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Hugh Thompson OC,  Interviews Chris Johnston OC

The article below is by Hugh Thompson & was originally  published in the Times on 10th June 2004 - It's not often that one OC writes about another OC and publishes it in Britain's premier newspaper!

MY BIG DEAL

The hidden benefits keeping rail workers in good health

Born: 1943, Blackpool

Education: Clayesmore

Career history: Johnston left school at the age of 16 with hopes of becoming an accountant, but he had failed his maths O level three times. He then got a job as a clerk in the Stock Exchange and eventually joined his brother in a business venture that failed. That left Johnston, 26 without any qualifications or a career. Luckily, in 1969 there was still a demand for unqualified public school men in certain sectors and Johnston found himself going door - to - door to business premises selling accident insurance for the Combined Insurance Company of America.

 "I was not a star salesman but I could do it. I learnt how to sell and how to pick myself up from the inevitable rejections"

Talking to those buying the policy, Johnston realised that there was a demand for an all-in-one sickness and accident policy. The Combined Insurance Company of America was not interested, so he approached its great rival, Mutual of Omaha who were just setting up in the UK.

The deal: Mutual was prepared to underwrite such a policy and backed Johnston with a loan so that he could set up a sales team. This went well and got better when Johnston expanded his offer to hospital plans, which would give patients cash for each day they had to spend in hospital. it went so well that various companies bought him out.

 Eventually, Johnston fell out with his new owners and as part of the separation deal they said that although he could not run an existing insurance company, there was no problem in him starting one from scratch

He persuaded Refuge Insurance, County Bank (now NatWest) and a venture capitalist group to stump up the bulk of the £1 million required, and Personal Assurance was born in 1984.

For a while the company continued as before selling hospital plans to the shop floor. Hospital plans where policy holders get a cash sum for each day in hospital are easy to sell and explain, and from the insurers' point of view the payouts are much more controllable than those for accidents and sickness.

Johnston attributes much of his success to his 20 year relationship with John Ormond, the man who ran his back office and claims department. "If that side doesn't work, then insurance doesn't work," Johnston says. "It's not just about sales and product development."

After five years the business, although profitable, had stalled. With rejection rates running high the turnover of sales people grew. "I have had several big upsets in my career," Johnston says "and the moral is that if you work through them and stay positive, then you look back and you realise that these were God-given opportunities."

Johnston switched emphasis to the then nationalised industries. The old British Rail employees proved to be a happy sales ground for his low cost high benefit policies. But British Rail employees were then paid largely in cash. They wanted their premiums taken off their payroll. British Rail were used to doing this, acting as something of a direct debit service for their then still cash centred employees, and agreed.

In 1988, having struck the payroll deal, the business took a dramatic and positive turn. The sales staff of 30 somehow became four times more productive. Soon as many as 30,000 railwaymen had signed up and were having their hospital plan money docked before they got their pay packet. 
Then it was into the bus companies, the Post Office and other leading public sector industries, where pay was high but benefits were relatively low.

"It was amazing. Some of our competitors had been using payroll for some time but by using this convenient payment system we had made our offer more attractive to the customers and more financially stable and cost efficient to collect," Johnston says. In three years profits trebled to over £1 million a year. Today they are more than six times that amount.

"Overnight the veil was taken from my eyes, 1 just kicked myself for not having cottoned on to the idea of being paid from payroll years before."

Since then the company has grown to having 290 payrolls deducting premiums at source from nearly 300,000 customers. The old reliance on nationalised industries has long gone and there is now a fair sprinkling of blue chip high street names whose employees pay their dues to Johnston.

He not only success floated his company on AIM four years ago but has yet again increased the offer. He now sells a whole variety of employee benefits either directly through his group of companies or as a broker. "As the benefits market has grown and become more sophisticated so have we, but if we hadn't come across the payroll method of payment, I don't think we would be here today," Johnston says.

HUGH THOMPSON
hugh.thompson@thetimes.co.uk

© The Times 2004