Companies across the board forced to reduce expenses, starting with personnel

Chartis Insurance UK is the latest insurer to come under pressure from the tough market conditions, announcing up to 130 job cuts.

Despite the harder personal lines sector and return to profitability in 2011, UK insurers continue to axe jobs to cut expenses in the face of a soft market and tough global economy.

As exclusively revealed by Insurance Times, the UK arm of the US-based insurance company announced this week that up to 130 jobs may be shed during the first half of 2012 in line with its reorganisation plans.

And market experts have warned that the trend of job cuts industry-wide may be set to continue for the foreseeable future.

The job cuts at Chartis coincide with the insurer’s global restructure in January. Chartis announced a split into three geographic regions – the Americas, Asia and EMEA – aiming to improve its commercial and consumer strategy execution and focus on growth economies initiatives.

Chartis UK, one of the country’s top three business insurers with £2.25bn in GWP in 2010, said last week that it would look to reallocate staff where possible.

Few insurers have been immune to the cost challenges experienced by the industry as a whole over the past 18 months to two years. To keep profit and loss accounts in shape, many insurers have reduced head count.

RBSI has cut 2,000 jobs and closed 15 offices in recent years, while RSA made 1,200 redundancies and has made £70m in annual cost savings since 2009 as the company hit its 14% expense ratio target for 2012.

Aviva announced in October that almost 1,000 staff in Ireland and Europe would go, while the firm’s general insurance operating ratio, excluding expenses, has already reached a market-beating 10.5%.

AXA, meanwhile, is seeking €1.5bn (£1.26bn) in cost savings in mature markets, some from the UK.

KPMG’s head of general insurance Mark Winlow said that he did not think the latest round of redundancies were a one-off event, but part of a more worrying trend

“I think that cost is always going to be a challenge,” he said. “I think this will continue as we have the challenge on premiums at the moment, particularly on the personal lines side. Certainly it is a way of operating in a constrained premium environment.”

PricewaterhouseCoopers insurance partner Mark Stephen said the decline in employment levels in the general insurance sector partly reflected the softness of the retail market and lack of optimism in the market.

“The general sense of optimism has come back a little bit but it is still relatively pessimistic and therefore I would be expecting the sentiment on overall numbers of employed people in the general insurance sector would be a continuing trend in the next quarter anyway.

“I think that contrasts with the life insurance sector where I think there was less of a dip in optimism and actually we are seeing just the turning of the corner on the employment front in that sector,” he said.

He expects there will be at least one more quarter of further jobs cuts in the general insurance sector but beyond that it was largely dependent on the overall economy.

Despite the fall in staff numbers, insurers would continue to focus on maintaining or improving service levels to distinguish themselves from competitors, he said.

Chartis UK said on Thursday: “Against this background, and given Chartis’ strong focus on underwriting discipline and expense management, we are proposing a number of operational changes that will result in the business being better positioned.

“In 2012, Chartis’ UK business is looking to reduce expenses from staff and non-staff related costs.”


Talking points …

● A total of 20,000 jobs in the UK financial services sector are expected to be lost in the six months to the end of March, according to a recent CBI and PwC survey. How many will be from the insurance industry?

● Can insurers adequately maintain levels of service to brokers, particularly if the expense base is constantly being trimmed?

● What commercial lines will be first to harden seriously? There is talk that commercial motor is desperately underpriced and a significant shift in rates is due.