In other sectors, keeping people on the books would be normal - why should protection be any different?
Journalists apparently have goldfish-style attention spans. Everything has to be immediate and yesterday's news is – at least before stricter food hygiene laws – fish and chip paper. But sometimes an unconnected event can remind of something in the past. Immodestly, it's on a par with Marcel Proust's herbal infusion and madeleine-induced memories in the first volume of A La Recherche du Temps Perdu (In Search of Lost Time).
My Proustian moment was receiving customer retention vouchers from two supermarkets soon after the new year. Life is tough across the board in retail – people don't have the money to go shopping, the internet is gnawing away at the high street, and landlords (including protection insurance companies) demand ever-increasing rents. Stores do what it takes to keep what customers they have – retailers know it is easier and more profitable to bring back a happy shopper than to win someone new.
Call it apathy or call it loyalty, repeat business is the key to survival in the retail gloom. So I was not surprised to receive supermarket offers of the spend £60 and get £10 off variety in the post. Translate that into "a normal shop with a bottle of reasonable wine thrown in".
I can't really compete with Proust but these customer retention vouchers triggered off a memory from the autumn. I had been invited to a unique event – the Legal & General Business Quality awards – in the insurer's swish and still relatively new London headquarters. There was lunch washed down with champagne, a few glasses of wine and the chance to catch up with people.
The formal part was the awards – given to selected protection advisers who had, presumably more than others "demonstrated a commitment to business quality" and, more vitally, "identified the importance of retention". The winners came up to the stage, were applauded and collected their trophies, a process punctuated by a couple of case studies of women whose lives had been helped by claims on L&G protection plans after they or their families had suffered traumas.
Obviously the afternoon was great for the winners but, although not wishing to tarnish their moment, I had left with some interconnected niggles in my mind.
But they remained just there – in the deep recesses of my brain - until they came to the fore when the supermarkets sent me "stick with us" tokens.
I wondered why L&G had stressed the case studies so much. The two were articulate and attractive – they could have featured in the Daily Mail. Yes, they had gone through bad illnesses and one only discovered she could claim later because she was apparently unaware what her plan covered (praise due to her adviser). And yes, both were obviously grateful they had bought the policies.
But no matter how heartwarming or reassuring their stories, surely protection advisers do not need to be reminded of what the ultimate purpose of the policies is all about. And that must be even more so when those invited were the best of class.
At the same time, I remember wondering exactly what the winners had done to identify the importance of retention and how they carried it out in practice.
What was this extra mile they had travelled? What went on during those additional hours at work? I – and I suspect others – wanted to know the secret of their success.
However, as I had my Proustian moment, my biggest thought was why was the event needed in the first place. It's great to get together over some food and drink especially as L&G is so big in protection. It got me thinking as to what a skewed industry this can be.
Obviously customer retention is key to any firm in any sector. Elsewhere, however, keeping people on the books would be normal. There would be no awards. It all arises, of course, from the commission structure of the past decades.
Advisers have been better, far better, rewarded for new business than for keeping the old. The bulk of their earnings generally came up front – in the case of some now historic endowments, anything up to the first 27 months of premiums went to the seller. Compared with that, the remaining 20 to 30 years offered a pittance. It was no contest between spending a given time on gaining a new policy or the same on retention. No wonder the churn rate was so high.
But it would be wrong just to blame the policy seller. Insurers routinely release new business figures without any overt reference to how the existing business is sticking to the books. They do make executives look good around bonus time, however.
Retention is good for the policyholder, good for the adviser and, most vitally, good for the industry's image.
So here's a few ideas from the L&G armoury.
- Identify advisers with higher than average loss rates – bad for them and bad for the insurer. Discuss what the root causes and what can improve the situation.
- Give sales managers the ability to track activity that can lead to performance improvement – L&G has the “Business Retention Tool” – a consultancy that looks at specific practices within a firm and compares them to best practice.
- Set up an early warning system to provide electronic notification to advisers when a policy is in danger of cancellation.
- Provide quality and retention expertise free of charge.
- Review, track and calculate policies that are not taken up, cancelled from outset and lapsed.
L&G cannot surely be the only insurer thinking along these lines. So I look forward to more business retention award lunches in the coming year from competitors in the protection market. And I hope L&G will repeat its event next autumn, perhaps taking my well-intentioned criticisms on board.