CompaniesOct 8 2015

Firing Line: Paul Hudson

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“Someone once told me that the definition of insanity is doing the same thing over and over and expecting a different outcome. There are lessons to be learned and these lessons are as much applicable to Fos as to anybody else.”

These are the words of Paul Hudson, chief executive of Cirencester Friendly Society, in relation to a high court ruling against two Fos decisions, which upheld fraudulent claims made against the mutual.

The case involved Christopher Parkin, a former member of the society, who acted fraudulently by answering no to several medical questions in an income protection application.

If he had answered correctly it would have resulted in the income protection application being rejected, according to the judgement.

In August 2007, Parkin brought an initial claim under the insurance on the basis that he could not work because of chronic fatigue syndrome myalgic encephalopathy.

This claim was rejected, but his complaint to Fos resulted in a payout from Cirencester of more than £19,000.

Mr Parkin then decided to make a second claim, contesting that chronic fatigue syndrome made him unable to perform his job; this was again rejected by the society, but - again - his complaint was upheld by the Ombudsman.

This time, Cirencester did not accept this decision and brought the case to the high court - which found that Mr Parkin had defrauded the society and Fos, and ordered that the amount awarded in the first claim be repaid.

Mr Hudson said: “I lived the case for eight years and that is an awful long time to have this type of situation.

“I think Fos is not well placed to deal with fraud. I do not think they have the experience necessary to see through this type of case. They reached two decisions which the judge passed comment on, they had all the papers which the judge had access to but they came to a different conclusion.”

Mr Hudson is no stranger to challenges. Stimulating growth was top of his ‘to do list’ when appointed to as chief executive – a goal he has achieved with some success, he said.

Assets have grown more than threefold to £74.5m, as has membership to 35,000, and premium income has increased by a significant seven times to more than £15m.

The company’s growth is somewhat down to its prudent approach, according to Mr Hudson, who said: “We are not going to speculate with our members’ money because they own the business. If an opportunity comes along I put myself into the members’ shoes and ask myself how they would feel about it.”

The firm’s cautious approach has not stymied innovation, according to Mr Hudson, who has unveiled plans to launch a product aimed at helping people to fund their lifestyle at retirement.

He said: “They used to say friendly societies care for people from the cradle to the grave. If you care for people, why should you stop at retirement?

“People are living longer but when you look at the provisions they are making for the future, many will not be able to afford their current lifestyle. This product helps them to bridge that gap.”

A lot has been said about the amalgamation of smaller friendlies as they struggle to compete with larger plcs when it comes to scale and cost.

Over the years, Cirencester has been courted by other players in the sector, and is in regular dialogue with similar sized providers to explore the prospects of a merger – but nothing as yet has come to fruition.

Mr Hudson said: “I have no doubt that M&As will become more prevalent and is something that I think the regulator would like to see happen, particularly with small providers which are facing big challenges with things like Solvency II on the horizon.”

He warned smaller societies to live within one’s financial means rather that spend in excess in an attempt to upscale their position in the sector.

“AKG, the actuaries, rate us as a B minus which is satisfactory. We will never be a B or an A because we are not Aviva. Sheer scale prevents us from doing that. It does not mean that we are not a good business.

“Some of the other societies have entered the market and have been keen to develop new products to improve their position, and as a consequence of that, their status has gone from B minus to C.”

Charity and goodwill remain an intrinsic part of the mutual’s philosophy, according to Mr Hudson. So much so that the society has set up a new socially responsible initiative, called Foundations 125, to commemorate the milestone 125th anniversary of its founding in 1890.

Mr Hudson said that the scheme, which is due to be launch before the end of the year, aims to spend £125,000 a year – in recognition of the firm’s years in operation - on good causes.

Foundations 125 will sit along side the society’s existing Benevolent Fund which donates money to a range of charities

Outside the office, Mr Hudson is a Mamil - middle-aged man in lycra, typically seen exercising on his racing bike. He is also a keen motorcyclist – although his time on the vehicle has been restricted in recent times at the request of his wife, whom he recently married.

PAUL HUDSON’S CAREER LADDER

1997 – present

Chief Executive, Cirencester Friendly Society Limited

1989 – 1997

Chief Executive, Nottingham Friendly Society Limited

1987 – 1989

Assistant secretary, Shepherds Friendly Society Limited

1974 – 1987

Various roles, Shepherds Friendly Society Limited