Case Study – Legal and general
Background
Legal & General (L&G) had been a successful player in the booming UK Life Insurance industry in the 1980’s. There had been a boom in new business, but also a growth in complexity and regulation, and consumer mistrust following aggressive selling. By 1993 costs were rising, sales linked to the housing market were flat, and competition was growing. The consensus view was that insurance was a grudge purchase and needed to be sold, with associated high costs of sale. A new Chairman, Sir John Egan, and CEO, David Prosser, asked SAMI to help the company take a strategic view. L&G’s response was to focus on quality, cost cutting and cultural change in the short term, and to develop a long term strategy for success in the new environment.
SAMI’s Role
The strategy process started with a scenario planning project, with SAMI as facilitators.
Interviews with customers, staff, competitors and regulators identified two key factors in the changing environment – demographics and information and communications technology. The industry was perceived to have been “asleep for forty years” and the culture of many staff to be “customers frustrate me; they don’t understand”.
There was universal agreement that continuation of the status quo was not a credible scenario, and two scenarios were created – Evolution and Revolution. The drivers for both were the same, the main difference was in the pace of change; by the end of the process, Revolution was looking more credible.
The Outcomes
With this in mind, L&G asked three questions to determine their strategic direction:
Could L&G grow UK Long Term Business profitably?
Were there other profitable opportunities in UK financial services L&G could exploit?
Were there profitable opportunities for L&G outside the UK?
Opportunities were identified in:
Pensions – the growth area
Retail investment products (eg unit trusts)
The protection market (eg household insurance)
L&G also decided to build direct as well as the traditional indirect distribution channels and introduce advice based selling and cross-selling. A Director of Marketing was recruited and business activities based upon core competencies. The scenarios were rolled out through the company in workshops run by facilitators trained by SAMI.
The results from getting ahead of the curve were growth in:
Market share
Profitable new business
Share price
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