Our five strategic imperatives* are applied across all business units. The following illustrates them in action in the Risk division.
(Download XLS:)  |
|
Imperative |
Activity |
|---|---|
|
Financial Management |
Balance sheet strength gives pension trustees confidence to use us for buyouts. |
|
Diversified Business |
Diversification to reduce reliance on mortgage event for life sales. |
|
High Quality Product, Broad Distribution |
Statistical database enables annuity pricing to better reflect actual longevity patterns. |
|
A Positive Customer Experience |
Rapid intervention secures early returns to work for Group Risk claimants. |
|
High Expectation Culture |
Stringent underwriting quality reviews drive improved reinsurance terms. |
* As outlined at Strategy of the Group.
During 2008 we made significant progress in diversifying our product offering to rely less on traditional purchasing events, notably mortgage sales, as the catalyst for sales of Risk products.
While mortgage approvals in the UK fell by 39%1, sales of Individual protection, historically often sold with mortgages, fell by only 13%. This suggests our strategic pursuit of diversification has helped mitigate the effects of housing market weakness. Our sales channels have stepped up the marketing of Individual protection on a stand-alone basis, with greater emphasis on alternative products, including ‘key man’ cover, and family life products such as Family Life Insurance Plan (FLIP). Legal & General is the UK’s leading provider of Individual protection plans and we have built on this strong base by increasingly supplying products, including life assurance and critical illness cover, targeted at High Net Worth customers.
Further diversification was provided by a strong performance in Group risk, which had a very successful year, achieving good new business sales and strengthening its progressive product range by introducing the innovative Premier ONEderwriting service. This allows clients to be underwritten once only and replaces visits to the doctor with company medicals, tele-interviews, or examinations at home or work. Commitment to broader distribution and greater market penetration was evidenced by the adoption of a new ‘key account’ approach and increasing use of specialist and regional sales forces. Service levels in Group risk improved further in 2008, with the business winning the ‘Best Service Provider’ award from the industry’s ‘Cover’ magazine.
The annuities business grew very strongly in 2008, underpinned by a variety of factors including our expertise in the new and fast growing pension buyout market. Success in pension buyouts requires a combination of investment capability, which in our case is provided by [LGIM], and longevity expertise. Our extensive longevity data is supplemented by an increasing focus on the science of mortality, where we work in conjunction with University College London. Success in this market also requires the administrative capability to service a large customer base. Legal & General’s business model has enabled us to deliver innovative products to de-risk companies’ defined benefit pension schemes.
For the individual annuity customer, we rolled out ‘postcode’ annuities in 2008 following our earlier successful trial. This enables us to tailor our pricing more closely to the circumstances of the customer. We intend to extend this concept of increasingly granular and tailored pricing of Individual annuities further.
During 2008 we delivered an increasingly positive customer experience. Initiatives included more flexible treatment of claims where there is an undisclosed condition. We have worked with the Association of British Insurers (ABI) to develop industry guidance on assessing future Life and Critical Illness Cover claims. This has resulted in an improved understanding of customers’ reasons for failing to fully disclose their medical history and a movement towards targeted medical reports. As a consequence, more claims are settled on either a full or partial basis. We have also worked closely with industry bodies to address speed of payments.
During 2008 we invested in the further development of our employees. Group risk is pioneering an industry-wide training programme to ensure underwriters are fully aware of relevant medical advances. In Individual protection we conduct increasingly in-depth analysis of underwriting quality which in turn improves our underwriters’ knowledge and skill. Our focus on employees is balanced by continuing investment in processes to make the product more cost-effective and improve processing and response times.
We continued to make progress in our GI business during 2008. This business, which is now focused on household insurance products, is in transformation, and in 2008 we made significant management changes to continue to drive forward the change process.
1 Bank of England data for the 11 month period to the end of November 2008, compared to the same
period of 2007.