Returning to the UK at the end of March after a holiday,I notice that there has been much comment and discussion concerning Norwich Union and its decision to reduce commission on certain products.
NU has often been arrogant in this respect, paying less commission on selected products than competitors.
However, in this case, rather than bemoan the fact, IFAs and, indeed, shareholders should rejoice.
I must confess to considerable satisfaction in being able to say, “I told you so.”
Indeed, in your own publication back in July 1999, in the early days of stakeholder,I was commenting on the fact that 1 per cent is not a viable margin and that those of us who held shares in insurance companies and particularly CGNU ought to think about bailing out.
I did so in August 2000 when the share price was 1,068.5p and I notice that currently it is 31 per cent below that at 737p so I can feel particularly smug. At last,the company is facing commercial reality.
What is difficult to forgive the large insurance companies, in particular CGNU, for is the fact that they did not stand up to be counted from the outset.
Indeed, the company stunned the City when it slashed its dividend by 40 per cent recently and declaring a £546m pre-tax loss. (They are not alone).
What is also difficult to stomach is the mendacity of the life offices, in particular, Norwich Union.
Historically they have been so adept at U-turns that it is not surprising that management hardly knows in which direction it is travelling. I refer ypu to several years ago when they were busy setting up direct sales and tied agents to the outrage of the IFA community.
Today, their chief executive admits that margins are thin and profits may have to be sought abroad and at the same time the UK arm writes to IFAs telling us what a wonderful success stakeholder has been. Who are they kidding?
Are the life offices going to miss their opportunity yet again? All reports point clearly to stakeholder being a flop. It is an open secret that the public has no faith in pensions,a point to which I have referred on numerous occasions in the past.
Life companies now have the opportunity to put pressure on the Government, to gain public support and IFA loyalty, by telling it how it is and stating unilaterally to the Government that they are not prepared to offer products at 1 per cent margins, that this is against the best interests of their shareholders and policyholders.
However, what can one expect from management that seeks to brand itself with the title of a Costa Brava ditty (Aviva Espana).
Norwich Union having sold their birth right to the comedians from Commercial Accident, now seek to make even bigger fools of themselves in the future – how very sad.