Big Interview: Charles Offord, Co-op Insurance

Just over a decade ago, in 2013, the Co-op Group suffered a near-fatal financial blow as the 2009 merger with Britannia Building Society created a £1.5bn capital blackhole in the organisation’s accounts.

Adding to the group’s woes was the fact that Paul Flowers, Co-op’s non-executive chairman between 2009 and 2013, had been caught in possession of cocaine, crystal meth and ketamine and had sent and received sexually explicit images via his work email address.

Amid that scandal, Co-op Insurance was put up for sale in 2013 and a new leadership team was drafted in, which took the business off the market in January 2014 to upgrade the provider’s IT platforms.

In 2015, Co-op Insurance commissioned IBM for a £50m IT transformation project, named Project Cobalt, under which the US-based technology provider would build a new software platform for the insurance and underwriting business.

However, the IT upgrade failed and, in 2022, the Court of Appeal told IBM to pay £80.6m to Co-op Insurance.

Lord Justice Coulson suggested the project’s failure was a factor in the sale of the business to Markerstudy for £185m in December 2020.

The judge’s ruling noted that, had the IT project succeeded, Co-op Insurance would have experienced increased profits, a buyer might have paid a greater price or the provider would not have had to be sold at all.

Tasked with raising the 157-year-old brand like a phoenix from those ashes, Charles Offord was made managing director of Co-op Insurance at the start of 2019.

He observes that transitioning from being an end-to-end provider to partnering with others was essential to the future success of the business.

“We made a difficult decision to exit underwriting and from being an end-to-end insurer to move towards being an insurance business, which is a members/customers distribution business, and hopefully choosing partners who want to tackle things we want to tackle,” Offord says.

Co-operative Insurance is now appealing to a younger generation. We’re still a mutual and a cooperative, but the reality is our demographics and customer base is changing.

“My job is to recognise how the Co-op’s membership is moving and make sure we’ve got the right products in the right places to meet their needs,” he adds, pointing to the recent partnership with Insurtech Urban Jungle as an example of how, after the fallout of a few years ago, Co-op Insurance has returned to its roots of delivering appropriate products for customers underserved by the wider industry.

The renter insurance product offers protection from £10,000 up to £50,000, with policies starting from as little as £5 a month, and Co-op members can access a further 5% discount on premiums.

Alongside this, renters can also customise their policy with optional add-ons, including out-of-home cover for personal items and accidental damage caused by pets.

The product has the option of monthly rolling plans at no extra cost, meaning customers only need to pay for the months they are renting, with no additional fees for amending or cancelling the policy, which Offord says reflects what Co-op members need.

Offord says that, to reach those young renters, throughout the summer Co-op is the only supermarket on site at major festivals and will sign up members to the app and introduce them to this new cover.

“Co-operative Insurance is now appealing to a younger generation because of that values-based piece,” he says. “We’re still a mutual and a cooperative, but the reality is our demographics and customer base is changing.

“A lot of the things that older customers fell in love with younger customers are now falling in love with and we’ve got to ensure products are appropriate and are fairer.”

Branching out

Creating a fairer type of insurance is identified by Offord as key to Co-op Insurance’s ongoing success. “We’ve realised if we’re going to meet more of our member needs, we’re going to have to offer more,” he says. 

Insurance policies are produced today by working with focus groups of Co-op customers plus the Co-op Collective, which consists of more than 10,000 members who subscribe to help the business design products.

“Renters came out massively in terms of insurance,” he says. “We could see in certain large urban areas people find it difficult to find homes and therefore there is more renting, and they couldn’t find insurance or it was inflexible and full of fees.

“Invariably speaking, these renters were going uninsured. We knew there were a need and we spoke to Markerstudy about if we had a home product [that would fit] and we didn’t.

“So, we looked around the market for a contemporary offering that we thought was right and we reached out to Urban Jungle and a few other companies.

“The founders of it [Urban Jungle] want to do things in the right way and they want to solve some of the pain points of insurance.”

In 2024, Co-op has several partners with whom it works to produce products suitable for members.

When Markerstudy purchased the old insurance business, a long-term distribution agreement with Co-op Insurance for car and home cover was established.

Around three years ago, pet insurance was launched with Markerstudy and travel insurance with All Clear was added, with Co-op then opting for Legal & General for life insurance to be brought on board in November.

Business insurance is provided to Co-op members via Specialist Risk Group, with Offord noting “independent shop owners who all need insurance” is a growing part of the business. “We run 2,500 shops ourselves; we understand the risks,” he explains. 

On what partners get from teaming up with Co-op, Offord says it is a value exchange. “It’s about us bringing some of our insight and distribution and some of the things we’ve learned to them and hopefully they’ll gain from it in terms of growing.

“We do have a few more things in the pipeline, but what we’d like to do is a slightly different twist on the conservative things that are in the market.

“The beauty of not having shareholders but having member owners is they’re quite vocal in telling you what doesn’t work and what does. Our job is to take that insight and to work with partners to deliver something that’s right.

“As you go through our products now, you’ll see in the features of some of those propositions that are appealing to inclusivity in some respects as well as some of the carbuncles we have in insurance today.

“With pet insurance, when we relaunched the proposition, we sat with members and got these little nuggets and discussion points. They were worried about taking on a rescue dog because they didn’t think they could get insurance for it or knew some insurance companies don’t cover it.

“Our job is we incentivise it. We provide you with an extra discount if you get a rescue pet, because the reality is all pets should be looked after and should have a home and people to love them. It came from member insight, from them being sat in a room.

“On travel insurance, for example, we found that lots of travel insurers didn’t cover statin tablets and when you look at the number of people in UK who take these tablets, there are millions.

“Those people were cut out from travel insurance. We made it really simple. It’s any age, any condition and you can go anywhere with our travel insurance.

“We want to provide a fairer type of insurance that is more inclusive, simple and transparent.”

Price point

Turning to growth plans for the business, Offord says Co-op Insurance will never offer the cheapest policy, but it will provide “a better value product because we're comfortable about knowing at that moment of truth we look after them”.

According to Offord, one of the benefits of the approach taken by the business to products and services today is that a lot of customers now have multiple products with Co-op.

“That's not the norm in the market,” he says. “The reality is everybody looks at their new business conversion – they look at their retention figures – but the real prize is when you know that customers buy multiple products from you, because there’s something right about your service and the product you offered.

“It’s not that we’re not interested in being keen on price for customers, but the reality is most customers want a bit more over and above price and we wanted to focus on some of those things as well.

Co-op is growing its membership and, for us as an insurance business with 18 million people going in our shops every week, that’s an opportunity for us to be able to be on the coat-tails of our convenience businesses.

“We think that’s aligned with our product, our values, and what Co-op is about.”

A main aim for Co-operative Group is to grow membership and increase the number of shoppers engaging with it through its app.

“Co-op is growing its membership and, for us as an insurance business with 18 million people going in our shops every week, that’s an opportunity for us to be able to be on the coat-tails of our convenience businesses,” he says.

“We’ve gone from the volatility of being an end-to-end insurer that was losing money to making money to something with consistent profits now. We made £14m last year, which is quite a considerable contribution to the Co-op Group.

“With only 40 people, it’s a capital light business.”

While the Co-op brand is still on the hood, if you look at the engine of the vehicle today, Offord says you see “a digital marketing and relationship management business that learns from the Co-op Group and all the data it has about what we buy and shopping behaviour [and the like]”.

While the industry quaked at what Amazon could do with its Insurance Store, talking to Offord makes you realise just how much the Co-op knows about the 18 million people who pop in every week to shop or to turn to the group’s funeral service when they lose a loved one.

“In the really difficult moments, the Co-op is there for you with probate, legal wills, funeral care and with claims,” he observes.

“So we have some expertise about being there at the real key moments and we can do a better job of telling that story as well.”

Improved engine

Flashing back to a decade ago, when it was looking to overhaul IT platforms, Offord is open that Co-op Insurance’s legacy systems were “worse than the worst thing”, which is why it turned to IBM.

“Out of the back of that [failed transformation programme] we were far behind competitors and it was too late to turn the business round,” he says.

“So we took a different approach, which was a different model, and said, ‘Where can we really add value, take our assets and what we stand for as the Co-op and deliver that in a better way?’”

We’ve got younger people who are quite prepared to give you an awful lot of data once and say remind me all the time.

He will not be drawn on what other products he is working on but is willing to say that new cover “will be adjacent to what we do already”.

“Whether it’s children going off to university and they need temporary cover for the car for when they come back at Christmas and summer, those are the things that we need to be putting in place, so they fit around the lifestyle and the changing lifestyle of the member and customer,” he says.

Co-op’s data has played an important part in spotting the needs of customers, he says.

“What we want to try to do is, instead of talking to people at the wrong time about the wrong things, we use it in an intuitive way to talk to them about the right things at the right time,” he says.

“Most people forget about travel insurance until the last moment, whether they’re in the car, on the train or on the way to the airport. The fact you bought sun cream from one of our convenience stores tells us you’re likely to need travel insurance at that point.

“So, wouldn’t it be more relevant that the Co-op tells you, ‘We do travel insurance and, because you’re a member, you also get a discount?’”

When asked how his business takes that retail data to deliver marketing at a moment when it is most likely to result in the sale of cover, Offord says: “In the old world, where we had the Co-op Bank and we have data, we never used it in the right ways. We used it in isolation.

“The reality is Co-op has invested heavily in terms of its data and about how we bring it together. Co-op has over a million members using our Co-op app every quarter. That’s a hell of a lot of people using the app given the demographics of the business.

“Our job is to create value and the connections and the relevance in what we do. We now have Salesforce CRM active systems that talk to each other, so we’ll have the information available.

“We’ll have a trigger in the data, and we’ll send you a message so that when you’re on the way to the airport, you don’t forget your travel insurance. It’s the same with pet insurance.

“If you’re buying pet food from us, you’re likely to need pet insurance so we’ll talk to you about pet. If we haven’t got those triggers, we won’t talk to you about pet.”

On how customers receive that marketing, Offord says it depends on what the customer’s preference is, whether it comes via the app, email or post.

Our job is to make sure we become relevant to people at the right time for them. We’re there when they need us but, equally, we’re in the background if they don’t need us.

“We try to build a profile of what’s the most convenient way to get a message to somebody. What’s their preference in terms of how they want to be contacted? Generally, let’s not bombard with millions of products, but talk to somebody about a relevant thing at a relevant time. That’s how simple it is.”

As Co-op is no longer an end-to-end insurance business, Offord says it has been able to invest in front-end digital marketing activities for a more personalised prompt to buy cover.

“Our job is to make sure we become relevant to people at the right time for them. We’re there when they need us but, equally, we’re in the background if they don’t need us,” he says.

“A big box shop once a week tells you something about a consumer but going in every day to a corner shop tells you something different about one. It tells you something different about their lifestyles and, ultimately, will tell you something different about their insurance habits and propensity to claim.”

While at this stage the data is just used for marketing nudges, could Co-op get to the stage where the business no longer just offers a reminder to purchase cover but provides a personalised price based on what is in your shopping basket?

He observes some insurtechs are already doing that with commercial lines, before adding his view that there is a fine line between being able to demonstrate that you’re responsible and concerning the use of data, adding value to the customer at the right time and that you’re not bombarding them “and being too clever and using it against them”.

“There’s something about being credible about what you do and how you use data when you talk to a customer,” he explains.

“I think there’s a journey over time in the use of data and the use of personalisation so it’s not creepy but is relevant and the customer can see the value and you can see the difference in the demographics.

“We’ve got younger people who are quite prepared to give you an awful lot of data once and say remind me all the time. We’ve been asking questions about this and that will help our thinking about the timing.”

He adds that steps towards more personalised insurance will need different timings for different generations.

Embracing AI

When asked if the Co-op was now capable of making the most of artificial intelligence, he says the group is looking at how to make the customer’s experience more convenient plus make the lives of staff members easier.

“There are some tools we’re using where people say it is saving them time from doing ABC, and they could never stand doing that. There are some real productivity opportunities.”

Insurance is seen as a bind. I think we’ve got to do our bit to bring costs down because there’s been rapid inflation.

From a claims perspective, he says insurance has become really fragmented and interconnected, with lots of different businesses and the ability to speed that up, offered by AI, so if they get “their car back quicker at a cheaper price” that is great.

“Insurance is seen as a bind,” he observes. “I think we’ve got to do our bit to bring costs down because there’s been rapid inflation.

“There’s a revenue opportunity. The reality is it’s moving on in AI and it will help us with propensity models. It will help us with the relevance of talking to people. It will help us on fraud and bringing costs down.

“We should explore those for the benefit of the cost to the consumer.”

Amazon fit

An understanding of how and where people like to purchase goods is what led Co-op Insurance to become one of only a handful of providers to sell policies via the swiftly-launched and closed Amazon Insurance Store.

“We were one of the first companies to work with Amazon on the insurance store,” he says. And [given it is now closed] you ask yourself, ‘Why did you?’ It was really simple; lots of Co-op members and customers shop with them.

“Our grocery business has been delivering for them and has lockers there, and it’s about taking our products and services to a platform where somebody buys.”

He admits he was disappointed by how quickly Amazon pulled the plug on the Insurance Store.

On lessons to learn from the experience, he says: “There’s lots of facets to it and I think you’ll see them popping up in other markets with the same proposition. But what we found from it, which I’m sure a lot of people might not see, is you learn an awful lot from them.

“You learn a lot from their business model, learn a lot about how they work, and I was proud about the speed in which we moved and we were able to get it live.

“Sleepy old Co-op – and the time that it takes to do things – we did it really quickly in a contemporary way and our partners really bought into it with us and showed we could move. So it proved our business model.

“What we learned from Amazon is the way in which they approach markets and the criteria in which they approach markets and what it means for them in terms of their growth in other global markets – they will take a fast view on things.

“I don’t think they necessarily did the wrong thing [by closing the store], but equally they could have stuck a bit longer at it, and I think they would have done OK, in my view.”

On whether Amazon’s Insurance Store could make a comeback, Offord says: “I think they’ve learned hugely and the teams still together, so where it pops up, I just don’t know.”

Looking ahead

Looking ahead to the next few years for Co-op Insurance, Offord wants people to talk a lot more about what the business stands for and why it is different from competitors.

Over this summer, insurance will be an integral part of the group’s latest marketing campaign.

“What I want people to realise is not many insurance companies have a food store in every post code in the UK and our job is to connect the insurance business and some of the great things that you see in food and what we do in the community and recognise that runs through all our businesses.

“The Co-op has got a big job to tell that story so I think what will happen is in five years’ time people, [will] have been reawakened to the Co-op and what it stands for as a brand and why it’s different.

“It doesn’t have shareholders. It has members and it’s not a loyalty card. They own us and tell us what they want us to do.

“They recognise all those things they get in the Co-op insurance that its products have better value and do good, and they can rely on us when they really need us.”

While Co-op has made strides in the past 18 months, the group aims to get to eight million members by 2030, so Offord observes any thoughts of the business being sleepy will be confined to history. “I'm sure you’ll see us move a lot more quickly.”