Kwik-Fit's fixer rings the changes; The call centre-based insurer

Sunday Herald, The, May 18, 2003 by Ian Fraser

THE idea of using an established high street name to sell financial services products is nothing new. Indeed, major retailers such as Marks & Spencer, Tesco and Sainsbury's have been doing it for years.

But for a chain of tyre and exhaust centres to launch its own- label for financial services products - including home and car insurance, term assurance and personal loans - is more innovative.

This was the dream of Sir Tom Farmer, when he launched Kwik-Fit Insurance Services from a Portakabin near Viewpark, Lanarkshire, back in late December 1994.

He created the business as a greenfield start-up, amid some controversy over whether it deserved to receive (pounds) 2.5 million in Regional Selective Assistance grant from the then Scottish Office, even though job creation targets were met.

The business came into being after established UK general insurers became concerned about the effect that the Royal Bank of Scotland was having on their market share with its Direct Line operation.

They are said to have approached Farmer - whose Kwik-Fit brand had developed a name for customer service in the automotive sector - to see whether he might help them mount a counter-attack. Using Kwik- Fit's customer base, the aim was to launch a "white label" insurer that would use established general insurers to underwrite all its policies.

However the start-up suffered from high staff turnover in its early days, hitting 70% in 2000. "We were not doing right by our staff," says KFIS managing director Martin Oliver, "nor were we targeting the right people for the job".

But Oliver, a former Ernst & Young accountant, who has been with the business since inception but stepped up to the managing director role 18 months ago, believes the company has changed its spots.

Earlier this year he was delighted when KFIS - which today employs 800 and is the largest general insurer based in Scotland - was ranked as the UK's 74th best company to work for. Only three other Scottish employers made it onto the list - Standard Life, Glenmorangie and Edrington. Oliver, 38, now believes that he can take KFIS, which offers an in-house gym and a flexible benefits package, even higher up the rankings. "We're aiming to be in the top 50 next year," he said. "We are now listening to our staff about what life is like in a call centre and we are now a top quartile payer."

Staff who meet certain performance targets are given a company car within six months of joining. Oliver says: "This has proved a key differentiator and staff retention is now much much higher. I don't know any other employer that gives a car to 21-year-old kids."

"It's a tough environment and it's not for everyone. But for those who are suited to it, there are great opportunities." Staff turnover has already been slashed to 30%, he adds. Born in the former steel town of Consett, Durham, but raised in Glasgow, Oliver will not say much on whether KFIS was unsettled by ownership changes Kwik-Fit Holdings went through between 1999 and 2002. Having been a plc run by Farmer for years, Kwik-Fit was taken over by Ford in 1999. But following a strategy shift in Detroit, the carmaker sold the group to venture capitalists CVC Capital Partners for around (pounds) 400m last year. It has since drafted in former Clark's shoes boss Tim Parker as managing director.

"It's business as usual," says Oliver. "The important thing is that we are outperforming targets. Cash flow is very important to venture capitalists."

The business model used by KFIS appears to work - and is heavily dependent on strong ties to the chain of fast-fit centres, which now number 650 in the UK and 70 in Scotland.

Oliver explains: "We make a service call within days of a customer visiting one of the centres. We ask them if everything was OK with their visit in terms of speed, service etc. We talk to every single customer, which gives a huge amount of feedback on service levels.

"The majority of customers are satisfied - 98%. We then ask if they'd be interested in receiving a free quotation when their motor insurance is up for renewal. We contact them again a couple of weeks before their renewal date."

Oliver says 40% of customers accept the offer of a free quote, and 20% of them end up taking a policy - meaning 8% overall. But it takes two million calls a year to sustain this.

The business currently has 262,000 policyholders and Oliver says he is targeting 285,000 by the end of this year "We're looking at a turnover of (pounds) 30m this year and our pre tax profits for 2002 were just over (pounds) 3m." For the time being, the future has been secured.

Longer term, however, it remains to be seen whether the notoriously reticent CVC believes it will get better value from selling the insurance and fast fit business separately or together.