Tower reaches new heights

Tower’s acquisition of Prefsure is by no means the only reason for it winning this year’s Risk Company of the Year award, but it has certainly played its part.

After all, Prefsure placed third behind Tower in this year’s Risk Company of the Year award, based on its performance in the nine months to its acquisition by Tower in April. Also, Prefsure beat Tower into third place in the 2005 Risk Company of the Year award, placing second behind last year’s winner, Aviva.

Further evidence of the part it played lies in Prefsure’s acquisition in late 2004 of Lumley Life, which was Risk Company of the Year in both 2003 and 2004.

Apart from its bronze medal in the main awards category this year, Prefsure’s Business Expenses Gold product has provided Tower with the silver medal as runner-up in the business expenses category.

Alongside Prefsure’s booty in Tower’s trophy cabinet will go its own gold medal as 2006 Risk Company of the Year, as well as a gold medal in the Term and Total and Permanent Disability (TPD) category and a silver in the disability category.

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For Tower chief executive retail life David Callander, the award is a sign the company is now “reaping the benefits of work done in the previous three years, during which time Tower has had an absolute focus on life insurance.

“We do have investments, but the lion’s share of management’s time, the board’s time and our staff’s time is about life insurance. In fact, we get up in the morning and think about how we can do better today what we did yesterday,” he said.

The acquisition of Prefsure during the year, as well as direct insurance sales company, Insurance Line, represents yet another example of this avowed determination to improve.

“One reason we were attracted to Prefsure as a business is that it is and was always our view that it is the leading life business from a platform point of view.

“In fact, in terms of market share, when you look at the group part of the life insurance market, the combined Tower and Prefsure entity is now the leader in terms of annual premium income (Plan For Life).”

He said by contrast, Tower previously “dabbled a bit in the platform/master trust market without any great success, mainly because our focus has always been predominantly around the independent financial advice market”.

“Our logic in buying Prefsure, therefore, was simply that we should acquire the company that has the real strengths in that fast growing market, allowing us to have all of the major distribution channels wrapped up.”

Tower’s acquisitions are also in line with his view that the current under-insurance gap will be closed only by insurance companies embracing various channels of distribution, as well as the IFA channel.

“The gap between the collective nation’s financial commitments and the level of insurance is now in excess of $1,300 billion, with the potential to grow further as personal debt levels rise,” Callander said.

However, he said if he “breaks down the gap into different parts of the market, then I don’t know if the IFA will on its own be able to play a really big part in closing the gap”.

“They are doing a very good job with their clients, selling insurance generally on a face-to-face basis to people roughly around their age group, say five to 10 years on either side.”

Callander said it’s more likely that gap will be closed through the use of platforms, super, banks, and mortgage brokers (at the time of taking out a big debt), and even direct sales, as with Tower’s acquisition of Insurance Line.

“It’s about trustees of super schemes thinking their members need more insurance, and doing something about that, and the same more or less applies for the other channels.”

Traditional channels will continue to sell just as much as they are today, he said, but the overall risk insurance pie will grow over the next few years by additional forms of distribution coming to the fore.

This year’s runner-up Risk Company of the Year, AIG, has launched its own significant distribution initiatives during the year, both within its core IFA channel and without.

The company has launched a business support program that offers selected advisers the ability in effect to tap into some of the buying power that AIG as a global organisation can bring to the table.

Marketing manager Ken Morgan said the program, which includes a very comprehensive online learning process for planners, is aimed at “ensuring our product and pricing is in the top quartile”.

AIG has also developed and launched a specific product for the mortgage broker market, which makes it “very easy for these brokers to make the cross-sale”, Morgan said.

The product is a “cut-down version of AIG’s Priority Protection plan”, which was runner up in this year’s Term and TPD category, comprising a “simplified PDS and application process”, he said.

It has been explained to advisers that this product is targeted to the middle market rather than the top end, so as not to compete in the adviser space, Morgan added.

However, the mortgage market is only one of a number of “under-serviced or un-serviced” markets on which AIG is planning to focus on for distribution efforts in 2006-07.

He said the company is also very focused now on developing an expanded range of products and, utilising a range of available distribution channels to reach these new markets.

“I think there’s an adequate number of products for the markets we are currently targeting, but is woefully inadequate for the non-traditional markets out there.”

It goes without saying that third-placed Prefsure is committed to platforms and other distribution methods, not least because of Callander’s comments, but also because it is already the insurer for 10 platforms, including heavyweights Colonial First State and Asgard.

However, for the record, product manager Tim Tez said the wholly-owned Tower subsidiary was committed to providing products in the master trust space and continue to support these within the platform environment (outside of super).