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The Actuary The magazine of the Institute & Faculty of Actuaries

In the hot seat: JW Clink-Bottle

Your company has a reputation for, among other things, innovation. What is your latest gimmick?
Well, I’m not sure I’d agree with the word ‘gimmick’, which makes it sound a bit trivial. We’re talking here about a highly advanced market-leader innovation. What we are about to do is launch a ‘happy hour’. If policyholders take out one of our policies between 6pm and 7pm, we’ll double their sum insured for free.
Doesn’t that pose an anti-selection problem?
It would do if we hadn’t taken the valuable advice of our underwriting office, who recommended that we close all our offices at 6pm sharp to prevent anyone from taking advantage of our good nature and generosity. Our arbitrage department is currently investigating whether we’re at risk from ‘temporal arbitrage’ one of our branches is in Wales, which is in a very different time zone, as you’re probably aware.
A lot of your policyholders have, quite simply, lost their entire savings with your policies. Do you have any comment to make about that?
Yes, and a very positive one. You see, it’s all an example of what one might call the ‘Reginald Perrin product philosophy’. Mr Perrin was, if you recall, a fictional television character who at one point ran a chain of shops that sold items such as smashed crockery. He claimed that his shops provided a valuable social service, because customers would think ‘what a useless broken tea-cup I could make a much better one myself’, or something like that. Likewise, when one of our policyholders realises that their savings have disappeared in a policy that they didn’t want in the first place, with excessive charges and a dodgy investment strategy, they’ll probably think ‘what a useless policy I could have done much better myself’, and thereby feel better about themselves. So we’re doing them a favour really. It’s all part of the unique service we offer.
There have been some complaints that policyholders with identical policies, with identical sums invested the same way at the same time, have received widely different payouts. How do you explain that?
That’s all to do with our ‘guaranteed interest’ feature, which you may have seen featuring heavily in our advertising. Again, it’s something we’re providing for free, although our generosity in that respect has gone unremarked in the press. What we want to do is make receiving a payout more interesting. If the policyholder knows how much money he will receive at maturity, and makes plans accordingly, it’s all so dull. Accordingly, we add an MRF ‘market randomisation factor’ whereby the sum insured may double, or halve, for instance, according to the output from our stochastic asset model. It makes our policies much more interesting.
Yes, let’s move on. Your company is quite famous for, among other things, a very effective incentivisation scheme based on daily embedded value reporting. How has this worked?
Well, as you may know, it all started with the actuaries. They originally had to calculate embedded values annually, then quarterly, and then monthly. But by then they had become so keen on calculating embedded values that they volunteered to do them daily. At that point someone had the bright idea of linking our daily EVs to things the staff could relate to directly like the heating, and the canteen menu.
How do you mean?
Well, obviously when the EV doesn’t grow by the target rate, we turn the heating off. Except in summer, of course, when we’d set it at maximum. The canteen is only allowed to serve puddings when we reach our targets and if the daily value of new business ever goes negative, then it’s cold baked beans for all. Last year’s Christmas lunch was rather spoiled by these new procedures, but that’s business.
That’s very interesting. How do you think the advent of the euro is going to affect your business?
So far, all that European Directive stuff has been very positive for us. We have converted all policyholder literature into Finnish; we’ve achieved a ‘Plain Finnish’ award the only UK insurer to do so I might add and also seen a noticeable decrease in policyholder complaints. Last year we paid all our bonuses in Italian lire all those zeros at the end of the cheque made the policyholders feel much happier. But as far as the euro is concerned, we don’t normally plan that far ahead.
There have been a number of comments in the press that you’re about to become insolvent, and go into liquidation. Is there any truth in that?
Yes, lots. What happened here is that we had a lot of rather expensive advice on how to improve efficiency through outsourcing. We decided that the most efficient route of all was for us to outsource claims payment to the Policyholders’ Protection Fund. So that’s what we’ll be doing.