It was the year David Hemery won the 400m hurdles Olympic gold medal, The Beatles released The White Album and a young Ron Wheatcroft joined an insurance company that was ultimately to become part of Swiss Re.
Back in 1968 Wheatcroft started a career in life insurance that has spanned an incredible 50 years, a period of continuous service that started at Mercantile and General, through the M&G days at Pru and eventually brought into Swiss Re.
This has led him to the role of technical manager at Swiss Re, a position from which he interacts, lobbies and campaigns with all the key stakeholders in the group risk sector.
If anyone has a top-down view of the group risk sector, it’s Wheatcroft.
Asked how the life insurance profession has changed in the half century he has been in the business, his answer is a reminder of how British society itself has changed.
“Probably the most obvious thing is the way the business operates. Back then it was extremely hierarchical, with management only toilets. Only management were allowed to come in through the sliding front door, or walk down management corridors. The plebs had to come in through the back.
“Only certain levels of management used to get afternoon tea, which looked even more strange when we moved to open plan offices,” he reminisces.
But when it comes to the group risk business itself, the size and number of insurance companies in operation is the main difference.
“The only significant difference in group risk terms – and to be precise, I didn’t actually switch to group risk until some years after I joined – was the fact that we had loads of clients. This was in part because we didn’t have any competition at that time, but also because there were so many small insurance companies back then – more than 100, most of which we probably still own through ReInsure UK,” says Wheatcroft.
The next big change was the establishment or significant growth of the likes of Allied Dunbar, Abbey Life and Skandia in the 1970s.
“Building on from that you had the advent of the unit-linked whole of life policy. This seems to have been the sales force’s dream because it allowed you to choose your level of sum assured depending on whether you wanted protection or investment, and to vary your sum assured as your needs changed,” he says.
And so when did the world as we see it today really start to take shape? “I would say the late 1980s and early 1990s. It is very easy to draw comparisons between the introduction of regulation and the demise of sales forces, but the economic rationale for having a sales force changed. The big sales forces of companies like Liverpool Victoria and Prudential were not sustainable. But it is a shame that their demise has taken away the personal connection that people previously had with the insurance industry.
Wheatcroft has been doing his own research trying to identify when the first group life scheme came into existence. “Aviva told me they wrote one in 1846, a company called Provident Mutual, which was based in Hitchin near Stevenage. I’ve never heard of anyone writing one earlier than that – and no, I did not underwrite it,” he says.
And how has the job of the reinsurer changed over the last half century?
“The relationship between provider and reinsurance has changed immensely – we have to understand the underlying business of the provider much better nowadays. That helps because if you put yourself in their shoes you can deliver what they want. Providers are more demanding on price. For us using our Group Watch market report is very powerful because it enables us to understand the dynamics of the market better both at a provider level and in terms of distribution,” he says.
So does Swiss Re have concerns that the market could shrink going forward?
Wheatcroft thinks the contrary is likely.
“The market is growing in premium terms. In the 10 years since we have been doing Group Watch, premiums have gone from just over £1.5bn to £2.2bn. We are covering 12.5 million people, which is really good. But there is an untapped market out there,” he says.
The industry has been talking about cracking new markets for years. Does he think it will it ever happen in a meaningful way?
“I think it is really hard. There is a conversation to be had about the SME markets. While we would love them to be all covering their workforce with lots of benefits, lots of them still haven’t got things like key man risk protected and there should be something in that space that works well, but how you deliver it, I’m not quite sure. It’s all too well covering the workforce, but if the business goes bust, that is not good either,” says Wheatcroft.
As an active lobbyist on behalf of the group risk sector how would he typify the Government’s different approach to pensions, which gets around £50bn tax relief a year, with that of another crucial life insurance product, income protection?
“We are certainly in the shadows, compared to pensions. We have looked at what might an auto-enrolment model look like, and one of the problems there is when you apply it to the benefits system it becomes very hard to pin down the level it is rational to not insure, because of the state benefit protection. We looked at it at the time to see whether there was something attractive we could take through to government, and we thought at the time that there wasn’t.
“Through the work I am doing on Building Resilient Households we are looking much more broadly at mortgages and how protection income can be disregarded under Universal Credit. The next stages of that will be rent and living expense cover, and we can expect changes around capital payments and how they are disregarded – these changes are mainly on the individual side,” he says.
One of his big disappointments is the Government’s attitude to the Improving Working Lives paper.
“We put a lot of work into responding to that, but it has gone quiet. Part of this work was SMEs, which is why in 2017 we asked providers to split their data by size of scheme. If nothing else, that nailed the myth that smaller firms don’t buy insurance, because they do. Two thirds of them were schemes with 50 or fewer people. The challenge is to identify what it is that encouraged those employers to buy the cover rather than bemoaning the fact that others didn’t. It may well be a simple product could help with that, as would taking out the complexity of the interaction with state benefits,” he says.
How does Wheatcroft see the market evolving over the longer term?
“We could see the employer becoming the conduit for the product rather than the provider of the product. Look at the world of pensions – gradually it has moved from non-contributory DB to the DC world of today. I could see the group risk market possibly moving in that direction. Probably not death in service, because the sums involved to buy it are so modest. But I could easily see some sort of combination where the employee and employer have a shared cost income protection policy. A few things need to change to make that happen, because the salary sacrifice rules at the moment actually make that really difficult, because you end up taxing the premium and taxing the benefit, which doesn’t really sound sensible.
Part of the problem is when you ask employees how much cover they think they have for sickness, they overstate it by a factor of three. So you are trying to promote something to them that they think they already have,” he says.
He also cites old chestnuts like changing the name of the products as something the industry needs to get off its to-do list and into reality.
He does see some potential storm clouds on the horizon, however. “Take tax relief on pensions – there is a lot of talk about it being taken away for higher earners and replaced with a flat rate of tax. If that were to happen there would be a massive impact on group life written in registered pension schemes. We make that point to government, that a flat rate may appeal for pensions, but it does have knock-on implications. So what we would like to see is the lifetime allowance disregarding death benefits out of a life insurance scheme,” he says.
And what parts of his lobbying is he most proud of? “One has to be the ‘protection gap’ – which had humble beginnings, particularly here at Swiss Re. We tested the methodology reasonably rigorously and came up with a figure for the life assurance protection gap in the UK of £2trillion. We always knew this was a massive figure that meant nothing to the man in the street. We had endless arguments about how many noughts there were, and whether it was an English or a US trillion.
“We never really intended it to be a measure to use to beat up consumers. It was meant to be a baseline to stimulate discussion. We did get a bit of criticism from the behavioural scientists who said we were just reinforcing the idea that it is ok not to have insurance if so many other people are in the same situation.
“It has gone global, and has been used by Swiss Re in other sectors such as flood insurance. It was thought up by myself, a colleague Alan Tyler and an intermediary named Leo Bones,” he says, the devoted Gillingham FC fan describing both men in terms of their footballing affiliation. “It would have been nice for the number to come down, though,” he adds.
One of his biggest disappointments meanwhile is the pointless return of pension term assurance with pension freedom – something that could have been nipped in the bud.
“At the time I recall contacting HMRC and said ‘do you realise people will be cancelling their life policies and buying these new pension term policies with a tax break?’. They said they didn’t think that would happen. But it did, and then the product got shut down. It was so much wasted effort – about 100,000 policies were written. They could have stopped it had they wished to do so,” he says.
Wheatcroft has been a stalwart figure within industry body Group Risk Development. “The market grows – whether that is because of Grid is hard to know.”
But should the trade body of this £2.2bn premium industry be funded with more than an £80,000 annual budget taken from global insurers contributing just £2,000 a year each?
“Historically Grid started out as a conversation between industry organisations. People got used to the idea that we do things on a smaller scale.
“We are happy to be members of Grid – we give quite a bit to it. It’s not just the money, it’s the opportunity to shape the rules. It basically operates largely on volunteers, people who are able to integrate it into their day job,” he says.
Asked who he thinks has stood out as real contributors to the industry over the decades, he names several figures whose work has gone beyond their employer’s interests. “I’d single out Bob Cheesewright, who worked for pretty much every company in the market. People don’t appreciate what a good job he did when the Insurance Mediation Directive came in, in managing a very pragmatic and sensible approach to the achievement of flex time benefits. He has been enormously influential over a very long period,” says Wheatcroft.
“Canada Life’s Ian McMullan is another individual who rose above the competitive company to company approach. He was very clear in his vision of what he wanted the market to do and tragically we lost him a couple of years ago.
“Then you also have the catalysts, like John Ritchie, who want to change the world. I should also note Howard Rayner, at Canada Life, who was one of the team that got the CII to adopt the GR1. I was one of the people who said he would never achieve it, and I’m very pleased I was completely wrong,” he says.
When, or maybe if Wheatcroft leaves the group risk sector, his contribution means he is bound to be spoken of in similar terms.