A state of independence putting Sovereign in the best of health

Russ Piper is helping Sovereign Health Care to prosper in the 21st century. He spoke to Deputy Business Editor Greg Wright.

CHEERLEADERS from Bradford will sing the praises of Sovereign Health Care when they take on the world’s best.

The team is getting the chance to compete on the global stage thanks to a donation from the Bradford-based company, which was founded in 1873 to provide local workers with healthcare in the days before the NHS.

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The fact that Sovereign can support the cheerleaders is one of the reasons Russ Piper, the chief executive, is so keen to preserve its independence.

“This is a group of people with disabilities who formed a cheer-leading group, entered a competition in Bournemouth and won it,’’ he recalled as we chatted in Sovereign’s HQ near Bradford city centre.

“They’ve been invited to compete in the world championships in Florida. The overall cost is £60,000. This will touch their lives. It will be something they will never forget.”

So Mr Piper and the trustees of Sovereign’s charitable trust fund have decided to pay half of the group’s costs. It’s one example of Sovereign’s philanthropic work in the Bradford district. It also recently donated £45,000 to the Yorkshire Air Ambulance, and other large donations have been made to such as Sue Ryder Care’s Manorlands Hospice.

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Mr Piper added: “Being independent is so important to us, because I’ve seen what happens when a company has things that are important to it locally, becomes part of a national brand, and loses some of that identity. We give £500,000 away to charity each year. We give a lot of that locally. We want to give something back to the community that’s supporting us and helping us grow.

“Sovereign has been quite prudent in terms of costs over the years. The financial position in terms of our reserves and our wealth means we can stand on our own two feet.”

Sovereign was established at a time when there was no state-run health service and life expectancy was much lower than it is today.

It’s still a not-for-dividend company which provides health cash plans for customers who want help with covering the costs of everyday treatment such as dental care and eye tests. The affable, driven Mr Piper, who worked for big hitters in the life assurance sector, such as Eagle Star, before he became Sovereign’s CEO in 2009, is determined to shake off years of decline. One of his key goals is to get customer numbers beyond the 100,000 mark.

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He added: “Between 2002 and 2009, we suffered quite a large contraction in customer numbers. We’ve turned that around. Last year, we were 170 customers from the break-even position. In 2011 we will expect to see net growth. We have 70,000 customers and we are attracting around 6,000 new customers a year, and we’re losing between 4,000 and 4,500.

“That potentially would give us 1,500 growth this year.”

Why had the numbers slumped in recent years?

Mr Piper said: “Cash plans had been around for a while, they were possibly seen as an old-fashioned type of benefit. More companies offered private medical insurance and some people thought that was better for them. We probably didn’t move with the times. If you keep doing the same, you do start going backwards. The world around us changed.”

One of his first jobs was to re-invigorate the sales team.

“The people we have recruited into the business have been through a robust selection process, that’s helped to drive standards up,’’ he said.

“With Morrisons, (one of the company’s biggest customers) they have specific products that reflects how important they are as a customer to us. They wanted a product that was branded in their company credentials.

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“When I joined, one of the first things I said to the people who stayed was, ‘We’re on a journey and we all need to go on this together. I will give you a sales and bonus target for the next three years... the target is reasonably soft by industry standards and we’ll give you the support to get there, but what we will do with the remuneration scheme is encourage you to go further.’

“Last year all of our sales people achieved the minimum standard, but many of them went far above that.

“Roughly speaking, our turnover is around £10m, however it is not a great measure of growth as the policy lapses reduce turnover and the biggest impact is if we make a scheme review, such as a price increase. Despite the one per cent increase to IPT (Insurance Premium Tax) in the last Budget, we have decided to absorb this, so even with net growth of customers this year, the impact on turnover will be minimal.”

Mr Piper wants to grow the business in a “controlled and sustainable” fashion.

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The vast majority of its customers are found inside the Bradford district, which reflects its traditional heartland.

He wants to extend its “natural geographic area” to include other parts of the North and Midlands, such as Derbyshire and Cumbria.

He said: “We’ve increased the sales force by three or four people over the last three years. It would be the easiest thing to say, ‘Right we want to grow the business, let’s recruit 15 sales people. We know that eight of them are going to fail, but let’s hope the other seven do OK.’

“We would get an increase in sales. We would also get an increase in cost and the likelihood is we’ll get a lot of staff turnover as well.

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“Health in the workplace is a key issue. We’re also trying to make the ‘customer journey’ as easy as possible. We’re starting a knowledge transfer partnership with Bradford University in April to look at e-media which will improve things like customer access to our systems. What we see as outstanding technology nowadays will be the norm in the future.

“You’ve got to be prepared to deal with your customers in the way they want.”

He acknowledges that achieving expansion during a time of uncertainty will not be easy.

Sovereign has links with public sector bodies, and if there are widespread job cuts it could make his growth targets harder to achieve.

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“We expected 2010 to be very difficult,” he said. “We set ourselves a challenging goal in terms of sales numbers and we only got to about 90 per cent of the objective.

“Having said that, last year’s sales represented a 12.6 per cent increase on the previous year, and the previous year we had a 30 per cent increase.

“What we found, is that regardless of the squeeze in terms of cost, you can’t choose when you are going to get toothache. You can’t choose when you need to see a physio. If you’ve got toothache you can’t leave it for six months. You have to get it treated.

“The products themselves, and the benefits they give do stand the test of time.”