As insurers run out of options, they are focusing on cutting costs – and that means staff
Blimey, times must be tough if Chartis is making redundancies. Historically, Chartis is not a company that easily takes to swinging the axe.
But as the soft market and flat economy continue to grind against insurer profit and loss accounts, financial chiefs find themselves with two options to placate shareholders: invest heavily or cut costs.
Nearly all insurers are focused on the latter, ripping out chunks of their expense base, and the starting point is staff.
RBSI has eliminated 2,000 jobs and closed 15 offices in recent years. RSA made 1,200 redundancies in 2009, which has helped it hit its 14% expense ratio target a year early.
In October, Aviva announced that nearly 1,000 staff in Ireland and Europe would go. The firm’s general insurance operating ratio, excluding expenses, is already at a market-beating 10.5%.
There will be other ways for insurers to cut their expense base: sub-letting their offices, overhauling computer systems and pushing on with e-trading; freezing wages or implementing below-inflation increases; off-shoring and so on. All are likely to continue until the market picks up.
This all helps the profit and loss figures, but the question for UK insurer bosses will be whether they can maintain service levels and do they give an advantage to foreign-owned rivals taking a less aggressive approach?
German insurer Allianz continues to steadily produce market leading combined operating ratios, meanwhile, Paris-based mutual Covea, is investing heavily in UK personal lines while rivals flounder.
In the meantime, the cutting of jobs across financial services against a backdrop of steep rises in director pay, not always a true reflection of performance, will sharpen government focus on remuneration.