There is a new set of social political and economic pressures facing our industry and the traditional drivers and virtues that formed the basis of providers business plans in the latter part of the 20th Century have been consigned to the history books.
There is a growing consolidation of providers and intermediaries through mergers and acquisitions and this is likely to continue in the short term with or without depolarisation.
Indeed, it could be argued that polarisation was an “1980s' solution to a 1980s' problem” of inflexible products with higher-charging structures.
Providers have already taken steps to provide greater transparency together with flexibility and “low-cost”products which have transformed the competitiveness of the market.
Initiatives such as the industry's Raising Standards scheme have gone some way to imp-rove the clarity and comparability of information and documentation given to customers at the point of sale and during the lifetime of a policy.
In a very competitive market and a product with a 1 per cent charge cap, either you evolve or you die. Size and diversity can help to secure a competitive advantage but the key issue that remains is whether the industry can deliver mass market commoditised products within 1 per cent.
The realities are challenging but if we are to restore the long-term credibility of our industry, we must embrace the Sandler and Pickering recommendations and find new and enlightened ways to close the ever-growing savings gap. It will not be a case of the same audience buying different products or a different audience buying the same products – innovative and creative solutions must be found.
In a market of falling margins, we need to be acutely conscious that customers are exerting more influence in terms of transparency, value for money and expected service delivery.
They want to be able to access us at the time and method of their choice – whether that is face to face, by phone or on the internet.
In such a climate, providers can no longer focus on the supply side of things and forget about the demand aspects nor can they organise themselves around their traditional internal drivers such as product lines or technical service areas.
The 21st Century is more about how companies respond to changing customer relationships.
A one-size-fits-all approach in a market that is so competitive but which lacks distinction in terms of basic product features simply will not suffice. The key to business growth and success in financial services is to build and develop customer satisfaction – particularly when the costs of new customer acquisition are so high.
Customer satisfaction is achieved by giving customers what they want in the way that they want it – it requires channel structure which is sensitive to this and delivers flexibility to customers.
It is important that providers also demonstrate the determination to continue to tackle social and financial exclusion by offering products which cater for a full range of personal circumstances in an environment which provides reassurance and confidence to consumers.
Intermediation is a key ingredient to encourage more long-term provision of future financial needs but it is important to remember that any channel is not just about the initial sales offer but about the ongoing service proposition as well.
The guiding principle, therefore, is to build cost-eff-ective models that acutely recognise the needs of end -consumers and distributors, irrespective of how they wish to deal with you on an ongoing basis.
We are at the beginning of a journey whose destination is uncertain. Whatever your views on the hows, you have got to believe in the whys and that somewhere, at some time, the solution will be found and that solution will give providers the best chance of viability and the UK public the best hope for a secure future.
Martin Clarke is general manager (marketing) at Co-operative Insurance Society