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Get on route 166

The fears surrounding CP166 are understandable, as inefficient

products and processes will be revealed to all and the changes to the

system will force companies to drop products that incur high charges

in favour of those that operate more efficiently. The wait-and-see

attitude, with many organisations holding on to see what their

counterparts will do, could be a significant risk. The challenges

are substantial and will not be overcome immediately.

There is a belief that the CP166 consultation paper is only bringing

forward an overhaul in business processes, which were inevitable with

or without the FSA&#39s proposals, improving efficiency and potentially

reaping rich rewards. In short, those that grasp the opportunity

have a real chance to increase market share.

A key business process in the FSA proposals is marketing. If the FSA

makes information to consumers on pro- duct and performance more

visible, consumers may begin to choose by product rather than brand,

requiring a shift in marketing emphasis. It will also become vital

for providers to market their goods to the different distribution

arms, whether they are multi-tied companies, IFAs or even tied

companies looking for products to supplement their portfolio.

Commission rates will no longer be a viable means for product

providers to differentiate products and so new services will need to

be developed to attract these distributors to the provider. For

example, providing regular reports on fund performance to the

customer will not only improve service but will also position the

relevant IFA as a reputable source of information and advice.

More cost transparency across providers and their products will

increase competition and force a reduction in product charges. This

should result in the development of simpler products with lower

charges, potentially meeting stakeholder 1 per cent charging rules.

The introduction of such products will make the insurance market

attractive to new entrants such as banks and supermarkets, Citizen&#39s

Advice Bureaux and employers, creating an even more competitive


Collaboration is going to be the key to success in the age of

depolarisation. It will be critical for product providers and

distribution channels to build new relationships and establish

information networks that enable effective communication.

This is not as easy as it sounds because not only must they overcome

the business challenges of these relationships but there is also the

challenge of how to execute pro- cesses across these collaborative

entities in an effective manner. Technology is the immediate answer

that springs to mind. But with increased collaboration comes more

sophisticated, complex business processes, resulting in iterative

almost indeterminate communication which technology has traditionally

struggled to cope with.

A further technical challenge will be integration.A typical big

insurance company could be utilising several different legacy IT

systems, none of which interfaces with each other very well, if at

all. Applying technology to these increasingly collaborative business

processes will, perhaps, be the key system challenge from


As insurers find new, more collaborative ways of working, it is

likely that we will see standards such as Origo, which builds

strategies to develop and implement widespread electronic commerce

for all practical business purposes, become more prevalent. It is

also likely that the numbers of multi-tied providers developing

custom-made e-business portals for their individual business

requirements will increase. This will enable providers to interact

with their business partners effectively while eradicating reliance

on any third parties to bring about individual objectives.

Product providers need to consider their businesses in their entirety

and scrutinise their strengths and weaknesses. To succeed in this

environment, providers will need to specialise on their strengths and

rid themselves of weak areas, bringing in stronger products and

services from outside of the organisation instead.

To work collaboratively and meet the demands of CP166, organisations will need

to join their process and technology to improve efficiencies and

reduce costs but we know this can be a difficult bridge to cross

using traditional technologies. Many companies already have proven

processes and systems and do not relish the thought of a massive

business process re-engineering programme to enable them to

collaborate with other partners and the potential of having to

compromise throughout the business as each new partner comes on board.

Investment in technology should focus on creating an environment

where differentiated businesses can share a single process with

multiple providers. This investment will be required to not only

create the framework on which the collaboration can exist but also to

continue to compete profitably.

CP166 is shaking up the financial services market and it is clear

that this shake-up will result in a new breed of winners and losers.

The models that will be adopted by the current players will vary and

whilst we can expect to see considerable consolidation in terms of

both products and players, the one overriding factor has to be


Organisations that take a wait-and-see approach, burying their heads

until they can see what the competition are doing, will fall into the

losers&#39 camp. Organisations that can work with their counterparts in

a constructive and collaborative manner will be the true winners in a

post-CP166 world.


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