Zurich Insurance, which recently announced plans to merge its corporate insurance business into its wider commercial unit, admits that the overall insurance sector needs to become more efficient. However, it does not believe that efficiency measures are automatically bad news for customers.<\/p>\n
Zurich\u2019s plan to combine its Global Corporate and commercial businesses into a single unit called Commercial Insurance is part of a process to \u201csimplify and strengthen its organisation\u201d, a spokesperson for the insurer told Commercial Risk Europe.<\/p>\n
\u201cCombining these businesses will deliver a simpler, more customer market-oriented and more accountable organisation, which will be easier for our customers and distribution partners to deal with,\u201d he said.<\/p>\n
\u201cHowever, reduced costs are merely an ancillary benefit of creating a structure that is more customer oriented. Customers will benefit from a more tailored local approach and from having one interface with Zurich across all of our business lines and products,\u201d the spokesperson added.<\/p>\n
hide<\/span><\/span><\/p>\n AIG is another insurer under-going restructuring and driving for greater efficiency. Anthony Baldwin, chief executive officer at AIG Europe and head of its UK operation, told CRE how the insurer is look-ing to deal with the prolonged soft market and balance efficiency with service levels.<\/p>\n \u201cHow do you deal with that? One, you choose where you want to apply your focus and resource and become excellent at that. This is all about good services but also additional value. If, in doing that, we can reduce the cost of risk, that is good for the client but also good for me as the insurer,\u201d he said.<\/p>\n If insurers are to achieve sustainable combined ratios, they will need to focus on adding value and helping clients reduce the cost of risk, explained Mr Baldwin. In addition, insurers need to evaluate how to use technology to streamline processes.<\/p>\n \u201cIf you think about change to increasing levels of digital trading, that is creating efficiencies. The insurance industry is very resilient and has been in operation for hundreds of years, but it is time for us to reinvent ourselves. I think we have all started on that journey,\u201d Mr Baldwin said.<\/p>\n Allianz Global Corporate and Specialty (AGCS) also recognises the need to focus on cost in today\u2019s competitive insurance market and low interest rate environment.<\/p>\n \u201cEvery company should be constantly looking for innovative ways to deliver quality service at an appropriate cost. Insurance is no different. We have to take advantage of technology to provide the best service to our clients,\u201d said Brian Kirwan, chief executive of AGCS UK.<\/p>\n \u201cWe recognise that a number of our customers are under significant economic pressure and are looking for cost savings in their business.<\/p>\n \u201cThis has pushed them to look for savings in their overall insurance spend. The market has managed to meet expectations in many cases. The conundrum now is whether you can obtain the same quality of product and advice for significantly less outlay,\u201d he said.<\/p>\n This means risk managers need to be clear on the service standards they expect, while insurers should be equally clear on the cost of attaining that service, explained Mr Kirwan. \u201cWe have to find new and innovative solutions to meet clients\u2019 expectations,\u201d he said.<\/p>\n Technology plays an important role in driving efficiencies, according to Mr Kirwan. \u201cTechnological advances free our experts from repetitive tasks and enable them to focus on how they can service clients more effectively,\u201d he said.<\/p>\n AGCS alone is investing more than \u20ac90m on major IT projects, the great majority of which are designed to improve service and delivery. It has also established offshoring centres in Asia to handle about 30% of AGCS\u2019 policy administration and around 60% of its IT needs.<\/p>\n \u201cWe\u2019re constantly looking at our value chain and asking: how can we do that better, quicker, more efficiently? To me, that\u2019s the right way of approaching the challenge of this market \u2013 constantly looking for improvements throughout the business,\u201d said Mr Kirwan.<\/p>\n AXA is another big insurer that plans to cut costs and improve the way it works through adoption of new technologies and better use of resources. It has announced plans to slash costs by some \u20ac2.1bn by 2020.<\/p>\n J\u00fcrgen Kurth, global chief underwriting officer at AXA Corporate Solutions (AXA CS), told Commercial Risk Europe that the stubbornly soft market and low interest rate environment is clearly adding pressure to the bottom line.<\/p>\n \u201cInsurers are generally under pressure for improved results. The continued soft market, combined with the emergence of new risks and higher trend for major losses, has already led to profit warnings from major players in the industry over the last 18 months. The gap between the technically required premium level and the commercial rates observed is significant in many areas, and insurers have to reduce it by improving various P&L factors. Expenses are no exception and have indeed to be leveraged. The aim to reduce costs also comes from the growing awareness that commercial insurance could be more efficient,\u201d he said.<\/p>\n \u201cUnderstandably, clients are concerned when they hear about cost cutting,\u201d added Mr Kurth. Matthieu Caillat, global deputy chief underwriting officer at AXA CS, was asked if insurers recognise the need to maintain service levels and invest in innovation, and whether this is really possible while making inefficiencies?<\/p>\n \u201cInsurance is key to ensure business continuity and there is a growing awareness of the value of a well run insurance programme, and symmetrically of the risks associated to a less robust approach. It is therefore fully understandable that insureds are concerned about the quality of the service they get,\u201d he said.<\/p>\n But Mr Caillat said savings do not necessarily lead to poorer quality of service. He added that electronic data interchanges (EDIs) are a good example of this.<\/p>\n \u201cAXA is developing EDIs with brokers and clients. This creates cost savings but also better service through quicker and more reliable information. Today\u2019s technology provides multiple opportunities to save costs while keeping our improving service,\u201d he explained.<\/p>\n Mr Caillat added that AXA has invested heavily to \u201crip\u201d the benefits from these technologies.<\/p>\n Mr Caillat said AXA is also aware of the need to invest in people, particularly at the more complex and sophisticated corporate end of the market.<\/p>\n \u201cFor the upper segment of the corporate business, human expertise cannot be replaced today. That\u2019s why AXA CS, as a leader, keeps investing in people. The costs have of course to be spread among insurers through leader\u2019s fees to recognise the very different contribution of the programme leader versus capacity providers,\u201d he said.<\/p>\n Another way that AXA CS and rivals have improved cost efficiency is through commercially selling, on a standalone basis, insurance services such as programme management, claims handling and risk prevention.<\/p>\n \u201cBy doing so, AXA CS increases the volumes, with a direct impact on marginal costs. This approach also enables us to identify and value much better our clients\u2019 needs, which drives day-to-day operations and long-term investment,\u201d explained Mr Caillat.<\/p>\n \u201cAn industry that does not innovate is in danger and insurance is no exception. AXA CS is very committed to innovation. The way innovation is promoted also has to be cost-efficient. In particular, having a close relationship with our brokers and clients and a good understanding of their needs and aspirations is key to ensure we can focus on relevant topics,\u201d he concluded.<\/p>\n","protected":false},"excerpt":{"rendered":" News of restructuring and job losses at large insurers is an obvious worry for risk managers, but leading insurers argue they are working behind the scenes to deliver better service more efficiently and customers will not 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