Norwich Union's top management has an almost religious faith in the future of the newly merged company, as Chris Wheal discovers
Norwich Union has inspired an almost religious faith in the future of the newly merged company among its senior managers. The archbishop, UK general insurance chief executive Patrick Snowball, has an evangelical zeal, but the vicars and vergers beneath him are all singing from the same hymn sheet.
“I've got five people under 40 as directors and the whole operational team is experienced in running industries. You can't help but be impressed with their clarity,” says Snowball. “We want to inspire people to work for the company, but you can't ram it down their throats; you have to show them you are inspired.”
He reckons the team is integrating the two merged companies while heeding broker concerns “We know what we've got to do and we understand the service issues. NU has been able to improve its service much quicker, but CGU's service is improving, too.” The Insurance Times postbag, just four months ago dominated by the issue, has noticed the difference.
Perhaps controversially, Snowball says part of the reason for the speedy improvement is that NU is not relying on insurance managers alone, but has sought talent from outside. “There are times when you have to move quickly. Insurance people expect a very high level of information before they make a decision – you have to in underwriting and claims. The people coming in are hugely respectful of those insurance skills, but we are prepared to take a little more risk than people have done in the past,” he says.
But Snowball tempers his enthusiasm: “The priority is to demonstrate that two major insurance companies can be integrated without damaging shareholder value, intermediaries' tempers or, more importantly, the staff,” he says.
The integration is due to take place from October 2. Marketing and underwriting director Bridget McIntyre reaffirms Snowball's views. “Some people are NU people, but were not in general insurance,” she says. “I came from life and human resources in the group head office. NU was a pretty focused personal lines and small commercial lines insurer, but now we are very much a commercial insurer.”
NU's ex-marketing director, Derek Plummer, says that is a message NU will have to get across to intermediaries. “We're going to have to work on that. We know that ‘NU' and ‘commercial' were not words that fitted together. We are going to have to make clear that, while it is the NU brand, the CGU underwriters are still there.”
McIntyre points out that NU's commercial underwriting and development offices will continue to be based in London. CGU's Clive Watson will be in charge of the London market business of the combined company.
The deal has been simple. The combined CGNU decided very quickly on a brand – preferring the older, more established NU to the infant CGU – and continued in the same vein, selecting the best from the two companies and jettisoning the rest. “We're taking the best from both,” says Plummer. “Not because we sat in a room in Norwich and decided ourselves, but because we spoke to brokers.” That has meant some painful explaining. “It's very sad having to tell guys who have been working on projects for years that it's not going to go ahead,” Plummer adds.
And not everything has been so simple. In motor, the two companies targeted different sections of the market. “That has meant a massive amount of work on pricing and different rating models,” says McIntyre. And not every decision will be made by October. CGU broker deals such as Bonus and Planet will be rebranded and continued, but not expanded until the company has had more time to decide their future.
In the meantime, the two companies have set out their “rules of engagement” to make sure they do not compete with each other before the October integration. For intermediaries, the explanation of these rules, in the form of a request to seek quotes from one of the two companies only, came from Ken Wallace, the intermediary business director.
“The broker channel is extremely important. It's bigger than the other two channels put together,” says Wallace. It actually accounts for more than 60% of NU's £5bn general insurance income. And NU will not be making martyrs of anyone. “We are not looking to lose any agencies. There's not going to be a mass cull,” he says. In the main he has found most agency agreement overlapped, but there were quite a few more CGU agencies than NU.
Within the intermediary channel, Wallace has identified four different groups. There are the regional operations, national brokers such as Marsh and Aon, and those with national accounts such as Hill House Hammond and the likes of the Broker Network. Then there are the telephone accounts and smaller, primarily personal lines intermediaries. “We need to segment. We do need to identify who our key brokers are,” he says.
It is Wallace's job to ensure that NU sends out the same messages to all its intermediaries across the country, even if handling their accounts in different, more appropriate ways. He is also looking at increasing electronic trading with intermediaries.
A key theme is that the cost savings from the merger will not be at the expense of service. That will mean some regional offices closing, but only where the combined company has two similar offices in nearby locations. “We will follow the footprint that CGU had. We're not looking to cut back on locations. We will have offices in 52 locations from Inverness to Plymouth,” Wallace says. And the offices will be empowered. “They will be local people who will understand brokers' businesses and they will be decision-makers.”
Wallace is also keen to sing the praises of the firm's underwriting talent, which he says is too often overlooked. “We're going to make sure that underwriters are given authority to underwrite. We have such a degree of skill in underwriting, and it is one of the forgotten skills in our business. Other things have taken over such as distribution and service,” he says.
But service will not be sidelined. “Service is the number one issue for us. It comes before price,” says Wallace. “I can categorically say that improving service levels and getting it right will be absolutely critical for us.”
That extends to claims too, where NU has opted to use its telephone-based Total Incident Management system. NU claims director Simon Machell will be working to switch CGU staff over to the NU way of working. “We're looking at the whole claims structure.” Machell says. In commercial lines, however, the CGU experience, through regional offices, will be the focus.
There will be some major changes in store. There is no overlap in loss adjusting, so, at some time in the future, there will be a shake-out. In motor, CGU has a network of about 1,000 approved repairers and NU has just 200. “We will move to a smaller panel,” Machell says. The two companies have more of an overlap in replacement goods firms and there is an opportunity to squeeze better deals there – the two insurers were getting different prices from the same companies.
“With our market share we should be able to get the best deal,” says Machell. “We're looking at the whole administration process, at the possibility of online procurement through portals.” It will be companies that can help improve NU's service that will win the contracts rather than just the cheapest suppliers of the goods.
The internet and intranets form a key part of NU's plans. CGU's use of desk-top internet access lagged behind NU's, which kept its staff informed through an online news service. In future, NU hopes to make claims tracking available online, perhaps with customers being able to see digital images of their car as it is repaired.
But Snowball insists, despite the NU bias, it has not been a takeover. “If you were a CGU person sitting in Perth who had just lost their job, you'd be sitting there saying ‘it's called NU, it's based in Norwich and Patrick Snowball's managing it – it's an NU takeover'. But from where I'm sitting, the head office is in (London) and you could say it's a CGU takeover. If you looked at it from the life side, it's called NU but it's taken the heart of the life side out of Norwich and taken it to York,” he says.
He is confident of success, however. “If you have happy staff, you will have happy customers, happy brokers and happy shareholders,” he says. “We will be the pre-eminent insurer in the UK, and to do that I have to demonstrate to people that I enjoy what I do.” Which he does.