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How can a ‘closed’ insurer be open for business?

Phoenix is widely known as a closed fund consolidator, but chief executive Andy Moss argues that this, in many ways, is a misnomer. In this article, he explains why the recent transaction with Standard Life Aberdeen is a “win-win”.

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Closed doesn’t mean shut

Even the businesses that are closed to new customers allow existing customers to continue to pay in premiums to policies and move money between different investment funds, and for pension customers – take out an annuity on retirement.

In some cases, the insurance businesses Phoenix acquires contain still-open segments selling new business, such as SunLife that we acquired in 2016.  These types of businesses offer exciting growth opportunities.

Why rush to close them, when we can continue to manufacture new products, as well as offering quality customer service, to both new and existing clients?

Standard Life deal

Our recent transaction with Standard Life Aberdeen is a prime example. Strategically, the deal is a win-win.

It allows Aberdeen Standard Investments to focus on investment management, and enables Phoenix to take on responsibility for the capital requirements, a skill which is second nature for a life company.

The acquisition includes offices in Germany and Ireland, giving us a presence in different European markets, which could be strategically helpful as Brexit negotiations continue, as well as offering potential to acquire businesses in these markets.

As part of the deal, Phoenix will acquire £170bn ($221.4bn, €190.4bn) of assets. Of those assets, circa £80bn consist of largely heritage business, but the rest remains open to new business and we will continue to use the Standard Life brand for these new business elements.

Open for business

The two main open areas of business are workplace pensions and Sipps.

Standard Life’s workplace pensions business offers many exciting opportunities. With the advent of auto-enrolment, UK workplace pensions assets are growing fast, with millions of people saving into defined contribution (DC) pensions for the first time.

Standard Life has long been a key player in the workplace pensions arena.  With our life company expertise, we intend to be a key product manufacturer in this sector, working closely with the distribution and investment specialists at Aberdeen Standard Investments

Similarly, Wrap Sipp, which allows IFAs the ability to manage their clients’ self-invested personal pensions, remains open for business.

With this area of Standard Life’s business flourishing, Standard Life Aberdeen’s expertise will once more come into its own when it comes to marketing and managing the investment products on the platform, while we focus on their manufacture.

Why customers matter

Each of Phoenix’s products is underpinned with great service and a quest for improving customer outcomes. From a moral stewardship point of view, we believe it’s our job to keep the promises that we made to our customers, regardless of when they bought their products.

In addition, there is a commercial imperative to get it right. No regulator would think we are a good home for a business looking for a buyer unless we can demonstrate that the way we look after our customers is at least as good, if not better than the home they are leaving.

As part of our strategy for improving customer outcomes there have been various initiatives that have been delivered over the last couple of years.  For annuities, these include insisting that our customers shop around to make sure that they are getting the best possible deal when they approach us to buy an annuity.

We have also offered our customers the ability to convert small annuities in payment to convert to a small cash lump sum where they would have received a very small regular payment via an annuity.

Heritage life insurers have a suite of often complex insurance products to manage so it’s vital we try to build customer understanding and engagement with their product.  As a result, we have invested heavily in the digital experience.

Phoenix constantly looks at ways to help people benefit from their policies. We have reunited policyholders’ estates with £13m of unclaimed life insurance policies, by proactively tracing customers.

Sadly, pension fraud is a serious threat to customers’ hard-earned pensions . We take the threat very seriously and have prevented circa £30m of potentially fraudulent transfers.

Our customers are often faced with important financial decisions. For that reason, Phoenix is extremely supportive of independent financial advice, and we encourage our customers to take it whenever we think it will be appropriate.

When customers opt not to go down the advice route, we are available via our dedicated phone lines or website to ensure we give as much information and guidance to them as possible.

Therefore, although we are known as a ‘closed’ company, in fact our lines of communication remain very much ‘open’ for business.

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