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I have set Saga on the right course, boss Lance Batchelor insists

It could turn out to be the defining moment of Lance Batchelor's time at over-50s specialist Saga.

The firm's 55-year-old chief executive had been invited on to Radio 4's Today programme in April to talk about Saga's new insurance deal when he made an admission that will have had many of his 2.1 million loyal customers – if not City investors – spluttering on their toast and marmalade.

Saga, Batchelor said, had been overcharging on its insurance for years. Like most home and car insurers, it offered low initial prices to lure in custom, but ramped up premiums in later years.

Steaming ahead: Lance Batchelor believes Saga’s new ship, the Spirit of Discovery, will be transformational for the firm

The message to pensioners was clear: the more loyal you are, the more you get ripped off.

City investors had known this dirty little secret of the insurance industry for years, but even they were about to get a shock. 

Under a new pricing scheme, Batchelor explained, Saga would end the so-called loyalty penalty by offering to fix premiums for three years.

Saga was going out on a limb that meant initial policy prices would have to start higher than at rival firms, making them less attractive to new customers. 

This, combined with the need to cut margins due to a competitive insurance market, ultimately wiped a third off its insurance profits. 

Saga's share price plunged 37 per cent when markets opened 45 minutes later. It now stands at just 42p, down from £1.07 before the radio appearance.

In his first interview since announcing his 'retirement' in June, Batchelor reflects candidly on a particularly trying day.

'I knew it would be painful, but I didn't know just how painful,' he admits. 'There was disappointment and a loss of confidence. And that stings as a CEO, knowing it was partly about me.'

Saga quietly started working on its insurance overhaul in 2016 and, though Batchelor understands why shareholders were 'frankly furious' when they found out the details, he is absolutely convinced it will end up as a masterstroke.

'In the eyes of the outside world [the overhaul was] a failure, but I know it's not. You've got to take [criticism] on the chin and carry on to do what's right for the business.

'I'm sure shareholders must feel frustrated by the share price fall, and I sympathise. But there is something fundamentally flawed about any industry that doesn't reward loyalty. Why should people pay more every year for the same policy?'

Watchdogs are now asking the same question, with the Financial Conduct Authority considering tough new rules, which could be announced in the coming months.

Has Saga smartly anticipated a major crackdown, or has it moved too far, too soon? 'Our decision was not driven by the FCA, but we were aware that it might do something and that's always been on our minds,' Batchelor says.

'I'm fascinated to see how others in the industry respond, because the rest don't appear to have changed anything yet. Investors tell me other insurers think [our new] product doesn't work and isn't going to work. But our customers love it.'

Before joining Saga as chief executive in 2014 – two months ahead of the float – Batchelor held the same role at Domino's Pizza, having spent most of a 35-year career at consumer companies including Amazon, Vodafone and Tesco Mobile.

Though Saga mainly focuses on insurance and travel for the over-50s, in 2017 it launched a membership programme offering deals on entertainment and other products.

Batchelor says that overhauling the insurance business felt like the final piece of his mission to revitalise Saga, putting it in a position to return to steady profits.

He says he set a departure date of January to give the company time to find a new boss, and jokes that he could have left the insurance profit warning to his successor. 

'I wouldn't do that though,' he laughs. 'You inherit the cards you inherit and you do your best. It's not all about trying to gather glory, and I'm probably not going to get a lot.'

His 'retirement' won't be particularly quiet, by the sounds of things. He is in talks with a fast-growing tech company to become chairman and is discussing non-executive positions at other firms. 

We meet in Dover for the naming of Saga's new cruise ship, the Spirit of Discovery, with Batchelor preparing to welcome the Duchess of Cornwall for the event. He doesn't seem disheartened by the criticisms.

It has taken four years for Saga to build the ship and it is another launch that Batchelor believes will be transformational for it. 

Its sister ship, the Spirit of Adventure, arrives next year and they will each add £40 million to Saga's earnings.

Batchelor is a former Royal Navy officer and is in his element as he offers a guided tour. He is particularly proud that the ship has a Red Ensign – a flag flown by British merchant and passenger vessels since the early 18th Century – and says it is the first cruise ship to be flagged in Britain since the 1970s.

It is filling with Saga's customers for the big day – the men in blazers and women in summer dresses and fascinators. 

Passing by the lobby, we see Jools Holland walking up the gangway. He will play for hundreds of guests later.

Batchelor admits Saga had to delay big projects such as this because it was loaded with debt by its former private equity owners, Charterhouse, CVC and Permira. They bought it in a £1.3 billion deal in 2004 and it was carrying £700 million of debt when it floated in 2014.

But he insists investors were aware of the debt and says he has brought it down on schedule. 

'When people buy into a float they need to know the debt will have to be paid down,' he says. 'I don't think there was any sting in the tail.'

He is confident that by cutting the debt, launching new ships and ending rip-off insurance pricing, he has set the firm on the right course.

'I'm hugely proud of what we've done. I believe the firm is set up for long-term sustainable growth.'

Later, he will host a meal for the guests, sitting alongside his wife, Wendy, and Roger De Haan, the son of Saga's founder, Sidney De Haan.

Batchelor can only hope that he's done enough to be invited back to celebrate one day, too.

Lance Batchelor, 55: Fan of Provence

Family: Wife, Wendy, and four sons. Two are at university and two are in school.

Lives: Near Newbury, Berkshire.

Holiday: Enjoys visiting the north of Provence, near Avignon.

Favourite film: Das Boot.

Favourite book: The Riddle Of The Sands, by Erskine Childers.

Favourite musician: Kate Bush.

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