john gillman. ‘living strategy and the death of the five-year plan: is strategy dead?’ no, but...
TRANSCRIPT
John Gillman
‘Living strategy and the death of the five-year plan: is strategy dead?’
No, but strategy needs to be different!
Source: Financial Times 27 October 2009
The hedgehog approach: corporatehibernation only works if recessions areshort
BCG: Organisations with adoptive advantage recognise the unpredictability of today’s environment and the limits of deductive analysis. They ……
1. Process relevant data quickly
2. They see clearly how their business fits into a wider context
3. They are alive to social change and shifting customer preferences
4. They experiment effectively
5. They draw on the talents of the best people they can find – whether they employ them or not
McKinsey:
‘You have to give up the pretence that you can
predict the future’
‘Strategy is really an evolving idea which develops
over a long period on a long and winding road
.… and this new world calls for just-in-time
decision making’
While the eternal truths - market position, scale and capabilities – endure, a more dynamic and adaptive approach is now needed.
Review of 2008/2009
Total people covered was 7,562,000 – 12.3% of the U.K. population with individuals the main contributors of market growth
PruHealth’s business grew by over 50%
AXA/PPP’s business added nearly £90m in premiums
Review of 2008/2009
Simply Health’s market share grew to 2.5%
Standard Life marketed heavily in 2008 (but lost market share)
The top 10 advertisers are focusing on direct mail
Top 5 competitors
BUPA, AXA/PPP & Aviva control > 75% of the market
Standard Life down slightly WPA market share down
What was the main reason you purchased PMI?%
Part of our financial planning 20
I consider it a financial priority 14
Death or illness of family friend persuaded me 9
Bought it with mortgage/loan 4
Persuaded by a salesperson 3
Other 46Source: The Hannover Re (UK) Protection Review Consumer Survey 2009
Why did you purchase – then and now?
Jumping the queue Choice of specialist/surgeon Hotel facilities
Now added: Fear of hospital acquired infections – AXA
PPP 2009 Research Cost of new drugs
Why didn’t you buy PMI?%
Can’t afford it 37
The State will look after me 18
I haven’t thought about it 16
Other priorities 6
I don’t trust insurers to pay claims 6
Other / don’t know 17
Source: The Hannover Re (UK) Protection Review Consumer Survey 2009
PMI Market share by subscription income 1992 – 2007
1992 % 2007 % BUPA 44 42 AXA/PPP 28 24.5 Norwich Union 3.5 10 Standard Life 3 7.5 Cigna 3 3.5 WPA 5 3 Simply Health n/a 2.5 PruHealth n/a 2 Exeter Friendly <1 1 CS Healthcare <1 0.5
Source: Laing’s Healthcare Market Review 2008/2009
Protection Insurance Adviser’s Forecasts
For the next 12 months
Write more 43.9% Write less 7.4% Write the same 48.7%
Source: Protection Review, 985 PFS members responding to an e-mail questionnaire April 2009
Tax Relief: Research amongMembers of Parliament
Conservative: 49% Labour: 1%
Source: BMI Healthcare Research 2009Sample: 44 members
Tax relief or tax incentives?
New funding models must pass the test ofEFFICIENCY and EQUITY
Efficiency: will the proposal achieve its proposedend and provide the greatest possibleimprovement and healthcare within the fundingavailable?
Equity: how will the proposal match financialcontributions to ability to pay, and how well wouldit match healthcare to health needs?
Should tax incentives be offered toindividuals and employers?
The efficiency test fails it in four respects: Its effects are likely to be minimal without a
strong level of compulsion It diverts funds from the public healthcare
system It does not save the public sector money It would inflate healthcare costs
It fails the equity test:
Its uses taxpayer funds to expand two-tier access to healthcare
It shifts the burden of paying for healthcare from the healthy, young and wealthy to the unhealthy, old and poor
Health & Wellness
Will ‘wellness’ provision become an integralpart of private medical insurance offerings?
The health and wellness approach
‘The principle of risk pooling means thatpeople who are healthy, fit and well don’tsee good value for their premiums. We seerewarding people for taking care ofthemselves as the key to breakingthrough this and focusing on improving andmaintaining health as the mechanism’
Source: Mark Noble, Aviva, quoted in the 2009 Protection Review
The health and wellness approach
‘The message is definitely getting across. Half
our policyholders agree that our unique Vitality
incentive programme has helped them to behealthy.
Continued…
The health and wellness approach
Vitality – which rewards our policyholders for
participating in healthy activities – is an even more
applicable model in this difficult economicenvironment because the value of the
incentivesand the rewards it provides means more’
Source: Shaun Matisonn, PruHealth, quoted in the 2009 Protection Review
Is the risk of needing to pay for parents’ longterm care something you think about?
%Yes, it is a major concern 17No, they have funds to cover it
20No, they can use house equity
10No, the State will look after them 5Other/don’t know 15Not applicable (parents deceased)
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Prospects
Subscribers will fall in the short term
Growth will resume between 2011 and 2013 (but more slowly in the group market)
PMI usually rides out recessions quite well since it is considered an essential purchase
Business development – what thecommentators say
Look out for more cancer drug top-up policies
Retention activity is more important than ever
Direct distribution is key to the individual market, but
Marketing via employers has a part to play
Business development – what the commentators say
Lower costs are needed to bring in customers
Adequacy of care for the over 60s is an issue
The NHS 18 week waiting time target is still seen as too long
Intermediary involvement may increase
Opportunities for the PMI market
Difficult to envisage the NHS getting all the resources it demands
Development of products that meet a range of perceived needs in partnership with culturally acceptable other providers
Public sector pensions and the emergence of flex plans?
Excesses, co-pays and ‘deposit’ plans for a wealthier baby-boom clientele
Government policy and the ‘Nudge’ strategy
Continued\......
Opportunities for the PMI market
Demographics and the ‘worried well’
Will the competition be slow to move?
Will ‘wellness’ be the new trend?
Emergence of more specialised and better qualified advisers
Marketing through employers – Flex and voluntary plans
Aggregate sites
Threats:
NHS waiting lists are effectively addressed
The recession lingers and bites harder
Competitors launch a ‘killer’ product aimed at market segment
Slow attrition as members age and premiums increase
Continued\....
Threats:
Development of new expensive drugs and treatments
Emergence of more specialised and better qualified advisers
Competitors throw even more resources at distribution in a static market
Key Performance Indicators 2014
1. Customer satisfaction – ‘very satisfied’ is the only really safe place. Listening to ‘the voice of the customer’ is even more critical and should drive product design. They need to know you value them even if they do not claim
2. New member growth – what part will advisers and employers play in this objective. Is entering the group market feasible?
3. Operational efficiency – essential, but remember that only claimants will know how great you are
Continued/….
Key Performance Indicators 2014
4. Financial performance – the ‘early warning system ’ is important
5. Positive staff contribution – empowerment and the correlation between staff satisfaction and customer satisfaction
6. Regulatory and governance – regulatory best practice is often just good business practice
Is the future friendly?
Yes, as long as we remember that it starts right now!
www.prioryhouseconsulting.co.uk
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