The honest truth is I went for a vocational guidance test at my university and they said I was suited to be an actuary. I am not sure if that is a good or bad thing,” says PruProtect chief executive Herschel Mayers.
He took heed of the results and joined South African insurance company Liberty Life, where he spent 18 years. “I worked my way up through the ranks and ended up in charge of their life insurance operations,” he says.
By 2000, financial services in South Africa was undergoing huge upheaval. “A major competitor was thinking of taking over the bank that Liberty Life was associated with, so I began thinking of starting my own company. When I mentioned my plans to my former Liberty Life colleague Adrian Gore, who had left in 1992 to set up Discovery Health, he said I should start my business within the Discovery stable.”
Discovery Life opened for business in 200 and has become South Africa’s biggest writer of protection business. “I did not want to run a me-too insurance company. I believe in being a market disrupter.”
This philosophy was evident in Discovery Life’s severity-based critical-illness proposition which made allowances for clients who recover from illness or who suffer from non-critical conditions.
“People claimed under our policies frequently, which made CI a much more tangible concept. We also utilised the Discovery Health vitality programme because we thought the concept of wellness was as applicable to life as it was to health.”
When Prudential joined forces with Discovery Health in 2005 to form PruHealth, the wheels were set in motion that would see Mayers extend Discovery Life to the UK market.
“Mark Wood, one of Prudential’s previous CEOs, used to take his team around the world each year for a brainstorming session. In 2007, he brought them to South Africa. When he saw what we were doing and what we had achieved in a short space of time, he wanted to mirror that in the UK.
“At that time, the UK protection market was awash with standard products and providers competing on narrow price differentials, so it was the perfect opportunity. Wood wanted PruProtect to disrupt the UK market as Discovery Life had disrupted the South African market.”
Total in-force policies for PruProtect have doubled on last year and a further 370 intermediaries have registered to write PruProtect business. It also launched seven new products in March, including whole of life cover.
“The market for whole of life products is only about 2 per cent in the UK but if someone has dependants and they come to the end of their term at age 65, that is crazy. We redesigned the product from a price-competitiveness point of view so it was more suitable for IFAs. It now makes up about 25 per cent of our sales.”
But PruProtect’s whole of life product has not closed the huge gap between the UK and South African protection markets. “The majority of protection in South Africa is whole of life while term insurance is the smallest. Innovation is also less frequent here than in South Africa but the main difference is in distribution. People buy protection on the phone or online but we believe protection is not a commodity, it is a solution and it needs face-to-face advice.”
PruProtect’s business model reflects this sentiment. It operates on a franchised basis, where a sales representative is assigned a city and 10 account managers, who then go out and market PruProtect’s products to IFAs.
“The advantage is everyone’s interests are aligned and advisers get an education. We have been able to make significant inroads we estimate a third of the UK’s IFAs are writing for us, so the opportunities for us to extend our distribution footprint are enormous.”
PruProtect has 15 regional representatives and 100 account managers and Mayers wants these figures to be 30 and 250 ultimately.
“I want to grow our distribution aggressively because I think that under the RDR more advisers will turn to protection for obvious reasons. Most people are woefully underinsured so if the RDR engenders holistic protection, that is a good thing.”
But Mayers does see potential problems with this. “Although you cannot argue against the principle, the RDR is pushing up the price of doing business and risks reducing the size of the adviser market Advisers will also need educating on protection if they are to sell it under the RDR. This could leave some providers with a huge gap to fill but PruProtect can be rather smug about that because we are already helping brokers diversify into protection.
“TV adverts are important but they are not necessarily a call to action. Consumer education ultimately comes through the adviser. Someone may see the Aviva advert during Downton Abbey and say, ’I need some insurance’ but where do they go? This is where advisers come in.”
Mayers thinks PruProtect’s severity-based product will also improve consumer perception of the protection market. “Our products should give the IFA much more confidence because they know that with a severity-based system, whatever happens to their client, they are covered. The whole industry gets a bad name if claims are rejected.
“I think the UK market is under-served in terms of both advice and protection but we just have to work with that and change this for the benefit of consumers.“
Born: 1960 in Zimbabwe
Lives: Johannesburg with his wife and three children
Education: BSc (Hons) at the University of Cape Town and a Fellow of the Institute of Actuaries
Career: 1982-2000: actuary and then life insurance director, Liberty Life; 2000-07 founder and chief executive officer, Discovery Life; 2007-present: chief executive officer, PruProtect
Likes: Travelling, good food and wine
Dislikes: Negativity and lack of enthusiasm
Drives: Mercedes CLS 63
Book: Autobiographies or history books
Film: Chariots of Fire
Album: Anything by The Beatles
Career ambition: For PruProtect to be the dominant protection writer in the UK
Life ambition: To leave a lasting legacy
If I wasn’t doing this I would be…Too hard to imagine. I love what I am doing