British Gas Insurance launched in 2009 with ambitions to become a major player, and fast. Jonathan Swift talks to Chris Stern and Edward Dutton about the challenges and opportunities they have encountered to date.
When Post broke the news that energy giant British Gas was seeking to set up an insurer at the close of 2009, heads were turned by the claim that the business aspired to be a top 10 player within three years.
The story was sourced from a recruitment advert for an underwriting director — and chief executive officer Chris Stern offers a wry smile when he remembers how its search for someone with insurance skills became front page news.
“If there was one part of that advert I would not have included with hindsight it was that boast,” he says. “We knew what we wanted to achieve here and had set out our stall internally.
“And we knew by transitioning our customer base across to being insurance policyholders we would effectively become a very significant insurance company. Now we talk slightly more modestly about it, but the reality is we are a very big insurer writing close to one billion pounds of premiums.”
A wider portfolio
As to why British Gas decided to go down the insurance company route, Mr Stern notes it ultimately came down to the fact there were segments of the market it could not operate in: “We were only selling maintenance products, but some of our competitors were already authorised, and could offer a wider portfolio.
“So we looked at our growth plan going forward and decided to put a toe in the water to see whether we could enter the insurance market, and, more importantly, whether it would work for our customers and they actually wanted those new products.”
That ‘toe in the water’ was Home Assistance, an intermediary that used a panel of insurers, and still works with RSA today, to sell insurance products to British Gas customers: “It is now a wholly owned subsidiary and an important test bed for new products.”
British Gas Insurance is the biggest thing to come out of the experiences learnt from Home Assist, although going down the Financial Services Authority regulated insurer route was not the only option on the table.
“We looked at all the different structures and domiciles, offshore and onshore but, because we serve UK customers, the FSA was always going to want to understand what we were doing,” Mr Stern continues.
The insurance company will soon celebrate its second anniversary and Mr Stern remembers that at the start — given it was a huge change stepping into the regulated market — British Gas and Centrica evidently had some issues that needed addressing.
“They wanted to know if we could operate effectively in that environment and what it would mean for the business in terms of the amount of change. We have had to train thousands of people within our business, including 1500 call centre agents, and 30 000 hours have gone into that alone. We also had a lack of insurance underwriting expertise,” Mr Stern adds.
This is where the above mentioned advert came into play, which led to underwriting and claims director Edward Dutton joining from Axa, where he was personal lines underwriting director. He says: “Part of the attraction was that it was completely different from the usual jobs that head hunters tout around. To some extent, when I arrived much of the hard work had been done and the transformation started but, for me, the attraction was that this is a global company — like Axa — and it was a unique opportunity to grow and develop that business.”
New kids on the block
Mr Stern jokes that BGI still feels like the “new kid on the block”, but adds it does not want to be seen as an outsider: “We want to play our part within the insurance industry, hence we have entered — and won — a British Insurance Award, become a member of the Association of British Insurers and engaged with the Chartered Insurance Institute, on the basis that we feel we are going to be a sizeable player. And, although we still have a huge amount to learn, we also believe we can bring something different to the table.
“We have a lot more customer contact that many insurers do, as we see our customers at least once a year. Many we will see two or three times depending on the products they have, which enables us to have a closer bond with them and a potentially different mindset,” Mr Stern explains.
This is something that has resonated with Mr Dutton from his days in the mainstream insurance sector: “For me that is a very obvious difference, in that this is a very customer-focused business. Insurers talk about their customers, about the moment of truth and claims experiences, but at British Gas it is much more tangible — our engineers are in people’s homes, and it lives and breathes within this organisation.”
Another important element to becoming an FSA-regulated insurer has been Solvency II, something Mr Stern admits was not on its radar when it started the process of setting up BGI. “We didn’t appreciate what it was going to mean, but we absolutely know what is coming now and have done a massive amount of work to catch up. The team has done a brilliant job.”
As things stand today, the pair believe that BGI is 95% of the way to converting its customer base, having started with its simpler products. But along the way it has introduced new elements and products and there is still more to come.
Not least are the opportunities surrounding the new ‘Green Deal’, which is intended to revolutionise the energy efficiency of British properties. As an energy company BGI’s parent is already seeking to gain a prime position in this shake up, not least in offering products like solar panels, which may need insurance.
As to the mainstream products, both chuckle about the approaches they have had offering to partner with BGI to sell a wide variety of products, some of which they believe are preposterous. “Our customers recognise we have the right to go into some spaces and understand the brand stretch, but we are not going to go into payment protection insurance. Yet, when you look at the household, or the commercial space, they are asking us when we are going to do this.
“The one thing I would say is that I don’t think we have the necessary skills to do that today, so if we do seek to explore these further down the line, it will be with third parties.”
Edward Dutton will be speaking at the British Insurance Summit 2011.
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