With the protection gap a signal of the public's disenchantment with the insurance industry, Nigel Bradshaw , managing director of RedMayne Consulting, tells Lucy Quinton of his plan of action
For a man that quite literally oozes qualifications, and went to Oxford University, Nigel Bradshaw, managing director of RedMayne Consulting, is well accustomed to the creature comforts of life.
While his father was an engineer, to Bradshaw that appeared to involve being outdoors too much, so he decided to become an actuary. "There were also too many people doing accountancy, so, when I found out about becoming an actuary, I thought that job was the one for me as it was inside in the warm – and a profession," Bradshaw explains.
After several years with various providers, such as Royal Life and Scottish Provident, he set up protection-focused consultancy firm, RedMayne Consulting.
His role gives him a significant amount of freedom while still being in charge of marketing and development. Over the next few years, he hopes to grow the business to nearly 10 employees as "we do actuarial work, but we are spread across the entire protection market, so we consult on underwriting, marketing and product development".
The most important role of a consultancy is to "challenge clients to make them think outside the box," he says, adding: "We are essentially there to shake things up and get people out of ruts." Bradshaw believes it is often easy for large companies to become too internally focused and the transfer of skills and experience can become slow.
He openly admits that the protection market is "boring" and attributes this to "people chasing the same market share", adding that "what we are not doing is getting to the people who do not have protection. I am a great believer that what we are doing is actually worthwhile – taking away one worry from people is essentially what we are here to do."
Problem
Bradshaw's view is that the industry has not had a particular push to widen the market, which results in a continual price war in the IFA market. This, he adds, has been accentuated by, for example, reassurance, decreasing expenses and electronic trading. He anticipates financing will be the next driving force in the price war. "It's all very technical, and it probably needs to be done as it improves price and probably improves service but it doesn't really open the market up," he laments.
Despite this constant price competition, Bradshaw believes the market is coming to the end of a trend, which has been electronic trading and underwriting. Most companies have now caught up with that, he believes.
In conjunction with starting up the consultancy, Better Underwriting=Greater Sales (dubbed BUGS) became another string to Bradshaw's bow, of which he has been director for the past five years. It looks at a variety of different things, such as medical screening and outsourcing and their effects on underwriting.
The health and protection business has changed since his career started, because it has improved the way it has been dealing with customers.
However, Bradshaw says a lot of insurers still do not know how to manage risk. Over the last 10 years, there have been very high quote shares on reassurance "driven by arbitrage rather than rational reason," he says, adding: "The result has been that insurers have whittled away at their ability to manage insurance risk – mortality and morbidity risk. They have largely abdicated to the reassurers. There is potential for quite a lot of problems with insurers not understanding what they are doing and that will create instability in the market and there will be some fallout at some point."
He believes that widening the market – as opposed to chasing market share – is a key solution. Fundamentally, until people start looking and trying new things, "we are not going to improve the market and make it more vibrant. Current companies aren't doing it so you begin to think that, at some point, an external company will," he says.
The necessity for income protection (IP) is something that weighs in during the course of the conversation and, from Bradshaw's perspective, IP is more important than anything else, including critical illness. However, from an insurer's perspective, it is not "a potential revenue stream regarding current sales levels. They are not entirely altruistic – they want to make money so it's a good thing to put in the armoury."
Product management
Bradshaw says IP is a product that needs to be managed properly and there should be a level of commitment to make it work. This also involves managing the claims and helping people get back to work. This makes it affordable and keeps the price down. "This is what needs to be done, but, in order for that to happen, a lot of claims need to come through, which, in turn, means you need to sell a lot – which is the difficult part," he adds.
He is adamant that, while IP's level of importance has not changed over the years, consumers' primary need is income. "Financial protection overall is becoming increasingly important because of increased debt; and people don't have the backup if something goes wrong. They need that extra support of having something there if it all falls down," Bradshaw says.
Changing times
Society has become so accustomed to having things immediately that, in order to increase the sales of protection, we have to address this issue along with making the product "tangible even though it will never be as sexy as having a car in the drive," believes Bradshaw. "There doesn't need to be any more new products because, if people aren't looking at them, there isn't much point," but he does add that there needs to be some element of selling – be it generic Government advice or a call to action.
With the current protection gap estimated to be at £2.3trn, Bradshaw says the primary aim should be to see people insured and that some cover is better than no cover, adding: "Where I think it falls down is the amount of information they are told about what they have got. If they believe that buying £50,000 worth of term assurance covers it, then that is where it all goes horribly wrong." Advised sales are a good way of enabling consumers to prioritise their requirements as they may struggle to afford all the cover they potentially need.
The future looks optimistic for Bradshaw. Being managing director of RedMayne Consulting and becoming increasingly involved in starting up insurance-based companies that will be coming to the market in the coming months, he confesses to having a "great desire to build things". Bradshaw sees himself doing that for around another five years before moving on. His dedication to that chosen profession has shown no bounds after having worked away from home during the week only returning at weekends for more than 10 years.
