Following an extraordinarily busy year Aviva's David Barral in conversation with Paul Robertson indicates there will be no let up yet
Aviva has had a busy year. Almost every month the insurance giant has announced moves that must have spent a long time in the development pipeline. Take October. Last month, ignoring minor policy tweaks and announcements, Aviva launched a new website for advisers, revamped its critical illness policies, began an expansion into Indonesia and commenced the restructuring of all UK business under one CEO. A lot for one month, and this has been typical throughout the year.
Perhaps the biggest move has been the rebranding of Norwich Union in June, as all subsidiaries move over to the Aviva banner. Executive marketing director for all Aviva products, David Barral has had a key role in the move from the Norwich Union brand, in use since 1797.
QUIETLY SPOKEN SCOT
A quietly spoken Scot, Barral is obviously pleased with the move, in both logistics and marketing terms.
He says: “In terms of the physical transference of systems, literature etc., right through something like 42 legal entities, it went incredibly well. We had a lot of time to plan this and it went pretty seamlessly.”
Awareness among consumers was a concern for Aviva. Under the Norwich Union brand the insurer’s figures had consumer awareness running at 58% while at launch Aviva was 4%. Now, as at the end of September, Aviva claims awareness is running at 52%.
“We’re delighted,” says Barral. “We are still investing through advertising and have begun to move those campaigns over to a product specific basis. Annuities and pensions at the moment but we had the free life cover, which was designed to raise the awareness of protection.
“The intermediary response has been excellent, we put a lot of effort into this. We discussed at senior levels how we were going to support the IFA market. The big issue is how we can give advisers the confidence that we are going to invest in the brand in order to create a consumer pool. Clearly IFAs need to have faith that the public will have some kind of resonance with the brand.”
The protection arena is set to come under the marketing spotlight next year. The firm has recently improved sum assured limits and medical underwriting limits, but Barral still believes there is a lot of unnecessary ‘fluff’ in the market and it will continue to ‘tidy up’ policies and improve on underwriting systems.
Barral says: “Next year we will be investing several million – I do not want to put a figure on it – into a strategic modular and menu driven protection suite of products. At the moment income protection and life cover bought from us would need two separate forms and underwriting processes. We are bringing them together making them seamless. We will also be bringing them online. It will all be a lot easier for advisers to use in a way that is driven by the customers’ needs.”
PROTECTION REMAILS PROFITABLE
Protection as a whole is a key market for Aviva. Between life, critical illness health care and income protection, Aviva has a range of products that are not only hopefully attractive to consumers but are attractive to Aviva as a business. Protection remains a profitable and important market.
“It might not be the highest volume we do but its profit makes it attractive. Advisers will find this as well, as it is not one of the sectors under threat in terms of renumeration in the way that investment products are. I think protection will be a growth market for a number of advisers,” says Barral.
Aviva expect more change in protection markets as society polarises due to epidemics of ill health through obesity and, on a global scale, increases in smoking.
“This is a definite trend. But we have a segment of society that is aware of health issues. Being overweight may be becoming more of a problem but on the other hand there is a section of society doing far more for their health than they ever have done. So the market is all about pricing for the risk we are prepared to take on,” says Barral.
This is why firms such as Aviva are introducing schemes such as My Health Counts, where people can go online and get advice. These schemes will become more standard in the market.
“It is similar to postcode pricing,” says Barral, “which a year or two ago was only really used in annuity pricing, and now any company that does not operate on a postcode basis starts to leave themselves open for selection against them. People affecting their health indicators will see that directly impacting on their premiums as a matter of course, certainly in the health side.”
The number of pricing cells will also continue to increase the more mature the market becomes. Especially, according to Aviva, on the life side, where it is such a pure market. “You can go online for a life quote and get a range in the region of pennies from each other. The drivers are how good a firm is at anticipating mortality and how efficient it is at processing the business it wins. It is all about keeping costs down, service up and having a brand that people are willing to trust,” says Barral.
Of course if a market is to grow it must increase its supply of custom. Barral is not personally involved in the industry scheme to grow the market through generic advertising but points to the money already being spent in this area.
“In effect we are already generically advertising. I would point out the money that is already being spent in this industry. Aviva is already on TV and will remain there to try and stimulate the market as a whole. Aviva’s campaigns are not about trying to drive direct business, because the amount of business actually written direct is absolutely tiny. We will have invested several million this year and we will be doing the same next year to stimulate markets.
“The free life cover for parents we introduced earlier this year is a classic example of this. We did not do this to drive new business, we did it as a brand positioner to demonstrate company values. It is interesting that 80% of that business was online and 15% was through IFAs. We were surprised, as we did not think the IFAs would be interested in pointing clients towards a free insurance. Interestingly instead of feeling threatened people understood that it was a market stimulus.”
Like many senior people in large companies, Barral occasionally finds himself co-opted into other projects. He was an original member of the FSA’s Regulatory Barriers and Enablers Group, one of the committees responsible for the detail of the Retail Distribution Review (RDR).
Talking about this dredges some interesting points. His was the only group chaired by the FSA, all others were industry chaired. As a result the RDR is primarily an industry concept.
Barral says: “In terms of the RDR what is often lost is that it is what the industry has argued for. The FSA did not impose this, the industry drove the RDR. If you look at the makeup of the RDR groups they were all represented by banks providers and IFAs. Nailing my own colours to the mast, this is pretty much what we advocated for.
REBUILDING TRUST
“There are two big issues. To rebuild consumer trust in the market something had to be done and the second is that if advisers want to look like professionals and be treated like a profession then they have to raise their game. A lot of them already have. We are so dependent on the IFA market that we are keen to support them through the transition, through our academy for example.”
As a result of the RDR Aviva expects a reduction in adviser numbers of between 20% and 30%. However, Barral is sanguine: “This is in terms of numbers, not value. In other words those at the lower end of productivity are those expected to go. Those that remain will tend to be the bigger, stronger and better capitalised firms. These firms will have a long term commitment to the market and if the management are not younger will certainly have succession plans. The market will be fitter and stronger and we are not convinced there has to be much of an effect in short term volume.
“There are advisers that are a stone throw from retirement that may not feel it is worth taking the exams, taking greater professional scrutiny. Others may be forced to a degree of consolidation, through joining larger firms or even joining a bank. So, the overall adviser numbers will not stay depressed for that long, and certainly the value of what that market produces will not be in direct relation to the numbers that leave the industry.”
If there was one thing we can expect from Aviva over the next year it is focus on the protection market. Barral gives a broad hint: “Aviva is lucky in that it has always been a broad spectrum provider and has the credibility to back that up, with critical mass and scale, as this is highly capital intensive. We are looking at a scale game, especially on the group side.
“The protection and health market is becoming more strategic and important than it perhaps has been in the past. We are in the throes of signing off on our three-year plan and that involves becoming number one in the protection market, full stop.”
It seems 2010 will be another interesting year.
