Medibank boss Craig Drummond vows to focus on customers

Medibank’s new boss, Craig Drummond, will use lessons from banking in a major shake-up of the health insurer.

Medibank CEO Craig Drummond announces the annual results in Melbourne. Picture: Stuart McEvoy.

Medibank’s new boss, Craig Drummond, will use lessons learned from a career in banking in a major shake-up of the health ­insurer as the sector struggles with membership and the high cost of cover.

The former top National Australia Bank executive and one-time investment banker used the release of his first financial results at Australia’s largest health insurer to set the tone for his tenure, signalling an immediate focus on customer satisfaction.

“In seven weeks (in this role) I can see the business has tremendous potential ... for me it is obvious the potential of Medibank will not be unlocked fully without a ­relentless focus on customers,” Mr Drummond said.

“We know looking at customer data our customers rate us lower than other providers in the market. The feedback is giving us very clear guidance that we need to do a better job.”

Mr Drummond, who yesterday revealed a 46 per cent jump in Medibank’s annual profit to $417 million, said he was under no illusions about the work needed to improve customer satisfaction.

To prove he is serious about the task ahead, he has tied executives’ financial rewards to customer ­satisfaction.

“If customers don’t get what they need and our net promoter score goes down, then executives will miss a good portion of their bonus,” he said.

“We will be having a range of programs implemented from the board through to the executive in terms of engagement with customers ... this is getting all the senior executives walking the talk.

“In order to run their business more effectively, they need to understand and feel our customers’ pain.”

Mr Drummond, who has taken on the chief executive role at Medibank almost two years after the government privatised it, spent his first weeks in the job getting under the hood of the business, looking through financial reports, marketing reports and customer feedback.

He also had four sessions in Medibank’s contact ­centre.

“I was focused on spending more time on the customer side rather than the financials, as I feel comfortable with the financials because of my background,” said Mr Drummond, who has also held senior roles with Bank of America Merrill Lynch and Goldman Sachs.

On his second day as chief executive, Mr Drummond was hit with some of the “pain points” after an upgraded technology system failed to deliver tax statements to members on time.

He said he had up to 100 emails and customer conversations on that issue, which he used as an opportunity to get customers’ perceptions of Medibank.

“We need to make Medibank easier to deal with. We have identified numerous issues that frustrate our customers and we will be urgently addressing those over the coming year,” he said.

“We need to reduce call wait times — if you contact our contact centre it’s around six minutes; six to 12 months ago it was around three minutes.”

Medibank will announce a product investment program next month and Mr Drummond’s wider strategy for the business will be revealed at an investor day in November.

“My short-term goal is to fix the things that are giving our customers the biggest pain,” he said.

Despite the customer concerns, the Australian-listed company yesterday reported a healthy profit of $417m and a lift in revenue to $6.81 billion. Medibank’s shares took a hit after it warned it would continue to lose market share after a weak second half. The stock ended almost 5 per cent lower at $2.84.

Medibank declared a final dividend of 6c a share, taking the full year dividend to 11c. The payout to shareholders was double last year’s full year dividend of 5.3c. Mr Drummond said affordability was a significant issue, not just for Medibank, but the industry.

“We are part of the problem, but so are a bunch of other stakeholders that we need to work hard with,” he said.

Other markets, including the US, had seen cost growth in the healthcare system stall, while costs had gained momentum in Australia, he said.

“I’m not saying I have the answers — I have been here five minutes ... but we need to do a better job collectively in coming to an answer that resolves some of this ongoing unacceptable growth rate in costs, relative to the broader inflationary environment we have.”

Health insurers have come under fire from others in the healthcare system for their calls to tackle costs when they are enjoying annual premium increases and healthy profits.

Mr Drummond said the company’s “reasonable” financial results were boosted by the insurer’s efforts to reduce waste in the healthcare system and focus on its own costs.

He said Medibank, as a payer in the healthcare system, had to make sure it did what it could to remove waste from the system. “Our financial results have taken us from what were substandard returns to what I would say are more market-based returns but now we need to be focused on giving back where we sensibly can.”