Royal London chief executive Phil Loney says banks and rival providers are ripping off life insurance customers and he plans to tackle the problem head-on.
The mutual is to launch a simplified protection proposition later this year and on Saturday unveiled its first TV advertising campaign for more than 10 years as the prelude to a concerted direct-to-consumer push.
Loney claims protection providers are offering “appalling” value for money and says Royal London intends to shake up the market.
“We are looking at developing very simple products in markets that exist at the moment but are giving people lousy value.
“The primary focus in D2C is the over-50s cash plan market. The value for money for customers and the fairness in that market is appalling.
“At the moment the cost of cover is very high because the providers are making very big margins. Secondly, you can go on contributing into some of these products for 40 years and over-contribute way beyond the benefit you are going to get out. That doesn’t seem fair.
“Likewise you can contribute for 30 years but as soon as you stop making payments you lose everything. That doesn’t seem fair either.
“We will be entering with a product that is designed to address those issues. We will be operating at much lower margins than the shareholder-owned companies do and we will be offering a much better customer proposition.”
Royal London’s strategy has traditionally been focused entirely on financial advisers. However, it is undergoing an overhaul as part of its D2C shift that will result in well-known names such as Scottish Life, Bright Grey and Scottish Provident disappearing and being replaced by an overarching Royal London brand.
But will this change in direction lead to a dilution of the provider’s advice offering? Loney insists not.
“If you could see my business plans you would understand why advisers are so important to us,” he says. “No matter how far into the future you go, our adviser business will always be much bigger than our D2C business.”
Loney says Royal London’s consumer advertising drive will be focusing on the virtues of mutual ownership versus shareholder ownership – ironic given that his previous role was as managing director of Lloyds-owned insurer Scottish Widows.
“We want to compete by being different and being seen to be different from all the other providers in the marketplace,” he says.
“We are an organisation run in the interests of its customers – who actually own us – rather than the interests of shareholders.
“But we can’t just say that, we need to be able to prove it. We have a great reputation in the pensions market and we have a very good asset management business that, unlike most insurance companies, beats benchmarks and provides very good investment returns at quite low costs.
“But it is no good doing that and then not being known for it. That is why we need to build the brand.”
One way Royal London plans to differentiate itself is through the provision of financial guidance. The firm’s direct-to-consumer service, previously known as MoneyVista, has been renamed Royal London’s Financial Planner and will be available free to customers.
Loney says: “Guidance isn’t new to us. We have been doing that for three years and we built it outside of the existing Royal London franchises so it was good enough to live, thrive and survive in its own right.
“Now we are bringing it within our franchise to make it freely available to all of our customers. It won’t have product sales in it, so it will remain as a service to help customers run their finances better.”
It is unclear how Royal London’s in-house service will interact with Chancellor George Osborne’s promise that everyone will have access to “free, impartial, face-to-face” guidance on their retirement options. However, Loney insists the guidance proposed by the Government must be offered independent of the pensions industry.
“We think guidance for people who are approaching retirement has to be seen to be independent,” he says. “So we think it shouldn’t come from the provider and should be done independently.
“That could mean a range of different things. So it could mean all the content is provided and rubber-stamped by an independent body such as Tpas [The Pensions Advisory Service], or it might involve setting up an industry utility.
“But we don’t agree with quite a few other providers in the market who want to do it themselves.
“We want to find the route that customers and the people who customers listen to will trust for the long term. Guidance has got to be credible and we just can’t have lots of negativity around this once it is launched.”
Loney is refreshingly opinionated compared with other insurance chief executives. He has previously described the annuity market as a ‘cult’ and barracked Steve Webb when the pensions minister announced plans to cap auto-enrolment pension charges at 0.75 per cent.
On the thorny issue of pensions tax relief reform, Loney is again willing to go against the grain by backing Webb’s call for the introduction of a flat rate of 30 per cent.
He says: “Pensions tax relief needs reforming. You won’t hear me say this too often but I agree with Steve Webb – I think we should have a flat rate of tax relief and I also like the fact he has been speculating about removing the lifetime allowance.
“That is absolutely the right direction of travel. A flat rate would actually support auto-enrolment because the real focus of these reforms is people who are paying lower tax rates.
“If you can give those people a better rate of tax relief, at the expense of richer individuals who are going to save anyway, that has to be a good use of the Exchequer’s money.”
2011-present: Chief executive, Royal London Group
2010-2011: Managing director, life, pensions and investments, Lloyds Banking Group
2003-2010: Managing director, general insurance, Lloyds Banking Group
2000-2003: Chief operating officer, UK life and pensions, Axa
1997-2001: Managing director, direct business, Aviva
1995-1997: Sales and marketing director, Saga Services
1986-1995: General manager, Lloyds Bank Insurance Direct
What is the best bit of advice you’ve received in your career?
Don’t take a position on issues too quickly. Listen, mull and then decide.
What keeps you awake at night?
Worrying about whether my eldest daughter will get home safely from her latest clubbing exploits.
What has had the most significant impact on financial advice in the past year?
The obvious answer is the RDR but I suspect history will show it will be the pension reforms in the recent Budget.
If I was put in charge of the FCA for a day I would …
Introduce a lower-cost internet-based advice regime for mass-market customers, starting with those approaching retirement.
Any advice for new advisers?
The profession needs more bright, young, tech-savvy folk: the sector’s long-term future depends on it.