The mother tongue of António Horta-Osório, the new boss of Lloyds, is Portuguese. He might as well have written parts of his strategic review of the bank’s future, published this week, in that language for all the sense that it made to an English speaker.
If a single Times Money reader can explain, for example, what “positive operating jaws” actually means, I will be impressed. Among the promised changes were “better end-to-end processes”, a “de-layered management structure” and “centralised support functions”. I have no idea what any of this means but I imagine that they are euphemisms for job losses. In total, 14 per cent of the workforce, about 15,000 people, are to be made redundant. Quite how this squares with the bank’s plan to improve customer service and cut the number of complaints is anyone’s guess. Unless these 15,000 people are sitting around doing nothing, or Lloyds thinks that it can squeeze extra productivity from its remaining staff, both of which seem unlikely, it is hard to imagine how this will not affect customer service, even if no branches are closed.
“Our aim is to become the best bank for customers,” Mr Horta-Osório said. Well, my aim is to win a Pulitzer prize and the EuroMillions lottery but, let’s be honest, it’s never going to happen. Mr Horta-Osório also bragged that Lloyds had increased lending to small businesses by 2 whole per cent. That is a bit like a mechanic boasting that he has fixed the headlight on a car whose engine has seized up.
So putting aside the bluster, jargon and job losses, did the strategic review say anything of interest to customers? Well, there were a couple of areas of note. The first was that Mr Horta-Osório wants to reinvigorate Halifax to make it a “challenger brand”. Put through the Times Money jargonbuster, this roughly translates as: “Halifax is going to start offering more competitive deals.” This is exactly what Mr Horta-Osório did when he was boss of Santander. Under his leadership the bank regularly topped the best-buy tables, particularly in the savings and current account markets. So any attempt to repeat this strategy at Lloyds is a welcome development, although at Santander there was always the suspicion that best-buy deals were subsidised by shoddy customer service.
A far more worrying development, however, is Mr Horta-Osório’s ambition of selling his customers more insurance. Banks don’t exactly have an unblemished record in this area. Indeed, having just agreed to pay out a whopping £3.2 billion to compensate customers who were mis-sold payment protection insurance (PPI), you might have thought that Mr Horta-Osório would be more circumspect. Apparently not. The simple reason that Lloyds wants to sell more insurance is that the profit margins can be high. The following passage from the strategic review is the giveaway: “Our strategy will create shareholder value [ie, profits] through simplifying processes, systems, products and policies and by investing a portion of the savings realised in growth initiatives targeted at high-return areas of our business.”
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The problem is that there is an almost perfectly inverse relationship between how profitable an insurance policy is to sell and how useful it is to customers. Identity theft protection is a classic example. This type of cover is about as near to useless as insurance can get. Claim rates are low because banks are obliged to refund losses to fraud anyway. The result is that the policies are very profitable to sell.
So Mr Horta-Osório’s plan for Lloyds boils down to attracting new customers by offering some bargain deals and then flogging them overpriced insurance when they venture into a branch. You have been warned.
Insurers’ unfettered greed is no shock to us, Mr Straw
Insurers are greedy and short-sighted. That was the supposedly shock news this week after Jack Straw highlighted how the industry has been selling its customers’ personal details to claims management companies. Of course, regular readers of Times Money do not need a former Labour minister to tell them this. Barely a week goes by without us publishing some shocking tale or another about the industry.
Indeed, only the other week we reported that the practice of kickbacks for leads had spread from car insurance to payment protection insurance (PPI). Victims of the PPI mis-selling scandal — like victims of car accidents — are now plagued by calls from claims handlers. And if you think the car insurance racket stinks, let me tell you that the PPI racket hums like a French cheese factory on a hot summer’s day. Why? Because some of those who mis-sold PPI in the first place appear to be profiting a second time from their bad advice by selling on their customers’ details. Presumably the logic is that they are going to have to pay compensation anyway so they might as well get a slice of it back through referral fees from claims handlers.
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Of course, those who suffer genuine injuries from car accidents deserve recompense, as do those who paid for insurance that they could never use. But the excesses of the claims industry are clearly driving up the cost of car insurance and taking an unnecessary cut of PPI refunds. In the process, plenty of people are plagued by annoying phone calls and text messages.
Ultimately no one benefits from this other than the claims handlers but so far the Government has resisted pressure to ban referral fees. Quite why is a mystery. What little benefits there may be in this system are greatly outweighed by the costs. Ministers think that “transparency” is the answer but when so many involved in this racket are shameless, that alone is unlikely to help.