How the insurer is battling a hike in personal lines and a perceived slip in broker service
Has the insurer lost its way? That’s what some brokers are asking after a difficult year for the insurer.
Earlier this month, Zurich revealed it had lost more than £200m in UK revenues this year, a result of 20% rate hikes in personal lines motor. Brokers have begrudgingly accepted the need for premium increases, but it has left a bitter taste in their mouths.
Zurich has joined Equity Red Star, KGM and NIG in either pulling out or scaling back aggressively. Brokers feel abandoned in their hour of need on motor.
And the proof is in the pudding: Zurich slid down Insurance Times Broker Service Survey from 11th to 24th.
Making touch choices
Broker managing director Dave Smith admits the motor hikes had a big impact on the survey, but says: “We believe we are an exceptional underwriter and that means being highly selective in new business selection and pricing when a line is generally unprofitable.
“The line of business of motor, I think we’d all agree, has been hit very hard by bodily injury and the impact of aggregators.
“And as an exceptional underwriter, we make tough choices. We would believe that other rapidly growing competitors can see only deterioration of their results in 2011, at which point we’ll be well positioned for growth with our stable pricing.”
Stable in SME
Aside from personal lines, brokers want Zurich to enhance its proposition in SME. While AXA is putting commission deals on the table with its ‘fighting fit’ initiative, and Aviva is doing the same, brokers aren’t seeing any similar deals from Zurich.
Smith says such moves are out of the question: “From our perspective, any moves that we make in SME won’t be short-term tactical commission plays. We’ve never believed in that.”
The SME book has been stable ,with profitability and premium revenue heavily reliant on its Broker Alliance partnership with 2,500 to 3,000 intermediaries.
Beware the new kids
However, there are hungry players in the wings, such as Ageas, LV= and QBE. All have big ambitions to aggressively grow their book, and the evidence is that they are pricing competitively.
The new kids on the block have to take a slice of the cake from somewhere, and Zurich among others, will be targeted.
However, Smith is sanguine: “There is plenty of capacity in the market and new competition puts pressure on pricing across the market and that’s where exceptional underwriting does come into play.”
Burning in the background, is the issue of reputational damage following the data loss fiasco. In August, the FSA walloped Zurich with a £2.28m fine for losing a data tape containing the personal details of 46,000 customers in 2008.
The loss was a massive blow to Zurich, leading to FSA enforcement director Margaret Cole blasting the insurer for "letting its customers down badly".
It was a messy affair, and UK chief executive Stephen Lewis apologised, promising to beef up data security.
But the damage was done. Zurich’s reputation had taken a severe blow.
Smith sees it differently: “Stephen Lewis was very honest at the time; we regretted the incident and apologised unreservedly for it. I think if you ask brokers or customer now, the overwhelming reaction will be that the manner in which we responded to the incidents showed the true integrity and professionalism of Zurich.”
Despite the setback this year, there are still some plus points for Zurich. Its reputation in corporate remains as strong as ever, although once again, it faces stiff competition from rivals. Aviva this week swooped for head of global corporate David Hall.
Zurich also has a lot of goodwill. Patrick Manley replaced Annette Court, who suddenly left in the summer, and when he finally begins as European head in January, brokers will give him the benefit of the doubt.
One source says: “Yes, I think they’ve been off the pace a bit but they’ve got some good people and they will get their act together. It’s a good organisation, focused on strategic relationships.”
No more excuses
Overall, it’s been a tough year for Zurich: the data loss fine, personal lines pruned, revenue plummeting and broker service standards slipping.
Lost their way? The management argues it's taken tough decisions to steady itself for the future. That maybe so, but try telling brokers that.
Many have watched their motor book shrink away at a time when Zurich is being fined for system failures.
Next year, there’ll want Zurich to get back on track.