Industry: Insurer loses business in the face of criticism over processing times
Embattled Norwich Union has suffered a further setback in its life business with the news that Tesco Personal Finance has dropped the insurer as the provider of its life insurance proposition.
The supermarket recently announced that it will not be renewing its contract with Norwich Union when the five-year agreement comes to an end in February next year. Instead, Tesco invited seven providers to pitch for the business, and selected execution-only insurer, Direct Line, as its new distribution partner. The choice raised eyebrows as Direct Line is owned by Royal Bank of Scotland, part-owners of Tesco Personal Finance, although the retailer denied that this influenced its selection.
"Our reasons for changing provider are purely strategic and in line with the needs of our business," said Monica McCormack, spokesperson for Tesco Personal Finance. "Unfortunately Norwich Union were not in a position to commit to resourcing the developments we required."
McCormack also commented: "Direct Line was selected because their existing capability will mean customers benefit from the quickest application processes available in the current marketplace."
Norwich Union has been dogged in recent months by suggestions that its applications process is not up to scratch. Just last month IFAs pinned a sharp drop in protection premiums at the insurer over the last year squarely on poor processing times.
"Norwich Union's online system is working well, however their back office processing function is not providing the level of service we expect at the moment," said Jason King, managing director at Life Policies Direct. "Norwich Union has had service issues for some time now and are lagging behind other providers who have grasped the service initiative better. They have some considerable ground to make up."
Norwich Union has hit back claiming that such suggestions have nothing to do with the situation at Tesco Personal Finance. "Service has not been an issue. We were coming to the end of our contract and during our re-pitch it became clear that we could not commit the level of investment and resources that Tesco needed to develop the business in the way they wanted," said James Evans, head of media relations at Norwich Union.
Evans also rejected the notion that IFAs may have been angered by Norwich Union's alliance with Tesco since it contradicts their highly publicised commitment to advice-based sales. "As Norwich Union has multi-distributional capability we believe that there is room for both advice and non-advice sales in the market."
While Norwich Union will continue to insure existing clients, Direct Line will administer all new customers from mid-February 2006. Norwich Union also confirmed that it intends to bid for future supermarket partnerships in the future.
