Although membership is declining, the unions still represent a sizeable opportunity for well-placed insurers, which can offer many benefits for larger groups. Rachel Gordon examines the market within which this mutually beneficial relationship operates
Trade unions are still a force to be reckoned with - even if their days of having massive economic influence have faded. Today it is less a case of downing tools and being swayed by the power of the shop steward and more about a good credit card deal, tax help and preferentially-rated insurance products.
The union movement is changing in the UK, with many making a concerted effort to appeal more to women, the support of family-friendly working and community issues. It is a strategy that appears to be working. Although numbers are still dropping overall, there is also a certain stabilisation and if unions can continue to put across the right marketing messages, they may even start to grow. A crucial message to get across is that a union is not just there in times of industrial strife - collective bargaining can also mean a discounted holiday or free access to a range of helplines.
Dr Jane Wills, an academic at London University's Queen Mary's geography department, is a specialist researcher in trade union membership and influence.
She points out that since 1945, unions have focused on gaining workplace recognition, but are now finding it harder to sustain strong organisation.
She says unions are finding new ways to gain support and influence - typically "through international agreements with multinational companies, or at a local level through community links with faith groups, schools and other local union branches around common concerns".
So, how can insurance fit into the brave new image unions are trying to project?
Mutual insurer UIA is a specialist provider to the union sector. Marketing director Ian Cracknell comments that this sector is where the company has its heritage. "There are a lot of insurers that would like to move into the market, but it's not that easy to break into. Relationships tend to be long-standing and there are high service expectations."
UIA sells some cover direct to unions and also part-owns and distributes through a company called Uniservice, of which it owns 49% - the remainder being owned by finance sector union Unifi.
Uniservice also sells cover to other unions, including Amicus, the National Union of Journalists and train drivers' union Aslef. It provides a range of products including household, travel, life and pet insurance. Motor is also available, but this is not underwritten by UIA and is sold on a brokered basis.
Mr Cracknell believes a major reason for partnering UIA is its approach to investment. "We use Morley Asset Management and its socially responsible investment team to manage our funds. This means we don't invest in firms dealing in alcohol or tobacco, for example."
There will obviously still be plenty of union members who would opt for a cheaper quote rather than pay for an insurer's ethical stance. But, Mr Cracknell says: "There are values that bind people together. We find many members do want to buy from a not-for-profit company that is inclusive and socially responsible."
UIA recently announced a deal to sell cover through the shop workers' union Usdaw, where is will distribute to 325,000 members across the UK.
Products will be marketed through direct mail, advertising and exhibiting at the Usdaw conferences, as well as local and national press. Sales will be made either online, or via a Freephone number - both administered by UIA. Sir Bill Connor, general secretary of Usdaw, says: "We liked UIA's principled approach and felt they were the best choice to reflect our members' values and protect their valuables."
One important reason why insurers like dealing with unions, and other affinity groups, is that price is not the sole emphasis of the product.
According to Mr Cracknell, most union members are prepared to pay a bit more - "as much as £20 to £30 extra if they liked the company they were dealing with and felt the quality was there". He admits this behaviour tends to be linked more with older people, who are likely to be more loyal to unions anyway.
Even so, prices tend to be competitive and for some risks - particularly those with a lower risk profile - rates may be among the best in the market.
Another reason insurers favour unions is the high conversion rate. Mr Cracknell says UIA has found around 40% of people buy after making the initial call, whereas the average industry conversion rate would be 25% or less. And, he says, nine out of 10 customers stay with UIA.
Bob Gaster, account manager, Corporate Partners for Norwich Union, says: "This insurance is not price-driven, but it is good value." NU has a long history with teachers unions, having worked with them since 1932, and is official partner to the UK's largest teaching union the National Union of Teachers, as well as a further education and lecturers' association.
"It works because we've identified their needs and are able to provide cover that is really relevant to them," says Mr Gaster. "For example, under NU's motor policy, a teacher transporting pupils in their car would be covered. A teacher taking school equipment home would also be covered under the contents policy."
He describes the sector as a "valuable niche" pointing out that, in the case of teachers, there are 500,000 of them throughout England and Wales.
Mr Gaster adds that NU staff working on the account undergo regular training on issues affecting teachers and the insurer operates a dedicated call centre for NUT members.
Other significant players in the market include Liverpool Victoria and Royal & Sun Alliance. Intermediary Endsleigh is also a substantial provider.
Promotions manager Carol Watkins says her company's long-standing connections with students - the company is part-owned by the National Union of Students - was a factor in it winning the women teachers' union NASUWT account.
"We're familiar with the market and have tailor-made policies for teachers. For example, we cover malicious damage if a teacher's car is left on school premises. This is offered free to members."
Paul MacLachlan, assistant secretary, membership services, for NASUWT, says his union automatically provides some cover within members' subscriptions.
Apart from the malicious damage element of the car insurance, there is also loss or damage to personal possessions through fire or theft and personal accident insurance. Other benefits include financial assistance through benevolent funds and helplines which include teacher support and access to legal advice. While these are not revenue earners for the union, selling insurance is - and earning commission is standard practice.
NASUWT acts as an introducer for several financial services providers, including Wesleyan for financial services and mortgages; Endsleigh for motor, household and other general insurance products; UNAT Direct - personal accident and female cancer insurance; and Britannia for roadside recovery.
"We seek to add value to the member's subscription," says Mr MacLachlan.
"Clearly, the association is keen to ensure the service providers are reputable and their products are appropriate to members' needs."
He adds that because of the union's endorsement of these service providers, NASUWT does look for members to receive competitive premiums. "We understand there is a relationship between quality and cost and prefer to offer good quality products, rather than simply cheap products." He also emphasises that while commission is earned, this is a "virtuous circle as the commission is fed back into finances and subsidises the subscription fee paid by members".
Not the only option
General insurance products are not the only game in town. Arc Legal Assistance acts as a facilitator between underwriters and lawyers to set up legal expenses offerings. Director Richard Finan says unions are a core market for providing legal expenses insurance packages and services. However, winning them over is not that easy. "Unions tend to have long-standing relationships with certain firms of lawyers. But these are not always the best deals and, to this extent, some unions are behind the times."
He says Arc provides a consultancy service where it will examine a union's existing legal relationships, look at what is being provided and if it is value for money. "We then provide a report on competitiveness and make suggestions on how service can be improved."
Mr Finan claims legal expenses insurers have a more advanced outlook when it comes to working with solicitors. "They avoid paying over the odds. You get unions still paying lawyers by the hour, rather than on a fixed-fee basis. There are still unions where the senior partner of a law firm knows the union's general secretary and the arrangement to service members is on this basis. A thorough examination of their existing arrangements is likely to be in the members' best interests - not least because it could mean more funds are being retained by the union."
With statutory regulation by the Financial Services Authority approaching, unions may have to think about either applying for direct authorisation or becoming appointed representatives of providers, depending on their level of involvement in the sales process. Kate Bristowe, spokeswoman for the FSA, says the regulator will make decisions on an individual basis, but added that she was not aware of any enquiries to date from unions.
"It very much depends on what they are doing. If they are advising members such as helping them complete forms or suggesting what they should buy, then yes, they will need to contact us."
But Mr Cracknell disagrees that unions will require authorisation. "Unions almost always outsource financial services. They may need to check clarity issues, such as are they stating that UIA, for example, is the insurer on a website or newsletter? But it will be the person who deals with the call - and this would be ourselves or a broker if we were using one - that would need to be regulated." Simply earning a commission for acting as an introducer does not call for regulation, he says. But unions would be well advised to double check their own position with the FSA.
Undoubtedly, the union market can be a profitable one for insurers. But providers such as UIA are looking to widen the net by working with charities and interest groups - it recently linked up to provide cover for The Ramblers' Association, while Endsleigh is also the intermediary for Manchester United Football Club. Being part of the union market is important, but, as far as brokers and insurers are concerned, they need to keep their fingers in other corporate partnership pies to keep the revenue flowing in.
THE SIZE OF THE MARKET
According to the Trades Union Congress, in 1979 there were 13.3 million people who were a member of a union and the total proportion of employees who were union members stood at 55%.
The latest figures, which are produced by the government as part of its Labour Force Survey shows that in autumn 2002, 7.3 million people, had trade union membership in the UK. Union members as a proportion of all in employment - union density - was 27% and there are 8.7 million employees, whose pay is affected by collective agreements - 36% of all employees.
In 2002, total trade union density for both men and women, including the unemployed, was 29%. Density is higher among older employees - a third of those aged 50 and over are members, compared with a quarter of those aged 25 to 34. Membership is also more common among those who work full time - 32% of employees, while the figure for part-time workers is only 21%. Lowest levels are in the South-east, where 21% are members compared to the high of 41% in Northern Ireland.
So, what are the reasons for trade unions' diminishing popularity? The TUC says they include:
- a dramatic fall in the number of jobs in manufacturing industries, where union membership was traditionally high
- larger numbers of unemployed people
- a fall in traditional full-time employment and an increase in part-time and temporary workers, who are less likely to join unions
- an increase in the proportion of the workforce employed by small companies, where it is often difficult for unions to organise
- anti-union legislation - when the Conservative government was in power, it introduced laws that made it more difficult for unions to operate and keep their members There is also evidence that the decline in union membership is beginning to slow up. The TUC has launched a major recruitment drive called 'New Unionism - Organising for Growth' and many unions are stepping up their efforts to recruit in new industries and jobs. It claims that more people are turning to trade unions because they want the protection they can provide.
Source: Department of Trade and Industry.
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