Legal & General Executive: Uncertain Times Provide Openings for Insurers

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LONDON, May 19, 2009 (A. M. Best via COMTEX) -- LGGNY | Quote | Chart | News | PowerRating -- The replacement of a 20-year climate of aspiration among insurance customers by one of ?fear and doubt? offers dramatic opportunities for insurers, according to John Pollock, group executive director for protection and annuities at U.K.-based life insurer Legal & General Group plc.

?What a great climate for protection sales,? Pollock told delegates to the Future of Life Assurance conference in London.

In uncertain times, customers are increasingly receptive to the message that they ?need to protect themselves,? he said.

Swiss Re has identified a 2.3 trillion pound (2.6 trillion) euro ?protection gap? in the United Kingdom, Pollock said.

In 2007, Pollock said, quoting the Association of British Insurers, the U.K. insurance industry paid out 18 million pounds a day in death and disability benefits, a ?pretty substantial number.?

According to the ABI, the U.K. insurance industry is Europe?s largest and the world?s second largest, with 11% of total global premium income. Despite the size of the industry, he said, only 15% of U.K. households have personal pensions. A quarter of U.K. households do not have contents insurance, Pollock said.

Insurers should expect resistance, said Pollock. Some would-be customers may reply that they don?t need insurance. ?Patently not true,? he said. Others may complain about cost, despite the fall in prices to their lowest point in 20 years. Still others may say that they haven?t gotten around to it. ?How pathetic is that?? Pollock asked.

Insurers will also have to work to rebuild the trust of the public. Pollock said he would like to see more initiatives from the industry to improve relations with customers. Such things as the U.K. Financial Service Authority?s Treating Customers Fairly drive and strictures on capital adequacy were imposed from outside.

?There is not really a huge list of industry-generated customer-based, forward-looking confident initiatives to re-engage our customer base,? Pollock said. ?And I think that?s something that we absolutely need to grasp hold of.?

Pollock predicted a trend toward fewer, more highly capitalized financial services providers in the United Kingdom as the number of registered providers decreases under regulatory pressure. He questioned whether this shift will provide customers with access to much-needed advice. ?The opportunity for us to engage much more directly with our customers is clear,? Pollock said.

Insurers should strive to personalize their products and services in order to make them more relevant to customers. Marketing should concern itself with what customers need, and move away from the heavy use of brochures and mass mailings ?that still proliferate in our industry,? said Pollock.

?Pricing optimization? would take note of the activities of the competition, he said. And insurers should think in terms of ?lifetime value, something that we often talk about, but rarely genuinely pursue.?

Pollock pointed to the success that U.K. property insurers have had with analytics. Since 1990, he said, they have moved from counting bedrooms to ?full post-code analysis? and even the pinpointing of data related to particular addresses. These techniques can reveal the location of the nearest tree and the makeup of the subsoil, Pollock said.

Legal & General has pioneered the use of post codes to guide the pricing of annuities, said Pollock. ?I come from Glasgow, so I haven?t got long to live,? he said in joking reference to the Scottish city?s reputation for relatively short life spans. ?Hopefully, I?ll make it to the end of this speech.?

The use of information is key to success, Pollock said. ?Understand the data,? he said. ?Know the risks you?re running, and price for those risks.?

(By Robert O'Connor, London editor: Robert.OConnor@ambest.com)

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