'You can kid yourself that you can be better at underwriting but that advantage only lasts so long’

Steve Hardy is a man on a mission. His challenge: to ruffle the feathers of his well-established rivals such as Aviva, RBSI and Admiral by turning AXA into a top three player in personal lines. It’s a pretty big task considering that in 2009 AXA made an underwriting loss of £66m and was ranked 10th in size, according to AM Best. Combined operating ratio was 122%.

The head of AXA personal lines and founder of Swiftcover certainly has the energy to turn the proverbial oil tanker around. He crackles with enthusiasm as he meets Insurance Times at Swiftcover’s plush offices in upmarket Cobham, Surrey. The fine spring weather seems to match Hardy’s optimism and it’s all handshakes, wide smiles and warm salutations. Hardy is definitely a people person. “I want to make AXA personal lines a fun and vibrant place for people to work,” he enthuses.

Hardy is a great admirer of his former mentor Martin Long, the founder of Churchill. “He’s a huge inspiration in how he focused on people,” Hardy says. Shortly after RBS bought Churchill in 2003, Hardy and sales director Andy Blowers hatched a plan to create a start-up that would crack selling insurance direct to the customer online. “At the time, every insurance brand you can think of had a website, but it was almost like a call centre script put on the internet, with a giant ‘go back’ button and a tiny ‘buy’ button; it was very difficult for any customer to go through and make a purchase,” he remembers. “It would take five minutes of page after page of questions, and then it would go to ‘can’t quote’.”

The idea was simple enough: forget the clunky websites backed by expensive call centres, Swiftcover would be an easy-to-use internet site promoted through slick marketing. Hardy and Blowers received financial backing from Bermudian-based investor Primary Group, and on 1 July 2005, Swiftcover launched its first advert in the middle of a Coronation Street break. Hardy remembers customers clicking through almost immediately: “I saw people coming through, and there were laughs and relief.”

The growth thereafter was phenomenal. “We rode the wave of price comparison sites because at the time, in late 2005, Moneysupermarket and Confused were both really hitting their stride in terms of their growth,” he says. Just two years later, AXA swooped for Swiftcover in a deal thought to be worth around £110m.

Entrepreneurs are known for their independence and free spirit, so did Hardy ever think about jumping ship with his riches following the deal? After all, Blowers left in 2009. Hardy pauses briefly, pondering the question, and then leans forward slightly in his open collar shirt and says: “We all wanted to stay, we had launched on something that was successful, we were proud of, but it was still a fledgling business. We all were delighted to work with AXA’s backing to take the business onto the next level.”

Last year, Hardy was promoted from boss of direct to overall AXA personal lines chief executive. At the time, there was talk that Mike Keating, the extrovert intermediary chief, might take the top job. Hardy says: “Mike Keating has a massive role to play in terms of our distribution through intermediary and corporate partners.”

How will Hardy and his team take AXA to the next level? The personal lines portfolio is currently split equally between corporate, broker and direct. The big project for Hardy is getting all those parts onto one IT platform – currently used by Swiftcover – which will bring down the expense ratio.

“To succeed in the UK personal lines market, you have to be low-cost. That is a given in today’s environment where everything is cost driven. I think you can kid yourself that you can be better at underwriting than anybody else over a period of time, but with price comparison sites and the amount of work that people do looking at each other’s rates, underwriting advantages only last for so long.”

The secrets of the much-heralded IT platform are jealously guarded by AXA, but it’s safe to say they are extremely confident it will take ‘customer profiling’ – the idea that systems can instantaneously credit check, claims check and eventually driving licence check in microseconds prior to pricing – to a new level.

Hardy points out: “We are able to do a lot of screening and verification of customer data at the point of sale, before we sell. A lot of our competitors check customers’ claims history when they make a claim – that’s too late.”

What other tricks does Hardy have up his sleeve? Telematics, maybe? “Watch this space,” Hardy replies, ever careful not to leak too much information to the enemies.

We can also expect to see more adverts of craggy rocker Iggy Pop and his puppet lookalike on our TV screens. The hugely successful advertising campaign has helped achieve AXA’s target of pulling in one million direct customers.

One more prosaic but vitally important part of ensuring stability within AXA personal lines will be prudent reserving.

Hardy explains: “We are taking action on pricing, but we are also strongly and prudently reserved. So we’ve seen in the numbers the makings of an issue and I’d rather face up to it and reserve it than have an issue come out in two or three years’ time.

“Bodily inflation is there – we are seeing it and reserving it and taking actions in pricing so that in 2011 we will see a big turnaround in terms of the combined operating ratio of AXA.”

But Hardy’s carefully laid plans could be jeopardised by one major personal lines player deciding to break ranks, undercut competitors and quell rate rises, which are on course to reach 20% this year, according to the AA. “The main threat would be from an established profitable player saying: ‘I’ve got the rate increases I need, now I’m going for growth’,” he says.

Hardy will face many challenges on his mission to make AXA a profitable top three player. Can he do it? If energy and enthusiasm count for anything, it won’t be long before AXA is breathing down the necks of the big boys.

Snapshot: The man

Age: 48

Hometown: Sevenoaks, Kent

First employer: Royal Bank of Scotland Insurance

Family: Married, father of three

Interests: West Ham United

In his own words: ‘We all wanted to stay, we had launched on something that was successful, that we were proud of’

The company

Ranking: UK’s 4th largest insurer

GWP: £3.05bn

UK employees: 3,000

Market view: AXA, helped by Swiftcover’s growth, now has the critical mass with 1.5 million policies. Growth was at the expense of combined operating ratio. Now the market waits to see if AXA can polish up the bottom line.