Penny James, the CFO of motor insurance giant Direct Line Group, made a critical career move when she was financial controller of life insurance group Prudential.
Taking on a non-executive director (NED) role for three years at Admiral Insurance, a competitor of Direct Line, James was able to fill out the part of her career that has set her up for her current role.
Although her elevation to chief risk officer (CRO) at Prudential soon after gave her a FTSE-100 board position, a reflection of the importance attached to risk across the group’s global business, a second view of a top level board was hugely valuable, says James.
“I would recommend to anyone looking to get more experience, to get onto a main board as a NED,” says James. “I picked it partly out of interest, and partly on the quality of people round the board table,” says James. “It lets you get another window into how people do things, and lets you broaden your experience that you can draw from,” she adds.
Although a finance professional with strong previous insurance experience from previous roles at Zurich Financial Services and Lloyd’s insurer Omega Insurance, James says she found the entrepreneurial culture of Admiral, founded 25 years ago, was an interesting foil to Prudential.
“When you’re on a board like that one of the things you’re very conscious of is how to protect that culture and enable it to be the large financial services firm you want it to be whilst still protecting the values at its core,” says James.
The upshot was that she was able to take the different experiences and use them to push on to the next stage in her career. “Through that period I was on two boards, which operate in very different ways with very different characters, different issues and concerns, so I had the ability to compare and contrast between them, to take cross-learnings,” says James.
“The interesting thing about being an NED is that you go through phases when you’re taking more from them and there are phases when you’re inputting more,” says James- who moved to become CFO of Direct Line just over a year ago.
Making the leap
Coming to Direct Line was a decision based as much as anything on the need to seek fresh intellectual challenges, says James. “A career is a collection of experiences. I had got to a point where it ceased to be a matter of whether you’re going up, down, sideways or backwards- it’s more about whether it’s adding to the experience set,” she adds.
Originally founded in 1985 by Peter Wood as the insurance arm of the Royal Bank of Scotland (RBS), Direct Line was the country’s first telephone-only insurer.
The group, which contains several brands including Direct Line and Churchill as well as roadside recovery provider Green Flag, was divested as the bank struggled to recover from the disastrous effects of the global financial crisis.
From 2012 to 2014 chunks of the highly business were gradually sold off after an initial IPO, until the firm known as Direct Line Group became a separate entity, a FTSE-100 constituent employing 10,000 staff. Last year Direct Line delivered operating profit of £642.8m on revenues of £3.34bn.
“I think the first few years, post IPO, were focused on releasing from RBS, in many forms, in IT, stabilising what was at that point an unprofitable book, and shrinking that back. It was also about losing the poor bits of the business, and growing the better bits,” she says.
James says another attraction of the role was the opportunity to be in a business that is much closer to the consumer. “I’d spent six years at the top of a global organisation, and loved it. But it’s a long time since I’d been in a call centre or I’d been anywhere near a customer,” says James, one of the FTSE-100’s few female CFOs.
Why does that matter? “Because I’m interested in strategy, and in the end to do that you need to be close to where customers are and what they want. My role was brilliant but increasingly focused on governance, risk, economics and regulation, and I felt I wanted to come back into a commercial space, and this role came up,” she informs.
“I’m working with people who understand brands, who talk to the customer before they talk about anything else, and who are really interested in how brand propositions fit together. They want to understand what will make a big difference to their customers- and I really wanted to work in that environment,” she says.
James describes how Direct Line is seeking to drive innovation across its product mix in order to be as competitive as possible. “This year we released a proposition that means if you’ve had a flood in your home we’ll be in within 24 hours drying it out.
“For no-fault, no-blame incidents we’ve introduced a fair claim commitment to customers that their no claims bonuses are protected in those circumstances. We are trying to be innovative in ways that are making insurance better for customers,” says James.
She says finance plays a part in supporting innovation by providing the necessary capital to invest in cutting edge technologies that will drive change in the motor insurance industry. “In our world it’s both the Big Data and AI type aspects that are interesting, because a lot of what we do is around predictive data,” adds James, who studied statistics at the University of Bath.
“We already have huge data models driving our pricing engines, but we’re also now building parallel pricing engines through AI and other forms of new maths to see whether those are more predictive than our current ones, so there’s quite a lot of work going on in that space, which is quite exciting,” she says.
James reveals the group is investing £100m a year to develop platforms that will harness this technology. “Some of this is about enabling end-to-end customer service and some of it is about enabling more in the data usage space,” she says.
Embracing the future
To maintain a leading edge in motor insurance, Direct Line needs to be close to the major innovations taking place in car technology. “It’s crucial to understanding how that affects customers, through customer ownership, models and what that does for insurance,” says James.
Direct Line has forged partnerships with motor manufacturers Volkswagen, Peugeot-Citroen and Tesla in order to keep pace with the changing technology. “Whilst those are business deals of varying shape and sizes, we also do them for strategic reasons because we’re trying to understand the direction of travel of motor car development,” she advises.
Regarding the development of autonomous vehicles, Direct Line is part of a consortium called Streetwise. “It’s looking to have an autonomous vehicle on the streets of Croydon, and we’re working with the government to understand the impact and potential,” she says.
“We think level 5 autonomy (fully autonomous vehicles everywhere) is very difficult and a long way away, as there’s a lot between here and there around car safety feature. But when it comes to autonomous driving on a dual carriageway as opposed to in a city centre, I think there will be a lot of progression down that path before we get to level 5. So we invest in all of those areas to make sure we’re driving the shape of it rather than being recipients at the end,” she says.
When it comes to the tone of her finance leadership, James says she has a number of core priorities. “We look at: what are we trying to achieve? What is the business going to look like? What are we telling our investors? Can we achieve it? Which levers do we need to pull to change that?” she says.
James is able to take a hands on approach in addressing many of these points as Direct Line’s strategy team reports to her. “I think the CFO has to be a leader in the strategic space, because you’ve got a role and responsibility for the long term shareholder value creation in the company and the only way you can do that is if you have the short term financial levers.
“As a CFO you have a role to tell your investors about what’s happened in the past and explain that, and you also have to lead and shape and give confidence about investing in the future. To do that, you need to understand the financial dynamics today, which is the important bread and butter work. But you also have to have a view on where the organisation is moving to, and the belief that it’s moving in the right direction,” she adds.