COVER magazine interviewed Peter Todd, new Managing Director of Mutual & Federal, on where he sees the company going and the role that he has to play in these developments.
COVER: You have a history in distribution and, specifically, the broker channel. Is this the main reason why you accepted the position at Mutual & Federal?
This was not the main reason why I accepted the role, although it probably played a significant part in my being employed. I looked carefully at the company before I joined and saw that despite the fact that it has significant distribution capability there are still many opportunities available to be tapped into in order to fully realise the company’s potential. I was also reassured of Old Mutual’s commitment to Mutual & Federal, which was a critical factor in my accepting the role.
COVER: Mutual & Federal has gone through many big changes over the last few years with restructuring and re-engineering of your supply chain. Have all the large changes now been implemented, or are we still going to see any major developments?
I am excited to say that there are still some major developments ahead for Mutual & Federal. We are not even a year into our major Step Change programme, which covers just about every aspect of the business from culture change to system enhancements to capital management and efficiency.
The key focus for us is to deliver on the change programme and we need to embrace multiple distribution channels. iWYZE, valuables insurance, a direct initiative in partnership with Old Mutual which targets the retail mass market, was our first foray into alternative distribution. Direct has become a segment on its own and appeals to a different set of customers who simply choose not to deal with a broker and we perceived a particular need in the retail mass market where many customers simply did not have access to financial advisors. Mutual & Federal has also entered into the arena of Underwriting Managers as a means not only of increasing distribution but also to ensure our brokers have access to specialist products allowing them to fully address their clients’ needs.
Given my background in the industry, I will be looking at our distribution strategies as a whole, with a view to meaningfully growing the top line profitably. I must emphasise that while we may be adopting a multiple distribution philosophy this does not mean that we are moving away from our broker strategy, which has always been, and will continue to be a prime focus for Mutual & Federal. We will continue to roll out our new operating model which in personal lines recognises the increasing commoditisation of personal lines by centralising all transactions allowing for quicker turnaround on policies and claims, greater cost efficiency and simply just easier for brokers to do business with us. We have also introduced world class on-line transaction capability allowing brokers to access us to quote, amend or issue policies from anywhere they have access to the internet. Although we have centralised personal lines transactions the branches will retain the relationships with the broker at branch level. More importantly this restructuring has freed up the branches to focus on engagement with the brokers, to grow our joint businesses and further to this we have empowered our sales staff to make point of sale decisions on commercial, allowing for quick response to brokers needs in an increasingly competitive commercial environment.
Management of costs is becoming important for all business and brokers themselves face increasing cost pressures from compliance amongst other things. We consider efficiency essential since it will allow us to pass on the cost savings to the brokers and the customer thereby assisting the broker to remain sustainable and competitive.
COVER: Where does Old Mutual fit into these plans? Has Mutual & Federal been able to optimise that relationship yet?
We certainly believe we can extract more from our relationship with Old Mutual. iWYZE is a joint initiative, and a significant one – so far; it has been a great success. We will continue to explore opportunities within the wider Old Mutual group, and, as far as our Africa expansion is concerned, we will leverage off the Old Mutual relationship. We appreciate the commitment from Old Mutual and their support makes it clear that we are very much a part of the Old Mutual group.
COVER: Mutual & Federal had a slow start in the UMA environment, but seems to have joined the race now. Where do you see the UMA opportunities in the future?
When I mention distribution strategy, I, of course, include the UMA model. Yes, Mutual &Federal has been slow to branch into the niche arena, but we have now started to make positive strides in this space and we will continue to look for opportunities in the niche operating space, utilising UMAs, though not exclusively, but it is a key focus area.
COVER: Is personal lines insurance becoming commoditised? If so, where does that leave the intermediary?
As mentioned, Personal lines is becoming more and more commoditised, there is no question about that, but commoditisation does not mean the broker does not have a role to play it simply means we need to work together to be more efficient and easier to do business with. I myself, as the Managing Director of Mutual &Federal still utilise the services of a broker, as I see value and convenience in her services. There is a large segment of the market that sees that too and this is proven by the fact that 95% of our business is still brought to us by brokers. The challenge for brokers is to demonstrate their value that they add and they can’t afford just to complete on price. Many clients don’t understand the contract in personal lines; they don’t understand the extent of cover. The broker is also there to help the client through the claims process. The average person in the street does not know what questions to ask, so the broker has a major role to play.
COVER: How successful do you think the direct insurers will be in the commercial market?
Well, those in the industry, who predicted that direct insurers would not succeed in Personal Lines have been proven wrong, so one will predict failure in the Commercial space at one’s own peril. Direct insurers could see some success in the small commercial space, but as the level of complexity increases, the role of the broker becomes increasingly important.
COVER: How badly was Mutual & Federal impacted by the recent floods?
Not as badly this year as possibly some of our competitors. In fact, we are slightly better than we were this time last year in terms of weather claims.
COVER: Can you give us a brief comment on your results?
It was a good year for the industry as a whole, and we achieved an underwriting margin of 7,6%. We saw a 27% improvement in Operating profit. Our top line remained flat; however, this was after having cancelled a number of unprofitable group schemes. The challenge in 2011 will be to grow our top line profitably. We did see an uptick in our revenue in the last quarter of last year, and this has continued into this year although it is not yet at the level that we would like.
COVER: Finally, how are you feeling about all the legislative changes that are facing the industry currently?
Yes, we are certainly living in a changing legislative environment. The legislative changes are not just coming from our own Supervisor, for example, The Consumer Protection Act is due to come into force and effect on the 1st April, as is the new Companies Act and these two pose particular challenges and opportunities for the industry. Customers will now face far greater liability exposure which we need to respond to without having absolute experience of the increased risk, but nonetheless we will ensure our brokers have access to the appropriate covers.
Customer legislation will continue to be the focus going forward, we are about to see the introduction of our own ‘Treating Customers Fairly’ principles and this had significant impact on the UK Market. We will also continue to see increased focus on prudential management and we do not expect that the changes or pace of legislation or regulation will let up for some time.
Email this article to a friend.