With the economy shrinking for a fifth quarter; unemployment increasing to 25% and retail sales collapsing last month by 11%, a bail-out by the European Union seems inevitable if Spain is to be rescued from recession. The one million UK nationals who live all or part of the year in Spain have hardly been spared the agony of the local population. The value of a typical coastal property has halved and the cost of many essentials has doubled. Worse still for the majority who live on an income in £s but spend their money in €s, the currency has devalued by twenty five percent. No wonder that many of those Brits who are able to are now returning home.
To say that trading conditions are pretty difficult for IBEX, the leading provider of insurance to the expatriate community is therefore an understatement. Yet last week I joined their Chairman John Harrison for the opening of another new office in Sotogrande and the mood was far from glum. Turnover and profits of course are much lower than what would have been the case had the financial crisis not wreaked the Spanish economy, yet the outlook for IBEX is far from bleak. John and his team have reshaped their business model adapting to a new reality applying some important lessons along the way about surviving a recession that many others might usefully heed across Europe.
Recognising early in the downturn that their traditional client base was going to shrink, IBEX has sourced a more diversified blend of products from a wider range of suppliers, improving significantly the number of policies they now sell per customer. With the successful launch of medical, travel, pet, funeral cost and several other competitive programmes, dependence on motor insurance is reducing. As stronger customer relationships evolve IBEX is reinforcing brand loyalty by actively supporting the expatriate community on a very local level through associations with bowls clubs, dog shows and the like. The sales-force is trained to focus on renewing policies as much as acquiring new business, achieving fantastic retention ratios that UK personal lines insurers might only dream of.
An even more stark transformation, however, is in the way IBEX distributes its products. Back in 2007 the firm relied almost entirely on an external agency force of mostly small businesses scattered along the coasts of Spain and Portugal. Opportunistically taking advantage of the dire economic situation at an affordable cost IBEX has since established a network of its own 14 dedicated retail branches marketing direct to the customer. Added to that the growing turnover closed via their own website and call-centre, today over sixty percent of the current premium volume is now channelled directly from the policyholder. The perfectly timed shift from a wholesale to predominantly retail business model is creating long term value in the business.
To take such profound steps in a period of massive uncertainty has required strong leadership and slick operational execution and this is where the IBEX management team have excelled. Some painful decisions on headcount have been unavoidable but with the opening of new offices, the number of employees has in fact increased quite significantly. Motivating staff has been a top priority. Famed for having fun, the IBEX team were on top form at the Sotogrande function even if it was a mere prelude to next month’s Christmas party, the legendary reports of which every year I eagerly await!