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The
one that got away A group risk sale, like fly-fishing does not come easy. With trout or salmon fishing there is always a fight – more than once, the fish will appear to tire and seem ready for the landing, net only for it to find reserves of strength that push angler and equipment to the limit. It is vital not to break your tackle and provided you handle things properly and with patience, this should not be a problem. The group risk market is also a fight. Effectively, there is too much capacity chasing too little supply. The group life market is almost stagnant, although there is some growth in the group income protection market and the group critical illness market still appears to be in its infancy relative to the other two. The question therefore is, if group risk players are to survive, where is the profitable new business to come from? It does not make sense for the same players to continue to chase round and round after each other’s business since that will only result in reduced rates and margins. Cost savings for customers would ensue from this, but not, I suspect, indefinitely. There seems to be an assumption abroad that with every review the rate will reduce whether because of pressure, implied or otherwise, from other players, or because someone wants to maintain or increase their market share. So, where do we go for honey, as Pooh might say? There are several options for catching more, or bigger fish, or both – change the tackle, change tactics or change the venue. Changing tackle or even just changing the fly (bait) means that you think you know where the fish are, it’s just a case of finding something appetising that will appeal to them. Now, in order to do this, you really need to be able to think like a fish; what would I like to see drifting towards me that would tempt me to bite? In group life terms, this may simply be a dramatically reduced rate. It may also be a minor change in the terms of the contract such as an increase in the free cover limit. It may even be a relaxation in some term or condition of the contract. We have all heard, “If you don’t make this change, I know someone who will” from our suppliers. However, should we not, as providers, be thinking about what our customers actually need? How do we deal with the request for cover for large fluctuations in membership because the customer employs lots of seasonal workers? How can we ensure that we get the right amount of premium for the risk we are covering? It is surely not impossible to come up with ideas that will appeal to both the end customer and supplier. If changing tackle does not produce results, how about changing tactics? This is more difficult and more risky. Those cunning old fish will surely not be tempted by anything they do not recognise or something presented to them in an unfamiliar way. And it is no good trying to tell them that what is being offer is much better – if the fish understood, they simply would not believe me, and rightly so. As an angler, I am trying to catch them! What about changing the venue – the IFA? This is the riskiest choice of the three – especially if I decide to try somewhere that I have never been to before. I am unlikely to know what the conditions are like, what the fish like to eat and therefore what I should try offering them. This is either exciting or frightening. Personally, I think it is exciting. There are opportunities that I may never have dreamed of – fish that may be the size of Moby Dick and so many of them that I cannot fail to land them in numbers. I doubt I could be accused of being a pessimist. You need only to mention stakeholder pensions – what an opportunity to reach a market hardly touched up to now! You could be forgiven, of course, for not recognising this along with Alistair Darling, Minister for Work and Pensions, saying that stakeholder is reaching its target and the “think tank”, the IPPR, saying that it is an abject failure being used by rich grandparents to benefit their grandchildren. There is a big enough supply on all sides to keep everyone happy. This weekend, I am in a genuine fishing competition. When I come back from that, Ido not doubt I will be able to talk about the really big one that got away. Bob
Bowskill is head of group underwriting at Sun Life Financial of
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