The group risk market has rarely operated like clockwork. Ellipse CEO John Ritchie tells Health Insurance editor David Sawers that technology means it’s time for change
Whoever said that group risk can’t be cool should try telling that to John Ritchie.
The CEO of Ellipse, the burgeoning group risk provider, is adamant that the corporate protection industry could soon have a new image. He is determined, he tells me, to be at the forefront of innovation that is set to revitalise the sector and he is keen to harness technology to achieve just that.
“I am a strong believer in the transformative effect of technology on the group risk and benefits industry,” he explains.
Ritchie certainly has the track record to suggest he knows what type of makeover the group risk market needs. Senior roles in insurance and reinsurance have given him a broad perspective on the strengths and failings of how the market operates. The time, he says, is ripe for change.
It is perhaps fitting, then, that Ellipse is based in Bermondsey, one of the trendiest, up and coming areas of London. A stone’s throw from the City, in the shadows of the Shard, soon to be London’s tallest building, Bermondsey is home to fashionable art galleries, some of the hippest bars and restaurants in the capital and a cutting edge design scene.
But what actually is Ellipse? Ellipse, Ritchie explains, is the group risk insurance venture within Munich Re’s insurance arm, ERGO. It was formed by Ritchie and Eva Schwandner, now Ellipse chief operating officer, in November 2008, after Ritchie left his position as head of group risk at Munich Re to set it up.
At the time, the move raised eyebrows across the group risk market as some commentators questioned how Munich Re would manage to back what effectively is a competitor to its own clients, the primary insurers in the market.
Although the inevitable debate over Chinese walls continues today, Munich Re pressed ahead with its plans and the name, Ellipse, was chosen in May 2009. A month later a team of (now 17) employees moved into the Bermondsey HQ.
But while, even after two decades in the rather staid world of insurance, Ritchie seems at home in his new environment, he is keen to stress that Ellipse is far from some kind of trendy internet start-up venture.
“We want to be the leading insurer of all group risk business which is on an employee benefits platform within five years,” he says.
Grand ambitions, you might think, for such a recently established organisation. Not for one that is backed by Munich Re, Ritchie says.
“The Munich Re parentage means that, for a new company, we’ve got blue chip financial strength security, so we’ve got the best of both worlds,” he says. “I’ve got a very strong risk partner and shareholder and I can also tap into their risk management expertise.”
Ritchie’s business plan for Ellipse was approved in October 2008 – a time when “business plans were being iced all over” – and technology forms the bedrock of what Ellipse is all about. The philosophy, he says, was formed from his many years working in an inefficient group risk market.
“I’ve always felt that the processes in the group risk sector were pretty underinvested and that in terms of service excellence and adopting innovation, it has lagged,” he says.
According to Ritchie, that has resulted in a “lot of low value intermediation” which has put advisers under increasing pressure to demonstrate that the service they provide actually adds value as opposed to them simply being part of an inefficient data chain.
“Bits of paper would go from corporate clients to the pension administrator, from the pension administrator to the risk unit, to the advisory firm then to the insurance company,” he continues. “So there would be lots of hand-offs, lots of really inefficient data interfaces. That makes data late and that means that you bring operational risk into this business.”
The role of the adviser
In addition to that operational risk, questions are being asked about the value that intermediaries add – or otherwise – in the process.
“From the biggest employee benefit consultancies to the smallest general adviser, they know increasingly that they can’t get paid for that work,” he argues. “What they should do is consult, structure, review, deal with problems, but the direct administration between insurer and the corporate client means they just can’t get paid for non-consulting intermediate work anymore.”
In contrast to the status quo, Ellipse, Ritchie says, aims to provide a fully automated group risk system which, he argues, should allow faster turnaround times for quotes, scheme renewals and member underwriting. He claims it also enables the automated upload of data and download of policy documentation.
The solution, he believes, will not only free advisers up to do what they do best – consult – but it will also appeal particularly to finance directors who have become increasingly frustrated with the damaging effect that group risk inefficiencies can have on their accounting procedures.
“Finance directors would have very few good things to say five years ago about their group life insurer or the right reinsurer because the accounts reconciliation made them very late, they are seldom right first time,” he says. “So we thought ‘let’s change those processes’.”
“I looked at member underwriting and what was happening in individual markets,” he continues. “I looked at private medical insurance, I looked at pensions, I looked at my asset base within the group and thought ‘what have I got to put something together which is a fundamentally simpler, better and cheaper way of doing this business?’ That’s informed
the scheme underwriting online which we’ve rolled out. That’s gone terrifically well.”
After launching in October 2009 by managing all communications in an electronic format to a secure online document store, Ellipse then introduced medical underwriting as an integrated automated 20 minute process in April 2010. The launch late last year of an online self service quotes system for advisers is the latest in a series of developments which, Ritchie believes, is exactly what finance directors and financial advisers have been crying out for.
There are, however, advisers who argue that it is, and always will be, part of their job to chase data and be intimately involved in the group risk admin process. Some, he concedes, do not want to be cut out of the loop.
“Some still think that corporate clients aren’t ready to give data promptly and in a structured manner,” he says. “Some advisers think they need to intermediate on member underwriting. They think the world hasn’t moved on and my contention is that employers have already moved on, the buyers of this stuff are there ahead of us.”
With this in mind, other changes afoot at Ellipse include the expansion of the online system to cover the full policy lifecycle, including going on risk, data refreshes and renewal. However, while Ritchie’s vision of a fully automated group risk market remains clear, he also emphasises the very human element – “thank God for those 98% of life
claims that get paid” – of the protection industry. That is why at Ellipse claims will be one area that is never automated.
“Claim time is not when you should become remote and formal,” he says. “It should be appropriate professionals looking after families because somebody’s died, somebody’s got a cancer or somebody is chronically ill and can’t work.”
Nonetheless, technology remains absolutely fundamental to Ellipse’s plans. Ritchie says one of his business “heroes” is Mike Harris, the founding CEO of First Direct, and points to the fact that the early scepticism and uncertainty around online banking now seems anathema to the majority of consumers.
The majority of advisers, Ritchie believes, are keen that the group risk market similarly changes with the times. Ellipse has signed agency agreements with 95% of the “top tier/largest” EBC firms and is now in the process of rolling out its offering to the broader advisory marketplace. His distribution strategy, however, remains measured.
Some insurers on launch get quotes “of all sizes from all angles and they drown in it and immediately you absolutely ruin your name for good service”, Ritchie explains. “We’ve come in gradually and I thinkthat’s been a sensible strategy.”
But how big does Ellipse actually want to be?
“We are not going to go public with the 10 year business plan, of course we’re not,” he responds. “What we aim to be, though, is the best, to be recognised by advisers and corporate buyers as the best insurance supplier platform for employee benefits. That’s the strategic ambition.”
It remains to be seen, though, just how successful Ellipse will be in getting its message across to advisers and customers. The provider has not embarked on a major branding or advertising campaign as yet and is keen to harness social media to spread the word.
Ritchie also faces the challenge of taking on the established heavyweights of the group risk market. At present, Ellipse only offers group life/death in service pension schemes, from five up to 500 members, and group critical illness schemes, from five up to 300 members. An income protection (IP) proposition is coming “hopefully within the year”, but Ritchie is well aware that he must take on the major players in the sector with care and consideration.
“We want to bring something very distinctive to the IP market,” he explains. “I think if I try and take on the big guys with the established IP schemes, that could be painful – mostly for me and not very for them.”
While Ritchie is keeping his plans for IP under wraps for now, he hints that he is looking to structure something that is very much for “new, small, growing businesses”.
“To me it is about that structural change in the industry – it’s not about product particularly, it’s about process. How easy is it to get this? How easy is it to have it? How effective is it?”
So will Ritchie be able to bring about the makeover that he believes the group risk market desperately needs? What does he have that other providers don’t?
“I’ve got a great long-term investor that has got an asset base that I can tap into,” he says. “But I’ve also got a separate
team, I can create my own culture, I’ve got a licence to innovate. I’m very lucky.”
John Ritchie is a well-known figure within the group risk sector, which he has worked in for over 20 years.
Having spent over a decade at Munich Re at the outset of his career, he worked for Swiss Life UK from 1998 to
2003 before re-joining Munich Re in 2004. He took up the mantle of heading up its group division and from
there he led the creation of Ellipse, a project he started in October 2008.
Out of the office, John Ritchie spends most of his time pursuing passions for golf and gardening – he is “a 14-handicap golfer but virtually scratch at growing veg”. He is married with two sons, both at university.