Transcript Slide 1

John Gillman
‘Living strategy and the death of the
five-year plan: is strategy dead?’
No, but strategy needs to be different!
Source: Financial Times 27 October 2009
The hedgehog approach: corporate
hibernation only works if recessions are
short

BCG: Organisations with adoptive advantage
recognise the unpredictability of today’s
environment and the limits of deductive analysis.
They ……
1.
Process relevant data quickly
2.
They see clearly how their business fits into a wider
context
3.
They are alive to social change and shifting
customer preferences
4.
They experiment effectively
5.
They draw on the talents of the best people they
can find – whether they employ them or not
McKinsey:
‘You have to give up the pretence that you can
predict the future’
‘Strategy is really an evolving idea which develops
over a long period on a long and winding road
.… and this new world calls for just-in-time
decision making’
While the eternal truths - market position, scale
and capabilities – endure, a more dynamic and
adaptive approach is now needed.
Review of 2008/2009

Total people covered was 7,562,000 – 12.3% of the
U.K. population with individuals the main
contributors of market growth

PruHealth’s business grew by over 50%

AXA/PPP’s business added nearly £90m in
premiums
Review of 2008/2009

Simply Health’s market share grew to 2.5%

Standard Life marketed heavily in 2008 (but lost market share)

The top 10 advertisers are focusing on direct mail

Top 5 competitors
BUPA, AXA/PPP & Aviva control > 75% of the market
Standard Life down slightly
WPA market share down
What was the main reason you purchased PMI?
%

Part of our financial planning
20

I consider it a financial priority
14

Death or illness of family friend persuaded me
9

Bought it with mortgage/loan
4

Persuaded by a salesperson
3

Other
Source: The Hannover Re (UK) Protection Review Consumer Survey 2009
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Why did you purchase – then and now?



Jumping the queue
Choice of specialist/surgeon
Hotel facilities
Now added:
 Fear of hospital acquired infections – AXA PPP
2009 Research
 Cost of new drugs
Why didn’t you buy PMI?
%

Can’t afford it
37

The State will look after me
18

I haven’t thought about it
16

Other priorities
6

I don’t trust insurers to pay claims
6

Other / don’t know
17
Source: The Hannover Re (UK) Protection Review Consumer Survey 2009
PMI Market share by subscription income 1992 – 2007


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


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
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
BUPA
AXA/PPP
Norwich Union
Standard Life
Cigna
WPA
Simply Health
PruHealth
Exeter Friendly
CS Healthcare
1992 %
44
28
3.5
3
3
5
n/a
n/a
<1
<1
Source: Laing’s Healthcare Market Review 2008/2009
2007 %
42
24.5
10
7.5
3.5
3
2.5
2
1
0.5
Protection Insurance Adviser’s Forecasts
For the next 12 months
 Write more
 Write less
 Write the same
43.9%
7.4%
48.7%
Source: Protection Review, 985 PFS members responding to an e-mail questionnaire April 2009
Tax Relief: Research among
Members of Parliament


Conservative:
Labour:
Source: BMI Healthcare Research 2009
Sample: 44 members
49%
1%
Tax relief or tax incentives?
New funding models must pass the test of
EFFICIENCY and EQUITY
Efficiency: will the proposal achieve its proposed
end and provide the greatest possible
improvement and healthcare within the funding
available?
Equity: how will the proposal match financial
contributions to ability to pay, and how well would
it match healthcare to health needs?
Should tax incentives be offered to
individuals and employers?
The efficiency test fails it in four respects:
 Its effects are likely to be minimal without a strong
level of compulsion
 It diverts funds from the public healthcare system

It does not save the public sector money

It would inflate healthcare costs
It fails the equity test:

Its uses taxpayer funds to expand two-tier access to
healthcare

It shifts the burden of paying for healthcare from the
healthy, young and wealthy to the unhealthy, old and
poor
Health & Wellness
Will ‘wellness’ provision become an integral
part of private medical insurance offerings?
The health and wellness approach
‘The principle of risk pooling means that
people who are healthy, fit and well don’t
see good value for their premiums. We see
rewarding people for taking care of
themselves as the key to breaking
through this and focusing on improving and
maintaining health as the mechanism’
Source: Mark Noble, Aviva, quoted in the 2009 Protection Review
The health and wellness approach
‘The message is definitely getting across. Half
our policyholders agree that our unique Vitality
incentive programme has helped them to be
healthy.
Continued…
The health and wellness approach
Vitality – which rewards our policyholders for
participating in healthy activities – is an even more
applicable model in this difficult economic
environment because the value of the incentives
and the rewards it provides means more’
Source: Shaun Matisonn, PruHealth, quoted in the
2009 Protection Review
Is the risk of needing to pay for parents’ long
term care something you think about?
%
Yes, it is a major concern
17
No, they have funds to cover it
20
No, they can use house equity
10
No, the State will look after them
5
Other/don’t know
15
Not applicable (parents deceased)
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Prospects

Subscribers will fall in the short term

Growth will resume between 2011 and 2013 (but
more slowly in the group market)

PMI usually rides out recessions quite well since it
is considered an essential purchase
Business development – what the
commentators say

Look out for more cancer drug top-up policies

Retention activity is more important than ever

Direct distribution is key to the individual market,
but

Marketing via employers has a part to play
Business development – what the
commentators say

Lower costs are needed to bring in customers

Adequacy of care for the over 60s is an issue

The NHS 18 week waiting time target is still
seen as too long

Intermediary involvement may increase
Opportunities for the PMI market

Difficult to envisage the NHS getting all the resources it
demands

Development of products that meet a range of perceived
needs in partnership with culturally acceptable other
providers

Public sector pensions and the emergence of flex plans?

Excesses, co-pays and ‘deposit’ plans for a wealthier babyboom clientele

Government policy and the ‘Nudge’ strategy
Continued\......
Opportunities for the PMI market

Demographics and the ‘worried well’

Will the competition be slow to move?

Will ‘wellness’ be the new trend?

Emergence of more specialised and better qualified advisers

Marketing through employers – Flex and voluntary plans

Aggregate sites
Threats:

NHS waiting lists are effectively addressed

The recession lingers and bites harder

Competitors launch a ‘killer’ product aimed at
market segment

Slow attrition as members age and premiums increase
Continued\....
Threats:

Development of new expensive drugs and treatments

Emergence of more specialised and better qualified
advisers

Competitors throw even more resources at
distribution in a static market
Key Performance Indicators 2014
1.
Customer satisfaction – ‘very satisfied’ is the only really
safe place. Listening to ‘the voice of the customer’ is even
more critical and should drive product design. They need to
know you value them even if they do not claim
2.
New member growth – what part will advisers and
employers play in this objective. Is entering the group
market feasible?
3.
Operational efficiency – essential, but remember that only
claimants will know how great you are
Continued/….
Key Performance Indicators 2014
4.
Financial performance – the ‘early warning system’ is
important
5.
Positive staff contribution – empowerment and the
correlation between staff satisfaction and customer
satisfaction
6.
Regulatory and governance – regulatory best practice is
often just good business practice
Is the future friendly?

Yes, as long as we remember that it starts right now!
www.prioryhouseconsulting.co.uk
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