Norwich Union has endured a disappointing 12 months in its protection business, according to figures included in the 2005 interim announcement from its parent company, Aviva.
In the year ending 30 June 2005, the value of new premiums at the insurer plunged to £646m from £731m in the first half of 2004. The company statement laid the blame for the fall squarely at the feet of the housing sector, claiming: "the protection market remains challenging, reflecting the continued slowdown in the property market."
Results at sister company Norwich Union Healthcare were no better. The 80-page document devoted a solitary line to performance at the private medical insurance division, which reported: "Our health insurance business in the UK reported a breakeven result (2004: £3 million)."
Despite reiterating that the housing market was the primary influence on the disappointing figures, Graham Boffey, managing director at Norwich Union Healthcare admitted that an in-house reorganisation drive has taken its toll on the bottom line.
"The breakeven result was due to investment in restructuring our business to ensure future growth. This is part of an ongoing three-year plan to ensure that Norwich Union is best positioned for strong growth in years to come," he said.
Boffey vehemently denied the suggestion that service standards have been compromised due to the restructure. Some intermediaries, however, are adamant that the changes are directly responsible for falling premiums.
"Norwich Union went through an internal restructure in the second half of 2004 and it is no secret that they priced themselves out of the market to drive down business volumes while they made those changes," said Kevin Carr, senior policy adviser at Lifesearch.
"They then priced themselves aggressively when they had restructured but their service has suffered. It now takes around two to three weeks to turn around an application and IFAs may be avoiding using Norwich Union on the basis of their service," he added.
Boffey refuted such suggestions but conceded that there have been difficulties at the insurer in the last year. "That is absolute nonsense. There is no way that Norwich Union would ever have employed a pricing policy to deliberately drive down business volumes. As for aggressive pricing schemes, our rates now are more than sustainable in the long- term," he said.
"There were things that went a little awry last year, such as our workforce systems as we got the onboarding wrong but we've had no such problems this year, and we are more than happy with how things have performed so far," he added.
Boffey revealed that he anticipates a return to profitability in the healthcare sector in the near future although he refused to be drawn on any specific timeframe.
