insurance arm will be big business.
M&S will pose a significant threat to both intermediary and direct channel insurers. Despite recent mumblings that its clothes were too old-fashioned and frumpy, Marks still has a loyal customerbase and a high profile in most high streets and all shopping centres worth mentioning.
And M&S is not about to start its insurance business as an amateur-run sideline. One of the company's non-executive directors was Axa's Barry Wells. He approached Peter Longstaff at Axa Direct a little before Christmas, and M&S very soon had a team of insurance industry stalwarts firmly ensconced at its financial services division in Chester. More will be recruited soon.
"We're recruiting the specialist insurance positions from outside, from the insurance industry, but the customer interface staff will come from within M&S and be specially trained," Longstaff says.
The team has had a wealth of information from M&S to help them develop their products. M&S has, for years, refused to accept Switch or credit cards in its stores, instead persuading six million of its customers to take M&S's own storecard.
Unlike many of the loyalty card providers, M&S has actively monitored the spending of its customers. Over the years it has built up a picture of what its customer buy, how much they spend and how often. Selling a range of items from food through clothing to household goods, M&S has a good idea who its customers are and what their houses and lifestyles are like.
M&S hallmarks
"We are keen to link to the retail side as people buy home contents, food, clothes etc from M&S," says Longstaff. The company has also carried out some independent research among its customers, which has provided additional information. "We have done a lot of customer research and come up with a product we think they want."
The insurance product, underwritten by CGU, will have all the hallmarks of M&S, even to the extent that customers will be able to take back their policy within the first 45 days and get a refund. "It will be a quality product that offers value for money," says Longstaff.
"It will be a product consistent with Marks' products. It's not just lifted off the shelf – it has been specially designed for us both in terms of cover levels and features. There will be a range of options with bits you can add in or take out."
M&S will be handling its claims in-house. It sees this as a vital part of the insurance package, which will concentrate on service standards as another key way of differentiating its insurance products from others in the marketplace.
"Our research shows that customers trust Marks & Spencer and they don't trust insurance companies. We're handling our own claims to make sure that we meet their expectations," says Longstaff.
"A customer judges insurance by their claims experience, so why would you outsource something as important to your reputation to someone else," Longstaff says. "Our research has confirmed that our customers do not want a Marks & Spencer badge on someone else's product."
And Longstaff is convinced the customers will be prepared to pay extra for the kinds of service levels he will be offering. "The research says customers will be prepared to pay for the cover and the service we will offer," he says.
High standards
Longstaff is adamant that the standards M&S has insisted he achieve are higher than those he has experienced working in insurance companies. That makes them far superior to the minimal standards required by the proposed new regulator, the General Insurance Standards Council. He says M&S could quite happily cope with a much tougher GISC regime.
"Our standards are a lot higher than in a direct insurer. Companies often have hidden administration charges, which we don't," he says. And even if GISC insisted on tougher regulations, such as keeping insurance money separate, Longstaff is confident M&S could easily meet the requirements.
"That wouldn't affect us as all premiums are paid direct to CGU, but the GISC training standards effect us – that's not a problem as the quality of the training M&S is providing to staff is a lot higher than in a direct insurer," he says.
That confidence allows Longstaff to suggest that M&S will insure 500,000 houses within five years, with half its customers coming from among the retailer's cardholders, and the rest from other customers. There are six pilot financial services centres in shops around the country but more will open in the major outlets. Smaller stores will have leaflets, but not sell the products.
A travel policy will be next, available as a stand-alone product and as an add-on to the household policy, with motor likely to follow. And Longstaff insists all the products will be "young and sexy" and in no way staid and boring. "And if you don't like it, you can take it back," he says.
Now, that's not pants.
