HDI Global prepares for new era

In mid-March, Talanx, the parent company of Hannover-based HDI Global, announced that Christian Hinsch, member of the board of management responsible for its industrial lines division, would step down on 9 May. Mr Hinsch will be replaced by Edgar Puls as chief executive officer of HDI Global. Adrian Ladbury interviewed Mr Hinsch about his long career at HDI, and Mr Puls about his plans for the future.

Adrian Ladbury [AL]: How did you get into insurance in the first place? What was your education and how did it direct you towards insurance? Presumably entering the sector was not your childhood dream?

Christian Hinsch [CH]: No, it was not my childhood dream! I trained as a lawyer. Luckily, my parents were very forward-thinking and encouraged and supported me in my idea to study in the US for a US degree on top of my German law degree. That clearly helped me to gain a broader view of the world, gain experience, knowledge and improve my English. Back in Germany, when I worked at a university I saw a job opportunity back in my hometown of Hannover with HDI as a claims handler in US product liability. My law training, plus time in the US, fitted the job and I knew the company because my parents had always insured their business with HDI. Above all, it offered me a free trip home to visit family! As it happened, the interview went well and I was actually offered the position of executive assistant to Joachim Schmidt-Salzer, the main board member in charge of liability and this sounded good to me – a much broader role than the one I originally applied for.

[AL]: Was it the right decision to take the job at HDI or do you wish you had taken a different path?

[CH]: It was the right decision and I have never looked back and regretted it. The industrial insurance industry is a great place to work for any openminded young person because it has such a thrilling blend of different skills and disciplines involving economics, sciences, engineering and the law – it is very much a mix of all these disciplines. I saw the chance here for me, as a lawyer, to be part of business itself rather than as an attorney who normally merely advises businesspeople.

[AL]: So how did you rise to the position of CEO?

[CH]: When the board member I had clerked with passed away in 1996, I was only 40 years old. Nevertheless, our CEO Wolf Dieter Baumgartl asked me to join the board. Later, in 2003 when Mr Baumgartl retired, he did it in steps and, as part of that process, he turned over the non-life business, which then was a separate entity, to me.

[AL]: What did you learn from Mr Baumgartl? What in your experience makes an effective leader?

[CH]: I learned a lot from him and could even say that most of the tools I have used came from him. He was very entrepreneurial and, at the same time, very consistent and straightforward. He was also a very good leader in that he gave his people autonomy, responsibility and genuine decision-making freedom when they deserved it. I tried to apply the same principles. In decisions with strategic relevance, I take my time to come to a conclusion because I always try to weigh up the arguments carefully. But, what I did learn was that once you do make a decision, you need to be clear and consistent when you implement it.

[AL]: And what are the core principles of running a successful industrial insurance business?

[CH]: The main quality that you need in an industrial insurance business is to find the right balance between courage and caution. While this is true for any business, to run risks is the very essence of industrial insurance business. I think that this is really underappreciated sometimes. If you are too cautious then you will fail, because you will stagnate and fall behind. If you are too aggressive then you also will fail and may be taken over by competitors. You need to learn how to take calculated risks, you need to be cool under pressure and you need to make your own independent decisions, irrespective of what your peers do. If you only follow, as many do in our business, you will not be able to excel. It helps if you are very cost-efficient, because it gives you more room for bold moves and errors than your peers before you cross the 100% combined ratio line.

[AL]: What would you identify as your three biggest achievements and challenges in your career?

[CH]: First, I would have to name the Gerling integration, which was a huge task. Most people were sceptical of this acquisition and whether it really was a good idea. But ultimately, after a lot of hard work, the job was successfully completed and HDI moved onto a different level.

Over time though, I would say that my biggest challenge was to maintain our independence by making HDI international. We were fairly large in Germany 20 years ago but we had no international footprint and this meant we were not fit to serve our customers sufficiently anymore, as they had become international players already. Short term, we overcame our lack of international presence by using the RSA network. The problem with this was that it was only on a contractual, not a proprietary, basis. RSA could have terminated this relationship at any time if it had been bought by Allianz or Zurich and we would have lost our ability to lead programmes overnight. Being restricted to the role of a following market, we would have lost our independence within two or three years. To preserve our independence, we needed to build our own network. So, the greatest challenge was to build that.

The third and most recent challenge was the need for the turnaround in the property insurance business and adoption of our 20/20/20 strategy. This is the goal to improve the premium/risk ratio by 20% in 20% of HDI’s industrial portfolio by the year 2020. This market has been difficult for 14 years now and, no matter what our peers do, we decided that enough was enough. We needed to tackle this to stop it from hampering our overall profitability. We made the right decision to entrust leadership of this critical programme to Edgar Puls, and he has done an excellent job. As Edgar takes on my role as CEO, he will pass this job onto David Hullin, who has been with the group for 24 years and whom I am sure will continue the excellent work. And, I have to add that, none of this, particularly the international expansion, would have been possible without the support and partnership of my fellow director Jens Wohlthat. I cannot emphasise his contribution enough.

[AL]: Going back to the Gerling acquisition, I covered this story closely back then as you know and I never really understood the high level of emotion that it generated at the time across the German market. You were criticised for being heavyhanded in your approach to the Gerling staff, for example. Why was this not a simple acquisition and integration? Would it actually have been easier if Gerling had been acquired by a foreign company?

[CH]: Possibly yes, it may have been less contentious. The main problem was really some of the management at Gerling, who really opposed the takeover. The owner of the private company – Rolf Gerling – was happy to sell it to us, stem the losses and see the business move into safe hands. But, some of the management at Gerling saw things differently. Mr Gerling was a remote owner and so some of the management felt that they were running the company and did not agree to the sale. Don’t forget that Gerling and HDI had been in competition for 100 years and, to be honest, for some of the Gerling management we were looked down upon as their poor cousins from lower Saxony.

[AL]: As you hand over the reins to Edgar, what would you say are the main priorities for HDI, or indeed any insurer, in the European and international industrial insurance market?

[CH]: The first priority has to be to continue the job of cleaning up the property insurance book. This requires a consistent and disciplined response that is fair to customers and realistic at the same time. Looking further ahead, I think it is fair to say that our business – the commercial and industrial insurance business – has not yet really adapted to, and made use of, the opportunities offered by digitalisation. There is so much more that we can benefit from if we get it right. Fortunately, currently I do not see that one insurtech, or whatever label you prefer, is disruptive to our entire sector so we do not have to solve this in one or two years. But, it is also important not to place this on the backburner or hope that it goes away. It is a fundamental change, just like the globalisation of our customers and subsequently our industry 25 years ago. If you don’t embrace this contemporary challenge, you jeopardise your company. You can be sure that in five years from now, digitalisation will have changed a lot in our industry, more than I can imagine.

[AL]: Which parts of the commercial and industrial market will see the biggest impact in your view?

[CH]: First, the insured risks themselves as they are made ever more interdependent by the IoT. Second, the interaction between customers, brokers and our own organisation, the insurer. We need to communicate with our customers on a digital and much more efficient basis. We cannot stay in the stone age! Transaction costs on the current level will not be acceptable in the future.

[AL]: What is the single piece of advice that you would offer to Edgar as he moves into your office?

[CH]: I think Edgar is very well prepared because he has been in this business for a long time, has broad experience and knowledge, and the right balance between taking risks and caution. I am sure of this, he has all the right qualities needed to lead HDI onto the next phase of development. So, I do not have one single piece of advice, and if Edgar wants a second opinion we have agreed that we will talk if needed in future.

[AL]: Finally, and most importantly, what are you going to do with all that spare time? Are you going to pop up in charge of another insurer like so many other ‘retiring’ CEOs in this market?!

[CH]: No, that will not happen! I am actually looking forward to spending more time with my family and pursuing my hobbies after 23 years on the board. I will probably do some consulting work in areas that I enjoy such as internationalisation or succession planning, but this would not be restricted to the insurance industry. I have always enjoyed working with the Mittelstand – privately owned companies – as I really enjoy talking to the owners of the companies, to entrepreneurs. But we’ll see. I certainly will not be going into direct competition with HDI.

[AL]: So, Edgar, what is the plan? I guess the immediate focus will be successful completion of the 20/20/20 initiative?

Edgar Puls [EP]: I am really looking forward to the job in front of me. But, before we come to the plan, I would just like to say how honoured I am to be taking over from Christian, these will be big boots to fill after such an incredible career. When I started at HDI 17 years ago, if anyone asked me what was my impression of HDI Global, it was basically always Christian Hinsch heading this company. He has led a great transformation from a very local Saxon and German firm into a global name. Now at HDI Global we have an equal number of German and non-German employees. This is a huge change and a big footprint has been left. But for now, my short-term task is, as you said, to complete the successful implementation of the 20/20/20 initiative. Our results during the past few years have not been satisfactory. We are not alone in the market in that regard. We all know that and some of the results of our competition have been worse. We started the change process last year and this was a brave step to take. We will not lose track; we need to achieve this and get back to a decent level of profitability as the rest of the market plays catch up.

[AL] As with all such strategic plans in a large company, this must mean a significant cultural shift and change in mindset for many. Is this the biggest challenge?

[EP]: You are correct, we are still in a process of transition. This was never going to happen overnight. We have made a great start and seen some very good results, but this is an ongoing process. Some of our people are still thinking too much in a German way and we still need to adopt a more international perspective. The focus has to be on performance, responsibility and culture. I see one of my main tasks is to further instil a culture of responsibility. We all work in a fast-changing environment and the very nature of work is changing quickly. We have to be prepared for this as a company and as individuals. We insurers sometimes think things through for too long and miss opportunities. We have to be courageous and brave. Sometimes you just have to try it, if the remaining risks are still acceptable, of course. Speed in various dimensions becomes a more and more important factor. Above all we have to ask: what will be the value added by the insurance industry in the next five to ten years, particularly in areas such as client services, risk engineering and game-changers like IoT?

[AL] Diversity is a hot topic currently. What is HDI doing about this important area?

[EP]: We do need to all focus on diversity and inclusion in this industry. We are focused on looking for young talent and working hard to really enthuse them about the exciting future for the sector. As for gender, we are making progress too. The last three country managers we hired in Europe – major territories – were women. Claire McDonald was appointed managing director of UK and Ireland operations in March this year. Florence Louppe took over the management of the French branch on 1 January 2019 from Dominique Guérit, who retired. Sharon van Herel became head of the Dutch office at the end of last year. We hired the best people for the jobs, all were women and we are very happy about this. Also, we are seeing a positive change in attitude to women returning to work after having children, in various countries. It varies from country to country. Germany still has some way to go in this respect, but it is much more common in France and the Netherlands, for example.

[AL] How do you see the evolution of the insurance market during the next few years?

[EP]: Well the insurance and reinsurance market is changing already. We have to ask: what will be the role of the broker, insurer and reinsurer in future? The reinsurers are more into direct business than in the past. Everyone wants to extend the chain. We have to ask: what will be the added value that we bring to the customer going forward? At the same time, corporate clients have developing risk appetites, captives are being used in more innovative ways, and retention strategies are changing. Insurance managers are becoming risk managers, seeking to mitigate enterprise-wide risk and not just buy insurance. We have to ask what added value we can offer to boards through international programmes, risk management services, claims handling and the like. Then there is the whole area of supply chain and rise in contingent business interruption, as long-known trends in the risk landscape. But there are also lots of opportunities. Starting early in aligning with our clients in the IoT brings great chances to prevent or mitigate losses, especially when combining production data with loss information. We have a lot of data that we can feed into public data and can use for our clients in a much more dynamic way.