Insurer Guardian to get out of direct sales

BY NIC CICUTTI

Guardian Royal Exchange, one of the UK's largest composite insurers, yesterday bowed to the competition now engulfing the financial services industry and disbanded its direct salesforce.

The decision will mean the loss of 220 staff jobs at its Lancashire headquarters, plus the departure of more than 250 self-employed direct sales and appointed representatives.

GRE said yesterday that Guardian Financial Services, its life and pensions arm, had decided that selling policies directly to the public was no longer profitable. Guardian now intends to market its products solely through independent financial advisers.

By doing so, it aims to cut out the heavy marketing, support and compliance costs associated with an in-house sales team. Keith Lugton, communications director at GRE, said: "What we are doing is simply a continuation of policy over the last few years. In 1990, we had a direct salesforce of 1,100, plus 950 appointed representatives. We have followed through the logic of what has been happening since then."

Guardian's move reflects both the continuing crisis within the financial industry and - until recently - its own relatively weak reputation.

It follows an unprecedented wave of job losses in the financial services industry, reducing the number of its sales representatives from 250,000 to 90,000 in the past three years.

Growing public mistrust of the industry, partly caused by the recent pension transfer scandal in which up to 1.5 million people may have been badly advised, has led to declining sales of life and pensions products. Only last week, London Life, one of the oldest and most respected among the industry's insurers, announced it was shutting its door to new business.

But Guardian, or GRE as it was known until recently, suffered more than most.

The company was among a number that rapidly expanded its salesforce in the late 1980s, exposing it to repeated accusations, some from disgruntled former employees, of sharp sales practices. In 1992, GRE was fined pounds 100,000 after admitting poor monitoring of its sales staff. In 1994, total new annual premium sales, at pounds 32m, were 25 per cent down on the previous year. Guardian's own sales arm contributed less than 20 per cent of that amount.

David Meldrum, Guardian Financial Services' managing director, said: "The market for life and pensions products in the UK has changed. Policies written through direct sales and appointed reps are not producing an adequate profit contribution and are unlikely to do so in the future. We aim to improve further the service and support we give to IFAs, both large and small."

However, Guardian's decision to concentrate on the IFA market was yesterday greeted with surprise by advisers.

Steve Butcher, deputy managing director of Countrywide, a national organisation of 600 IFAs, said: "We monitor every company's products and produce a recommended list of what we believe are the most suitable for our members to recommend in any given situation. I do not know where Guardian sits on all our lists, but we do not regard it as a major player."