Over the last two years Jonathan King has had the job of rebuilding HomeServe’s UK business. It is a process that has, he admits, seen hundreds of jobs axed at the company's Walsall headquarters and across the country.
But Mr King is convinced that the result is a better, more customer-focused business that will see itself stabilise early next year.
It is a massive turnaround for a company that has gone through a nightmare two years that saw it fined £750,000 by telecoms regulator Ofcom for making silent calls and then hit by a barrage of complaints about its winter performance and marketing. It has been under investigation by the Financial Conduct Authority (FCA) over potential mis-selling of policies since October 2011.
The FCA is yet to conclude its probe, but HomeServe has put £6 million to one side to deal with any potential fine and costs.
Mr King had only just been brought back from six years heading up HomeServe’s US operations when the crisis blew up.
It was not a prospect to relish, but Jonathan King seized it with both hands. “I recalled a famous line from one of Obama’s aides at the time of the financial crisis – Rahm Emanuel – he’s now mayor of Chicago. He said: ‘You never let a serious crisis go to waste. And what I mean by that is it’s an opportunity to do things you think you could not do before.’
Mr King said: “It’s really quite liberating. In a really good crisis you can change things faster than you could have imagined when things were going well.
“As a result we’ve been able to make HomeServe in the UK a better business.
“At the same time a lot of people don’t have jobs here any more. I am very conscious that we have had to make changes very quickly and that has meant making people redundant. It’s a cliche to say people have lost their jobs to safeguard the wider business, but it’s true.
“It has been a real shock. After nearly two decades on constant growth, it was the first major hiccup in the business. Its mean we have had to let hundreds of people go over the last 18 months. People who though their jobs were secure. And that’s obviously had an impact on morale within the business, which is something else we have had to rebuild.
“But it’s not just on the front line where things have changed, Only two of our 15 senior executives were here two years ago, 13 have left the business.
“There are now 1,800 people working for HomeServe across the UK, 1,100 of them here in Walsall. We have had to reinforce their belief they are working for a strong, successful company they can feel pride in.”
The UK business, HomeServe Membership, involves selling insurance and repair policies, usually through ‘affinity’ partners such as water companies, to cover domestic emergencies such as fused wiring, damaged carpets or burst pipes.
“Strictly speaking HomeServe is an insurance company, but my approach is to treat us as a customer service company,” said Mr King. The result has been some changes in the way it writes its insurance policies.
“When I came back I looked at the figures for how many claims we turned down because of things that weren’t actually covered because of terms and conditions. I looked at what a reasonable person would expect the policy to do in terms of coverage and what it didn’t do.
“We reviewed the terms and conditions of our main plumbing and drainage policy. We would always advise people to read the small print, but in reality most people don’t.
“What were the things people were being turned down for? Noisy pipes, smelly drains, dripping taps - because they are not considered emergencies.
“But when you listen in at the call centre and someone is having trouble flushing the toilet, you can’t help but sympathise. The call handler turned it down, quite properly, but I was unhappy about it. It’s the difference between insurance and service cultures. I got someone sent out to deal with it anyway.”
“Sometimes you have to take a leap of faith; believe if you do the right thing the benefits will follow.
“We rewrote the policy to cover more of those non-emergencies. It could have cost the business a couple of million,but I was convinced it was the right thing to do.
“The response was brilliant. People renewed, the reduction in the rate of complaints on that policy is 40 per cent down, customer satisfaction is coming up. The repudiation rate – which counts how many claims we have to refuse – was around 13 per cent. Now its down to three per cent. I don’t think we could get it much lower than that.
“On some of our lower premium policies there is an excess of £50. But if there was a second small job the customer needed doing at the same time they were liable for a second charge. They were expecting to pay £50 and ended up paying £100. I was sitting in at one of our call centres and the call handler turned to me and said that wasn’t right. I agreed. I came back here and stopped it. It took a few days, but now its one charge per call out, not per job.
“It’s an example of how people here know they can change things. And that positive attitude comes over when they are on the phone to customers.
“It makes it more pleasant for everyone working here to be able to say ‘yes’. It pays dividends all the way around.”
He added: “We’ve also drawn up a consumer charter, in plain language, telling customers what they can expect from us. I have one on my wall. It’s important to write things down sometimes, so people can see what they can expect from us and make sure we treat them right.”
Marketing was suspended at HomeServe’s Membership business in 2012 and only gradually re-started. As a result, in an industry that expects to naturally lose around 20 per cent of customers a year, numbers have fallen from a peak of 3 million in 2010 to around 2.3 million at present. This will fall to around 1.9 million next year but Mr King expects it to stabilise around that point. “After that, we will be looking for growth, but at a far more modest rate – no more 20 per cent growth.
“This year we recruited 250,000 new customers compared to our peak in 2011, when we recruited 600,000-700,000.
“My objective is for HomeServe Membership UK to be stable, I will be more than happy with that.”
In the meantime, the rebuilding continue, including a close look at how HomeServe operates. So-called ‘cold calling’ has been wound down, with most marketing calls now coming through affinity partners such as water companies.
“The aim now is to focus more on people who really want our service,” said Mr King. “The retention rate was down to 78 per cent last year, but in the first few months of this year it grew to 80 per cent. And when you have two million customers, a two per cent increase is a lot.”
The improvement in customer satisfaction has proved a mixed blessing – it has led to redundancies in the complaints handling department.
“We had 200 people dealing with complaints,” said Jonathan King. “That’s not a good thing, to have that many people having to answer complaints. Now it is about 35.
“We were selling complicated products over the phone. Not any more. We have improved our systems and I am very confident that we won’t get ourselves in that kind of difficulty again.
“We have a clear plan, we know where we are going. And we are still a profitable business.”