Journal of Consumer Culture

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Consumption Denied?: The decline of industrial branch insurance Dawn Burton, David Knights, Andrew Leyshon, Catrina Alferoff and Paola Signoretta Journal of Consumer Culture 2005 5: 181 DOI: 10.1177/1469540505053091 The online version of this article can be found at: http://joc.sagepub.com/content/5/2/181

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Journal of Consumer Culture

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Consumption Denied? The decline of industrial branch insurance DAWN BURTON University of London DAVID KNIGHTS University of Exeter ANDREW LEYSHON University of Nottingham CATRINA ALFEROFF University of Exeter PAOLA SIGNORETTA University of Nottingham Abstract. This article explores the rise and fall of a distinctive form of financial services consumption within the UK: industrial branch, or home service, insurance. It developed in the 19th century as one of the first generally available financial services products, and was targeted at working-class and lower-middle-class households through agents who sold products, and collected premiums, door-to-door. However, this industry is now in terminal decline, which is in part a product of long-term social processes, the rise of ‘at-a-distance’ delivery systems for financial services, but also due to the unintended consequence of government regulation in the 1990s. This article draws upon research into this industry as it withdraws from this market, reveals the ways in which such firms interact with their customers, throws light upon their strategies of market withdrawal, and reflects upon the implications of the demise of this market for their former customers. Copyright © 2005 SAGE Publications (London, Thousand Oaks, CA and New Delhi) Vol 5(2): 181–205 1469-5405 [DOI: 10.1177/1469540505053091] www.sagepublications.com

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Key words financial exclusion ● financial services ● home service ● industrial branch ● insurance ● saving

INTRODUCTION Over recent years consumption has assumed a place in academic research more appropriate to its importance in society (Bauman, 1992), so that significant contributions have appeared on the topic across the social sciences (for example, see du Gay, 1996; Miller, 1995; Warde, 1996). Consumer-centric discourse has also played a valuable role in reconceptualizing the labour process in services in which production and consumption are closely inter-related (du Gay and Salaman, 1992; Knights and Morgan, 1994; Warde, 1992). The simultaneous nature of production and consumption that constitutes the ‘service’ generates ‘moments of truth’ (Carlzon, 1987) when consumer expectations are either met or disappointed.1 The close proximity of service workers to consumers has generated novel areas of research including the role of emotions in organizations (Fineman, 2000) and service work (Crang, 1994; Hochschild, 1983; Leidner, 1993). A further extension of this work is the emergent interest in aesthetics and the location of employees as the physical embodiment of the service (Carr and Hancock, 2003; Leidner, 1993; McDowell, 1997;Witz et al., 2003). Despite the importance of the quality of the social interaction in the service delivery, an examination of the processes involved within financial services contexts remains limited (Aldridge, 1998; Burton, 1994; Knights and Tinker, 1997; Leyshon and Thrift, 1997; Morgan and Knights, 1997). The existing literature comprises accounts of customer care (Sturdy and Morgan, 2000) and service quality (McCabe et al., 1998). Other work has focused on asymmetries between financial institutions and consumers (Aldridge, 1998; Knights et al., 1999). The role of information technology has been investigated in the context of the changing nature of producerconsumer relations in the context of credit scoring, customer surveillance (Leyshon and Thrift, 1999) and the production of new modes of financial services delivery (Knights et al., 2001). While such accounts are valuable in mapping the field and synthesizing existing research, they tend to be less adept at documenting the unfolding of social relations between producers and consumers in a substantive context. A second and related limitation is that many accounts have focused on production and merely extrapolate the implications for consumption and for consumers. These ‘at a distance’ accounts do not give a ‘voice’ to 182

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the consumer (Stern, 1995). And yet it is precisely this register that is integral to discussions of the dynamics of the relationship between producers and consumers. A third and final limitation of existing studies is their focus on mainstream financial institutions and a largely middle-class consumer base. In this respect researchers are presenting only one aspect of financial services consumption and have ignored financial service providers that have tailored their offerings to appeal to low-income consumers (Alwitt and Donley, 1996), many of whom are excluded by mainstream financial institutions (see Collard et al., 2001). Evidence from the British Government’s Social Exclusion Unit reveals that 1.5 percent of lowincome households – comprising over two million adults – do not make use of mainstream financial services in managing their affairs. Meanwhile, more than 10 percent of households have no access to banking facilities (HM Treasury, 1999). Households that are most likely to be financially excluded are those headed by very young or very old people, lone parents or single pensioners, and by African-Caribbean, Pakistani or Bangladeshi people. These are some of the poorest households in Britain that have incomes of between £50 and £150 a week (Kempson and Whyley, 1999). Lower-income consumers have been marginalized not only within the financial services industry but also within financial services discourse, so it should be unsurprising that, to date, little attention has been paid to those companies that have tailored their activities to meet the needs of this segment of the market by distributing their services on the doorstep of people’s homes. The limited amount of work that has been undertaken on the home delivery of financial services has focused on the social relations involved in the production and consumption of credit through the participant observation of moneylenders (Leyshon et al., 2004; Rowlingson, 1994) and mail order agents (Ford and Rowlingson, 1996). Very little research has concentrated on home service saving provision. Home service, also known as industrial branch insurance, is a mode of delivering financial services that involves an insurance company agent calling at the policyholder’s home to collect premiums at regular intervals of usually less than two months apart.2 However, it is about to become a relic from the past since none of the original industrial branch companies are taking further new business of this kind and where possible are seeking to have policies converted to a form in which premiums can be paid electronically or seeking to freeze the policies.3 The aim of this article is to account for this demise of industrial branch insurance.4 In the first part of the article we seek to place ‘industrial branch’ insurance within its historical context, to assess the main organizations operating in the market, and provide a profile of existing 183

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customers. In the second part,we consider the attributes that customers value in this mode of delivery by assessing the relationship dynamics between customers and agents.The final sections of the article document the contemporary decline and transformation of industrial branch as a mode of delivering financial services and as a form of consumption, including a discussion of the ensuing social policy implications. Thus, the article documents the rise and fall of industrial branch, or home service, insurance. In broad terms, regulation has sought to protect consumers of financial services from unscrupulous sales people and practices, but one of its unintended consequences has been the demise of industrial branch insurance. THE DEVELOPMENT AND SCOPE OF INDUSTRIAL BRANCH INSURANCE COMPANIES While vague traces of the practice are to be found in ancient Greece and Rome (O’Donnell, 1936: 77–8), life insurance did not become fully institutionalized until well into the 19th century. This came about through a combination of proliferation of active marketing methods by insurance companies, a growing middle class in need of protection, advances in actuarial science connected to the growing availability of mortality statistics, and progressive government regulation which sought to clarify the distinction between a wager and a life assurance policy (Daston, 1990). Life insurance began to expand in the first half of the 19th century (Supple,1984: 5) and,due to innovative developments (e.g. investment bonuses and endowments), this expansion was consolidated in the mid-Victorian boom of 1851–71 as the middle classes began to use life insurance as a savings medium and to fulfil mundane obligations to the family. Prominent among them was the purchase of a whole life insurance policy,5 whether in connection with a marriage settlement or to provide for a wife and children on the death of the head of the household (Treble, 1984). The development of insurance practices contributed to an evolving ethic of family responsibility, familial obligation and an ‘ethic of improvement’ and ‘working class self-help’ (Knights and Vurdubakis, 1993: 745). The practice of paying regular insurance premiums to secure a future of comparative stability reflected the farsightedness of the head of the family in contrast to the ‘wastrel, improvident gambler’ (Knights and Vurdubakis, 1993: 740; Gillis, 1990).The very names of insurance companies – the Prudential, Provident and Equitable – reflected a concern with the ‘orderly, thrifty, prudent and farsighted’ (Knights and Vurdubakis, 1993: 740). Life insurance allowed one ‘to put chance in the form of risk in the service of morality; family life, foresight, prudence and parsimony’ (Daston, 1987: 248; Zelizer-Rotman, 1979).6 184

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Industrial branch insurance companies emerged as an extension of the practices of insurance to the less affluent industrial classes, those in the working or lower-middle classes. While they offered the full range of personal insurance products from life assurance to general insurance including accident, home and motor insurance, they concentrated their attention in the early days on the regular weekly savings (endowments) or whole life assurance (death) policies. These policies enabled less affluent consumers to save for the future or at least to ensure there was enough money available on death to avoid a pauper’s funeral. In parallel with the Friendly Societies7 – which are the other main actors in this market – premium collections were made face-to-face, usually on a weekly basis, in contrast to the ‘ordinary branch’ companies that generally relied on quarterly or yearly payments paid often by bank cheque. The earliest industrial policies were sold as a means of avoiding the indignity of a pauper’s funeral, but eventually the endowment policy was created as a regular savings vehicle. This philosophy was set out by the Prudential in its original mission statement, which was ‘to enable people of small means to provide first, for relief in sickness or in accidents; second, for a person in old age; third, for an adult burial; fourth, for an infant burial fund’. The development of industrial branch business was rapid, and as a consequence some of the earliest industrial branch advertisements focused on recruiting agents rather than new policyholders (Pearl Assurance PLC, 1990). In 1864, between 1500 and 1800 industrial branch policies were being sold every week by the Prudential. By 1871 this figure exceeded 8000 per week, and by 1873 it was 11,000. Most ordinary branch business was transacted by people aged 31–55, but 75 percent of industrial branch policies were purchased by individuals under 30 years of age (Dennett, 1998). Through their agents, companies took advantage of the high population densities of emerging industrial areas, and responded to the precarious financial lives of the working class, to offer regular door-to-door collection of premiums that, for the first time, made saving through life assurance affordable for people on low incomes within the UK’s industrial regions and cities. In so doing, these firms became effective aggregators of working-class savings (Davies, 1994). The growth of these firms – such as the Co-operative Insurance Society (CIS), Prudential, the Pearl, the Royal London, the Refuge, and the Pioneer, for example – was based on their ability to operate successfully within the cash economy, and their tailoring of a delivery and collection system to match. Often weekly visits were timed to take place just after the ‘breadwinner’ arrived home on or around pay-day. 185

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Agents have been central to the development of industrial branch. Experiments with postal life insurance in Britain in the middle of the 19th century failed (Germain, 1996). Some of the first companies preferred to advertise and distribute sales booklets rather than use agents. Sales presentations were only made to individuals that visited insurance offices and no follow-up of ‘prospects’ – that is, potential customers – occurred. These distribution methods attracted relatively few policies and were also unsustainable. For example, Clough (1946: 89) notes that, ‘[t]he Old Equitable of London, operating without agents, issues but a few hundred policies a year, whereas some of its more recent English competitors write nearly that many in a single day’. Apart from building up relationships with customers as a social context in which to facilitate selling, the role of the agent was also pivotal for another reason, because of the nature of the product. Unlike many other products, life insurance has to be sold. Few people, no matter how concerned they are about sharing risks, buy life assurance of their own accord without it being sold (Morgan and Knights, 1991a). Elsewhere, this reluctance to purchase has been conceptualized as a form of consumer resistance (Morgan and Knights, 1991b). In many ways industrial branch insurance is an early example of relationship marketing (Gronroos, 1984; Gummesson, 1991). Indeed, many company histories, such as Royal London for example, use metaphors of ‘the family’ or of a ‘family atmosphere’ to describe the relationships between agents and the company, and between agents and customers (Allen, 1961). However, it also needs to be recognized that ‘no poaching’ agreements were in operation between some of the larger industrial branch companies. These arrangements covered both customers and agents. In many respects these agreements somewhat artificially enhanced relationship continuity. By the mid-1980s, a significant number of the original home service companies were still in business, although they had progressively increased the proportion of ordinary branch business. Nevertheless, many of these firms retained industrial branch divisions, operating in the market in much the same way that they had always done, with agents going from door to door collecting small premiums from policyholders (see Table 1). In this respect, industrial branch is a ‘relic’ of a bygone era (Leyshon et al., 2004). Despite its longevity, over the last 10 years there has been considerable instability with significant amounts of merger and acquisition activity between industrial branch organizations.8 The net result is that home service became concentrated in a smaller number of larger institutions. In this respect, trends in industrial branch were not too dissimilar from 186

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activities in other parts of the financial services sector, notably banking and building societies (Burton, 1994). By 2001, only one industrial branch organization, the Co-op Insurance Company (CIS), was ranked among the top 20 general insurers, while the Royal London was the only industrial branch company to appear among the leading 20 long-term UK insurers (ABI, 2003, 2004). Customer profiles for the companies are difficult to obtain since many home service companies were relatively slow to automate their manual home service records. Data provided to us by Lifeco,9 one of the largest organizations left in the market after 2000, indicates that the majority of customers are elderly, especially over 75 years of age (see Table 1). Very few people under the age of 35 are home service customers. This data is consistent with that from Insco, where 51 percent of customers were over 60 years of age, 12 per over 80 years and only five percent of customers were under 30. At Friendlyco, the membership characteristics were slightly different and were concentrated in two main groups, the 25–35 and 50–65 age cohorts. The gender profile of customers reveals that women were more likely to be home customers than men. Among Lifeco’s customers, women outnumbered men by nearly two to one; the company had 731,358 (62%) women customers compared to only 445,397 (38%) men. Participant observation work undertaken with agents (see note 1) supported this finding. For the most part, the customers that interacted with agents on behalf of households were women, who were responsible for not only paying the premiums of their own policies but for those of other members of the family. These findings are similar to those of Ford and Rowlingson (1996) and our own empirical research that found women to be also the main consumers of credit in low-income households. In both cases, it is because, although women may not control, they have most responsibility for household finances. Traditionally, women were also more likely to be at home when the collector called. The data also revealed that the average premium for industrial branch insurance was very small. This reflected the age of some of the policies, but also the nature of the niche market among working-class consumers that industrial branch companies have traditionally mined. Nearly 14 percent of Lifeco’s customers paid premiums of less than £1.50 per month, 57 percent paid between £1.50 and £5 per month, and only around 30 percent of customers paid premiums of over £5 per month. At Insco a similar pattern emerged. Around eight percent (comprising 23,683 addresses) of monthly collections were 10p, 18 percent were below 50p, 12 percent between 51p 187

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Table 1: Premiums, age and gender profile of customers at Lifeco Age profile

Less than £1.50

Age profile

More than £5

Unknown 0–17 18–24 25–34 35–44 45–54 55–64 65–74 75+ TOTAL

121,227 124 618 3,122 5,553 9,448 29,199 65,356 153,229 387,876

Unknown 0–17 18–24 25–34 35–44 45–54 55–64 65–74 75+ TOTAL

185,277 1,707 10,127 54,996 59,430 56,712 90,486 99,900 269,815 828,450

Gender profile Unknown Male Female

Gender profile 16,863 145,141 225,872

Unknown Male Female

22,708 300,256 505,486

and £1.49, and nine percent were between £1.50 and £1.99. The very low levels of contributions make these consumers unattractive for mainstream financial institutions that have developed their marketing strategies to appeal to more upmarket, affluent consumers to whom they can sell profitable, value-added services (Burton, 1994; Leyshon and Thrift, 1999). However, during the 1990s, and partly because of regulatory costs, even the larger home service firms found collecting and selling small premiums through industrial branch unprofitable and restructured the ways in which they interacted with consumers.10 These strategies, along with some of the social policy implications that arise from them, are discussed in subsequent sections of the article. AGENTS, CUSTOMERS AND INSURANCE POLICIES: RELATIONSHIP DYNAMICS IN INDUSTRIAL BRANCH INSURANCE Despite industrial branch insurance operating as a method of distribution for over a century and a half, few attempts have been made to assess the nature of the interaction between the buyer and seller of insurance products. One objective of both the participant observation research undertaken with agents on their rounds and the customer focus groups that we ran was to gain an insight into the dynamics of the relationship in a more concrete way. This relationship was characterized by a number of themes 188

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that emerged during the research process, which included an ethos of social inclusion, intergenerational consumption and trust, and the importance of continuous social relations in the context of critical incidents. Ethos of social inclusion One criticism of mainstream financial institutions is that they promote social exclusion rather than inclusion through their use of discriminatory practices (Kempson and Whyley, 1999; Leyshon and Thrift, 1999). By contrast, there are at least four ways in which it is possible to conclude that industrial branch insurance companies were on the whole not exclusionary but, rather, were important vehicles for saving among low-income groups. The first were low financial barriers to the purchase of the products because minimum premium contributions were set at such a low level (e.g. £1–£5 per month depending on the company). In the past, of course, these premiums were as low as a few pennies. Several retired people in the focus groups indicated that their parents had started policies for them and they continued the practice with penny and sixpenny policies. None of them was embarrassed about their low levels of contributions, but stressed that when the policy matured ‘it was quite a sum’, and generated money that they would probably have not have saved otherwise. Others were very proud that they had managed to save for several years and this generated substantial loyalty for the company that had helped them do this. The following encounter, observed during our observational work with agents, confirms this. The customer is a 40-year-old male, labourer, in conversation with a company agent while taking out another policy: Customer: I’ve done it before mate. I’ve had a 15 year [policy] years before. I’ve been paid out on it. We’ve always been with [Lifeco], forever . . . the fella used to knock on the door every week and I used to say,‘I’ve been with you for 15 years’. And then they come round and give me the cheque after 15 years. (Source: participant observation) A second aspect of the inclusion facilitated by industrial branch insurance is its spatial dimension. There is significant evidence of the withdrawal of mainstream financial institutions from deprived areas (Leyshon and Pollard, 2000; Leyshon and Thrift, 1997). At the same time, the Post Office has embarked upon a programme of branch closures in urban and rural areas (Leyshon et al., 2004). The face-to-face delivery system deployed by home service removes barriers that occur with respect to the inability to access appropriate transport and technology. Several of the customers indicated 189

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that the cost of the bus fare to reach a financial institution on the high street would have cost more than their premium. However, the convenience of home service delivery is not unique to industrial branch nor is it necessarily benign; door-to-door distribution systems have also been influential in the context of home-collected credit. It is also a factor that has enabled unlicensed moneylenders and even loan sharks to operate effectively in poor inner-city areas and on Local Authority housing estates (Leyshon et al., 2004). A third factor is partly related to the second, since it deals with various aspects of disability. Some service organizations have gone to considerable lengths to meet the needs of consumers who suffer physical or sensory impairment. Within an ageing population, increasing numbers of individuals will undoubtedly be housebound. Home service is well suited to the needs of the customers who would otherwise be excluded on grounds of physical immobility.11 A fourth and final factor is related to the flexibility of payment terms. Many industrial branch consumers are engaged in insecure employment. Having a very structured payment schedule would be difficult for some consumers to maintain. As one customer explains, ‘My husband is a taxi driver and his earnings are uneven, so it’s better with cash. I can miss out the occasional payment and make it up over the next two months’ (Focus Group). This flexibility was important in other ways too. Individuals who did not have bank accounts had to pay a full premium for house insurance in advance with mainstream insurers, which many could not afford. Others who did have bank accounts were concerned about their lack of control of direct debits and the penalties for going overdrawn. As one focus group participant explained: If you haven’t got the money in they can actually take a penalty for the money not being there. It was a house insurance with NatWest and I’d actually said I’d have the house insurance and the money wasn’t in the bank and they took £20. Thus, social inclusion in its various different guises was an aspect of the service delivery that industrial branch customers valued in home service. It is an example of a service where the barriers of entry to participate, in the form of economic, social and cultural capital, are low. Elsewhere, these features have been identified as preconditions for the massing of the personal financial services market in the UK (Aldridge, 1998).

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Intergenerational consumption and trust Intergenerational aspects of consumer behaviour have not attracted a great deal of attention from consumer researchers (Moore-Shay, 1997; Viswanathan et al., 2000). A pertinent reason why the intergenerational consumption literature is scarce is because many products have such short life spans (Firat et al., 1995). Lunt and Livingstone (1992) argue that generational differences concern the historical and cultural climate regarding consumption, focusing on often-neglected socio-historical influences on attitudes and values. The focus on generational difference tends to concentrate on discontinuities and social instability. This approach is unlike other models of consumer behaviour that chart individual and household consumption, such as the life-cycle model for example, that focus on linear continuity and where changes are predictable. Industrial branch products have very long life cycles, spanning several generations, and provide an excellent opportunity to investigate intergenerational consumption (Burton, 1994). With respect to the consumption of industrial branch products, there would appear to be a substantial degree of generational continuity rather than difference. There was considerable evidence during visits with collectors and agents that several generations of the same family had policies with the same company, and it was not uncommon for customers to have policies with more than one industrial branch company. Home service companies were well aware of the importance of customer loyalty and trust and the accumulative effect of this over generations of the same family. The importance of intergenerational aspects of consumption was acknowledged by a sales manager at Friendlyco in the context of what he perceived to be misguided regulation: And again, what the regulator can’t understand is, if grandma has had a policy, if a mother’s had a policy, daughter has had a policy, [then] when she has a child, they . . . want a policy and you’d be surprised how many people, when we take maturities to them, want to maintain that contact. I don’t think regulators can understand that, that there’s been a [Friendlyco] Assurance policy for 100 years and they want to maintain that link by hook or by crook. It’s not that we do anything wrong in saying to a person,‘we can’t do this, that or the other’, people want to maintain that link. (Interview, Sales Manager, Friendlyco) The ways in which knowledge of home service was passed on from one generation to another was particularly interesting. Reminiscences of the insurance agent were very often tied into collective family memories 191

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through storytelling (Gabriel, 2000). As one participant in the focus groups explained: Regarding the past insurance people, when I was little I went to my grandma . . . she was born in 1880 . . . and she used to hold the insurance man in great esteem. It was like he was on a pedestal and he used to collect on Friday. I used to think this man was something special. To a significant extent, life insurance agents benefited from the accumulative aspects of intergenerational trust attached to the products, the home service method of collection, and the agents themselves. Continuous social relations and critical incidents An important aspect of the social interaction between customers and agents was that of continuity. Previous research on direct sales in the context of party plan shopping has indicated that the most successful events were those that exploited pre-existing social relations. Particularly important were continuous social relations where there was a high degree of relatedness between the party planner, the host and her guests. Continuous social relations were very different to episodic social relations whereby the group hardly knew each other. Party selling became more like work in situations where discontinuous social relations existed and where only some of the guests were mutual acquaintances or belonged to a loosely knit social network (Taylor, 1978). Since many industrial branch customers purchase policies that have a pay-back term of many years, the relationship that customers have with agents is a very good example of continuous social relations. This lengthy, continuous relationship was referred to many times by industrial branch consumers. They often looked upon the agent as they would a friend, neighbour, confidant or a member of the family.12 In this respect the relationship between industrial branch agents and their customers displayed many of the characteristics that mail order agents have with their customers (Ford and Rowlingson, 1996). As far as agents were concerned, they needed to stay on good terms with their customers since they were an important source of repeat business and new leads, but none of the customers mentioned this instrumental aspect of the relationship but preferred instead to concentrate on its paternalistic qualities. Continuous social relations between the agent and the customer were invaluable in the context of critical incidents. By the very nature of industrial branch products, customers are insuring against eventualities that can 192

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be stressful and distressing. These episodes might include the loss of a loved one, in the context of life assurance, or of possessions, in the context of contents insurance. The close personal relationship between the customer and agent was reassuring in this: The typical IB customer will have had their policy passed down from family to family, generation to generation to generation. The collector, if they’ve been working in that area for a number of years, they’re treated like a family friend and [the customer will] turn to them for all sorts of family situations. Particularly at the time of death, that’s really where a collector comes into their own, because they have befriended the family for so long. (Interview, Field Development Manager, Insco) Thus, in many cases industrial branch agents often performed the role of a death counsellor in cases of bereavement. There were also important generational differences in approaches to critical incidents and the role of the agent. Younger customers had different lifestyles and these were reflected in the relationships they had with their agents. They were more likely to take the initiative and cut out the interaction with the agents: The younger generation are very used to phoning directly into a head office [to] find . . . a policy document. ‘Oh well, I’ll phone [Head Office Location] up’. Whereas the older generation would want to speak to their collector because it’s a very sensitive time and they’d want to speak to somebody they know. They don’t want to speak to the voice on the telephone. (Interview, Business Manager, Insco) To some extent, the higher levels of confidence that younger people have in managing their affairs and dealing with financial institutions at a distance (Leyshon and Thrift, 1999) could be viewed as a contributory factor in the demise of home service among younger segments of the population. THE DECLINE AND TRANSFORMATION OF CUSTOMER-AGENT RELATIONSHIPS IN INDUSTRIAL BRANCH INSURANCE Despite the important role insurance branch agents and companies occupied in generating working-class savings, by the late 1990s many companies had pulled out of the market. Only a small number of friendly societies were issuing new business at the time of writing. As a consequence, there have been significant job losses in the sector. Approximately 193

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190,000 were employed in industrial branch in 1991 (HM Treasury, 2001) a figure that declined to only 20,000 by 2003 (Association of British Insurers, 2004).13 These trends have had profound implications for the decline and transformation of relationships between consumers and agents and the opportunities afforded to low-income consumers to save in a mode of delivery that has been deeply embedded in working-class communities for over a century (Leyshon et al., 2003). To some extent the trends observable in industrial branch reflect practices within the insurance industry and financial institutions more generally, to reduce face-to-face contact in favour of more at-a-distance provision and communication. Thus, the decline of industrial branch insurance may be seen at least in part to be a casualty of more general processes through which it became ‘crowded out’ within increasingly complex and professionalized organizations. As insurance companies evolved, and diversified the markets in which they operated, industrial branch became less significant and important within the organizational politics of large businesses (Knights and Murray, 1994). Internally these companies were also growing their ‘ordinary’ branch business at a much faster rate than their traditional door-to-door collections. However, there were at least two specific developments that have led to the decline of industrial branch business. First and most important is regulation, for while the industrial branch companies could in no way be seen as a part of the establishment, they had enjoyed comparatively low levels of regulation because of a ‘voluntary system’ operating in the square mile of the City of London. Here the notion of ‘my word is my bond’ was a definition of what it was to be a gentleman whose trust could be guaranteed as a function of character and breeding. It is what has been described as ‘club regulation’ within the British regulatory state (Moran, 2003). Club regulation was a Victorian invention that ranged across different aspects of British life. It was a product of the British establishment’s response to 19th-century industrialism and democratization, and effectively placed regulation beyond public scrutiny and democratic control within self-regulatory ‘clubs’, that were modelled on the institutions that constituted the club society of Victorian London; that is, they were exclusive, social and patrician. Beginning in the 1980s, the UK entered a period that Moran describes as one of regulatory hyperregulation. The financial services industry was subject to significant regulatory changes during the 1980s, as legislation was introduced to make financial services industries more competitive, by removing the barriers to entry that had prevented institutions from operating in more than one key retail financial services market. But the quid pro quo for these market 194

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freedoms was to introduce a form of prudential regulation that required demonstrably higher levels of compliance. Thus, the key piece of 1980s financial re-regulation, the 1986 Financial Services Act, imposed higher barriers to entry in the form of training and qualifications for all those offering investment advice. Individuals involved in selling investmentrelated financial services had to pass a Financial Planning Certificate at three levels. This proved too difficult or daunting for many of the agents of the home service companies since few of them possessed formal qualifications, or felt it was too late to start studying for exams. But this was not ultimately the reason for the collapse of industrial branch business since agents could be employed as collectors and sales handed over to those with the qualifications. Indeed, this is precisely what happened in the early stages of the new regulations but as we illustrate below, the regulators tightened up and even the qualified were found to deviate substantially from the new regulatory demands. As the regulators were simultaneously seeking to bring down the costs of distribution through, for example, transparency and the one percent cap on charges, there was no way that industrial branch companies could retrieve their increased costs. When the regulators began to target the sector for special attention, not least because of the high costs of industrial branch products, there was an additional concern about proper compliance of the regulations. A number of high profile regulatory fines and the necessity to withdraw sales staff from the field for retraining occurred in some well-established industrial branch companies. Pearl Assurance, to give just one of many examples, found itself on the wrong side of regulators and the company was threatened with closure. A training spend of £7.4 million, costing around £330,000 per agent in 1997, was required to satisfy the regulators (Marketing, 2000).14 The pressure to provide strong justification for selling industrial branch in preference to ordinary branch business, under the ‘best advice’ rules of the regulatory regime, also presaged an overhaul of industrial branch distribution systems. Second, the financial costs of a highly labour-intensive system were a further factor in the decline of industrial branch insurance (Kempson and Whyley, 1999), as it lost out to the cost effective product delivery systems such as ordinary branch and, more recently, direct sales through the telephone and the Internet. Third, there was the modification to the industrial assurance legislation in 1995 allowing companies to convert industrial branch policies into ordinary branch policies (Alferoff et al., 2003). This mode of delivery was particularly costly when compared with new ata-distance provision such as the Internet and telephone-based services. 195

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Thus, in short order, regulations made the business look vulnerable and the largest home service organizations began to withdraw from industrial branch business to concentrate upon more upmarket, direct and intermediary distribution systems. Despite very similar pressures from this new competitive environment, a diverse range of strategies were adopted by home service companies.15 Although the various home service companies have dealt with the changing environment in different ways, one theme that emerges from most of them is the ‘uncoupling’ of the once integrated role of the insurance agent as both salesman and collector.16 The policy of using a mere collector rather than an agent has not gone without criticism from customers. The loss of the personal service was highlighted by several people during the focus groups. For example, in referring to a Prudential agent, one focus group participant commented: There’s a lady that came, she went up the street to two more [houses] and every month she was there on the dot. It was a 10 minute job chatting to her, but today now they just want to come and go quick. There was also concern over the turnover of staff, the lack of continuity and security aspects. The high levels of trust that existed between customers and agents had all but evaporated as people said they would not let collectors into their homes as they used to. To a large extent, it was the pivotal role of the agent that gave industrial branch its competitive advantage. The evident decline in customer service is symptomatic of what is occurring elsewhere in life insurance companies. Mainstream life companies have tended to concentrate resources on sales and marketing to gain new business at the expense of providing a high quality after-sales service (Morgan and Knights, 1990). This is partly reflected in very poor product persistency rates for these companies.17 Data collected by the Financial Services Authority (FSA), indicates that on average one-quarter of endowments bought via company representatives and one-fifth bought via Independent Financial Advisers (IFAs) had lapsed after four years.18 A number of new initiatives are currently being explored by the UK government to generate savings among lower socio-economic groups. However, while such efforts are laudable, as are the attempts to give consumers more protection in the context of mis-selling, from a radically different viewpoint, all of these new initiatives are missing the point. The crucial factor in successfully generating working-class savings was the 196

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discipline of the regular call of the industrial branch or home service agent on his or her round and his or her willingness to operate within a cash economy. None of the current initiatives touch on these features, nor do they include any positive strategies to retain home service or to reinvent it. CONCLUSIONS This article has focused on exploring relationship dynamics and corporate strategy within industrial branch insurance, and their implications for lowincome financial consumers. Home service has enabled millions of people in Britain from lower socio-economic groups to save for their future for well over a century, but the industry has been decimated over the last 10 years. The rapid decline has largely occurred as a consequence of government legislation that, although well intentioned, has denied choice with respect to savings products and companies among some of the poorest sections of the population in Britain. The repercussions have had important implications for employment in this area of financial services work. Thousands of jobs have been lost and the multi-functional role of the agent has largely been downgraded to that of a collector with the resultant loss in terms and conditions of employment. Furthermore, the relationship between agents and consumers has largely been broken, resulting in lower levels of customer satisfaction. This is because the regulators have been concerned with the high costs and poor returns of industrial branch compared to ordinary branch life insurance, as well as with the dangers of the ‘mis-selling’ of financial products to uninformed consumers. During the late 1980s and 1990s the mis-selling of financial products such as private pensions and endowment mortgages came to light because of the regulatory requirement to give ‘best’ advice. This was fuelled by the government’s concern to privatize pensions by providing financial incentives to contract out of the state earnings related pension (Knights, 1997). Many sales staff saw this as a government endorsement not only to encourage contracting out of state pensions but also of clients’ own occupational schemes, which no private scheme could match. The scandal that ensued and the enforcement of compensation by the FSA provided them with the model to pursue the mis-selling of endowment mortgages and it all became a tricky political issue, given the shadow it cast over people’s lives, and was a major consideration in the reformulation of financial services regulation within the UK. A central conclusion of the article is that while there was much to criticize in this sector of financial services, in terms of the less affluent saver, its most redeeming feature was its regular door-to-door collection of premiums. It provided a vehicle for 197

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working-class savings that otherwise would not have existed. Few attempts to amend the social and financial exclusionary effects of the demise of industrial branch insurance have focused on this fundamental problem. The assumption is that since most people have bank accounts, this method of paying premiums is satisfactory. However, there is much evidence from our research and elsewhere that the bank is not an equivalent to the personal call from the agent as a medium of encouraging ‘financial self-discipline’ (Knights, 1997). It is difficult not to be critical of the way that the government and regulators have handled the home service industry over the last decade. There has been far too much emphasis on the deficiencies of home service and not enough attention paid to its strengths. It is undoubtedly the case that some industrial branch policies have been mis-sold, but so too have endowment mortgages and pensions (Aldridge, 1998; Burton, 2000). The temptation to mis-sell will always be a possibility where a sales force is paid on commission. Protecting consumers from the persuasive effects of sales ‘patter’ is also laudable since consumers in lower-socio economic groups are often poorly equipped to detect and deal with this type of behaviour (Bazerman, 2001; Wallendorf, 2001). However, it also needs to be recognized that persuasive ‘talk’ is not necessarily negative if the sale is in the long-term interests of the consumer. The costs of industrial branch policies have also been criticized by the regulators but this needs to be balanced against the highly labour intensive nature of the service delivery. Without the financial discipline of the agent calling on his rounds, many individuals would not save for their future. The competence of industrial branch agents to advise customers about their financial affairs has also been questioned by regulators and others (Harrain and Crockford, 1984). However, many of the competency issues were resolved through the education and retraining of agents by home service companies in the 1990s. The radical new approaches to encourage savings from individuals in lower socio-economic groups through the use of new products in a mode of delivery that resembles little of the past could be construed as ‘throwing the baby out with the bath water’. What is missing is a systematic assessment of features that are and are not working in home service, in order to make an informed judgement with respect to what elements to retain and those to replace. Regulators have largely based their assessment of home service on abstract knowledge through statistics including number of lapsed policies, the costs of the products and compliance. What is absent from this assessment is the importance of local knowledge about the mode of delivery itself. A crucial aspect of this process is an examination of the 198

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interaction between agents and consumers. We have demonstrated that consumers attach a great deal of trust and loyalty to the system of home service, the products, and the agents themselves. In many instances the relationship that customers built up with agents did connect them quite effectively to a financial system they knew little about. These features will not easily be replaced or even replicated in the new system of depolarization and the introduction of basic financial products. Had the government and regulators fully appreciated the nature of the relationship between agents and consumers in this market, more might have been done to prevent the demise of home service from the unintended effects of government policy.19 Financial incentives to enable industrial branch companies to retain agents in situ, while simultaneously modifying existing products to bring them into the 21st century, may have been a more appropriate strategy, and prevented the denial of a particularly important form of financial consumption to a large section of the less affluent population of the UK. Acknowledgements This article is based on research funded by the Economic and Social Research Council (ESRC award reference number R022250198). We are grateful for the comments on an earlier draft of this article by three anonymous reviewers and for the helpful editorial advice of George Ritzer. The usual disclaimers apply.

Notes 1. Although consumer expectations are also constituted by producers (see Noble et al., 2000). 2. Industrial branch companies changed their name to ‘home service’ in the 1960s since they thought it conveyed a better image. While these companies had concentrated on industrial branch business, the more affluent postwar years resulted in their ‘ordinary branch’ (i.e. monthly payments through the bank or quarterly/yearly in cash/cheque) business expanding disproportionately 3. Insofar as these options are not open to them, most of the companies have outsourced the door to door collections to specialized agencies. 4. The article is based on a two-year research project that focused on delivering financial services in the home. Data is presented from three case studies of industrial branch insurance companies, which for reasons of confidentiality are described in the article as Lifeco, Friendlyco, and Insco. They are fairly typical of organizations still operating in this sector of the financial services market. Research methods included semi-structured and in-depth interviews with key informants comprising sales and operations managers in industrial branch organizations. The fieldwork also included the participant observation of industrial branch agents and collectors out on their ‘rounds’ within these three companies. Three focus groups were also conducted with industrial branch customers. In addition, interviews were held with officers at the Association of British Insurers.

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5. That is, a policy that both insures and invests. The policy pays off a stated amount upon the death of the insured, while accumulating a cash value that the policyholder can redeem or use as security against borrowings. 6. However, it should be noted that Daston’s binary argument that life insurance evolved from a speculative to a prudential practice is controversial. Other commentators have argued that speculative and prudential tendencies have been interwoven with one another over the entire history of the life insurance history (see, for example, Clark, 1999; Itzkowitz, 2002; Pearson, 1990). We are grateful to an anonymous reviewer for bringing this to our attention. 7. A Friendly Society is a mutual organization whose funds, after the deduction of running costs, are owned by its policyholders. Emerging as early as the 16th century, the main purpose of a friendly society is to provide life assurance and to assist members during sickness and unemployment. 8. For example, United Friendly took over the Refuge but was then in turn bought by The Royal London, which also purchased Scottish Life shortly afterwards. London and Manchester was bought by Friends Provident, which retained the pensions management side of the business but sold on the sales division to Royal Liver. Royal Liver in turn expanded in the Republic of Ireland and bought up Guardian Insurance, while the Prudential withdrew from the market completely. 9. The identity of the company data used in this article is disguised to comply with confidentiality assurances given to our informants. 10. This was facilitated by legislation that allowed the home service companies to convert their industrial branch policies into ordinary branch with collection through bank direct debits (Alferoff et al., 2003). 11. For example, during the participant observation we came across one household made up of a disabled couple, one of whom commented that,‘I don’t know how we would manage without home collections’. 12. But this ‘friendship’ could be exploited by agents who were sometimes also money lenders or agents for direct mail or other wholesale outlets. 13. Although at least some of these losses were due to agents switching to collecting companies that expanded as industrial branch companies outsourced the collection of premiums. 14. It should be noted that more mainstream firms also suffered at the hands of the regulator in the sale of their products. 15. They each had significant implications for their customers. It is possible to identify at least four distinctive strategies: withdrawal, investment, consolidation and maintenance. 16. Although not a new process in itself – for example, the Prudential introduced decoupling in the 1970s – the regulatory changes discussed earlier have institutionalized this process and made it ubiquitous. 17. Which is also partly due to the process of ‘churning’ on the part of agents; that is, excessive trading of products that is generated primarily for the commissions such sales generate. 18. The figures for personal pensions were higher at 43 percent and 40 percent respectively (Skypala, 2003a, b). 19. Although it should be pointed out that, where the Prudential had led in the

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1980s, the other companies may well have withdrawn from the market in due course in the search for more affluent customers.

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Andrew Leyshon is Professor of Economic Geography at the University of Nottingham. He has undertaken research on the financial services industry since the mid-1980s. He is the co-author of Money/Space (with Nigel Thrift, 1997, Routledge) and co-editor of Alternative Economic Spaces (with Roer Lee and Collin Williams, 2003, Sage). He is Editor-in-Chief of Geoforum, and previously worked at the Universities of Bristol, Hull and Wales. Address: School of Geography, University of Nottingham, Nottingham NG7 2RD, UK. [email: [email protected]] Catrina Alferoff is presently working as a researcher on a Financial Services Research Forum-funded project, ‘Reluctant Consumers? Consumer Knowledge, Identity, and Citizenship in Financial Services’. Previously she has worked on a number of ESRC- and EU-funded projects and has also carried out independent research. She has published papers on financial illiteracy and exclusion, social policy, consumption and lifestyle, healthcare and aspects of human resource management. Address: School of Business and Economics, University of Exeter, Streatham Court, Rennes Drive, Exeter EX4 4PU, UK. Paola Signoretta is Senior Research Fellow in the School of Geography, University of Nottingham. She is Co-Investigator on a research project funded by the ESRC (The Changing Geography of Banking and Building Society Branch Networks: 1995–2003). From 2002–2004 she was a Research Associate on another ESRC-funded project (Delivering Financial Services in the Home: New Possibilities in Countering Financial Illiteracy and Exclusion), investigating issues of financial literacy and exclusion in relation to the delivery of financial services in deprived areas. She previously worked at the Universities of Sheffield and Ulster. Address: School of Geography, University of Nottingham, Nottingham NG7 2RD, UK.

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