Friday, August 10, 2007

Leader - What next for RBSI?

Leader - What next for RBSI?: "[August 02, 2007] Leader - What next for RBSI? (Post Magazine Via Thomson Dialog NewsEdge) The speculation that Royal Bank of Scotland Insurance is looking to develop its direct commercial offering, which currently stands at vans only, into the area of small to medium-sized enterprises, is the latest rumour to envelop the embattled group.

The insurance giant, which will post its interim results tomorrow, has recently been subject to considerable speculation about its joint venture with Tesco Personal Finance - with the supermarket understood to be underwhelmed by its recent insurance results. Another report linked RBSI with a trade sale to venture capitalists, but that is another story.

Tesco is believed to favour a move to an aggregator model, as it will offer customers wider choice. However, RBSI-owned Direct Line has made headlines recently with a television campaign warning customers about the pitfalls of using aggregators, and it has steadfastly refused to offer its quotes to these insurance providers, making a point of this in its advertising.



All these whispers come at a time when RBSI, like many of the UK's leading providers, finds itself at another crossroads in an increasingly competitive market, especially in personal lines.

Four years ago, when faced with a slowdown in the growth of its leading brand Direct Line, RBS purchased Churchill in order to grow its volume, but another move for a significant personal lines player - if that is indeed the answer - would probably face opposition from the Competition Commission.

Opportunity knocks

With Churchill, RBSI inherited a commercial broker-only insurer in NIG, which, contrary to many people's expectations, it decided to keep after realising that the commercial market offered significant opportunity - especially for a bank that already had more than a million business customers.

Incidentally, RBSI had already inherited a commercial broking arm through the acquisition of NatWest, and lo, it came to pass that RBS Business Insurance Services was born, which the bank hoped to revitalise using NIG's experience. Three years on and market insiders have described the venture as "massively" unsuccessful, given its potential. At the same time, NIG's heartland, the commercial broking market has become more competitive with the birth of the super consolidators driving up commission levels.

All this brings us back to the idea that RBSI, whether through Churchill and Direct Line - or both - could seek to gain a stranglehold over the direct commercial market. If it did so, it would have a ready made call centre - the RBS BIS centre in Bristol - at its disposal.

It also has the expertise from NIG, although how that would stack up with its broker-only selling point could prove a sticky issue. One suggestion is that RBSI could sell NIG, especially if it decided to spin the same line about middle men in its aggregator campaign into the SME sector.

All of this is based on speculation and rumour, and how much of it will eventually stack up is unknown. What is certain is that RBS is unlikely to do nothing and, as such, rumours will continue to abound."

posted by Mugenzi @ 8:53 am