View from City Road: Royal trying to raise its profile

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The Independent Online
Richard Hill, chief executive of The Insurance Service, must be furious. That's not our assessment but that of a senior executive of a leading rival to Royal Insurance, the owner of the Bristol-based direct insurer.

Royal has recently set up a second direct insurance writer operating over the telephone, based in Liverpool and trading under Royal's own name. Announcing its results yesterday, Royal again failed to provide a convincing explanation of what it is that distinguishes the new operation from TIS.

In fact, Royal went further, suggesting that the Liverpool pilot is an attempt to test which brand is more effective. This obviously raises the question: what will Royal do when it knows the answer?

When the Independent first reported the existence of Northern Direct, as Royal was calling the Liverpool pilot yesterday, the insurer said it did not intend to reverse TIS into it. The business has so far confined itself to the north of England but it goes nationwide next month.

Financial services firms operating over the telephone - an increasing band including Direct Line insurance and Firstdirect and the Cooperative in banking - rely on sophisticated, and costly, systems. The commercial benefits come from driving additional volume through the established cost base. It therefore seems perverse of Royal to run two separate businesses that are all but indistinguishable.

TIS is six years old and made its first profit, of pounds 5.3m, last year. In its latest half-year, it increased its premium income by almost half to pounds 43m. It insures 355,000 and is probably the second-largest direct insurer after Direct Line.

But although it is a substantial business, its profile is negligible. It is not as well known as Churchill Insurance, let alone Direct Line and its red telephone. The name - which even Royal's executives abbreviate - does not help. It is hard to believe that customers will respond more readily to the TIS brand rather than to Royal. Mr Hill may be fighting a losing battle to keep his business under its current name.

Direct writing will take an increasing share of the insurance business, and the traditional high street motor broker is going to find it hard to survive. But there is probably only room for a few well-known brands.