Royal in second direct move

ROYAL Insurance has set up a second direct insurance arm in competition with The Insurance Service, the Bristol-based subsidiary it founded six years ago. A pilot operation using the Royal name has been running from Liverpool for three months and expects to go nationwide before the year end, writes Paul Durman.

Analysts were puzzled why Royal should run two such similar telesales businesses side by side. 'The key issue is to get critical mass to drive expense ratios down,' said one.

Peter Tillotson, Royal's manager for retail and direct business, said having a second brand would give the company access to another group of people. He said the Liverpool operation, which currently employs about 30 people, was using existing systems.

The new telesales operation has been built on the old direct business that Royal wrote with customers who replied to newspaper advertisements or who called into its offices rather than go to a broker.

Mr Tillotson said Royal aimed to position itself on quality of service rather than price alone. It has linked up with National Breakdown to offer a vehicle recovery service.

Royal initially distanced itself from The Insurance Service for fear of antagonising brokers, and said it did not intend to reverse TIS into Royal's direct arm.

The Insurance Service made its first profit of pounds 5.3m last year. Richard Hill, its chief executive, said TIS had 400,000 policyholders and was adding 15,000 a month.