Four hundred layoffs prompt speculation that insurer will pull out of UK market

Zurich insists it has no intention of pulling out of UK personal lines, despite announcing plans for almost 400 job cuts in that part of the business by the end of 2014.

The latest round of planned redundancies has sparked speculation that it could herald the insurer’s departure from this market.

But Zurich’s personal lines managing director, Karl Bedlow, said that the relaunch of its UK personal lines into a low-cost operation, of which the job cuts were a part, re-affirmed the company’s commitment to the market.

The operational changes will affect 163 staff in customer services and claims in Whiteley, Hampshire, 113 in Cardiff, 39 in Glasgow, 14 in Farnborough and 13 in Leeds.

Zurich will also cut 51 positions from its personal lines claims team in Pune, India, before the end of the year.

The insurer lost about £200m in personal lines premiums in 2010, largely from hiking up motor rates by 20%.

Jefferies analyst Jonny Irwin said the planned job cuts were part of a shift in the company’s strategy towards commercial lines.

But Bedlow refuted any suggestion of a pull-out, saying the opposite was true and that Zurich was focused on being competitive in the UK personal lines market.

He said: “The fact that we are doing this and investing in our personal lines business shows that we are serious about it and are committed to the future.”

In an interview with Insurance Times, Bedlow said Zurich had stabilised its premium base this year in line with its business plan after a drop-off in the previous two years, and would now be looking to grow its market share.

He said the job cuts were not directly linked to decline in volume, but rather a refocus of the operational model to achieve greater efficiencies in light of upcoming regulatory reform.

“Unfortunately these job cuts are a necessary part of re-engineering our personal lines business so that it is really fit to compete,” he said.

Zurich announced that its branded motor product would be administered through existing partner Broker Direct, while the company is also planning to transfer its existing books of personal lines business for direct and partnerships to its subsidiary Endsleigh, and existing supplier Wessex Group.

This follows the launch of Zurich’s new online direct motor policy through Endsleigh last year.

Since then, Zurich’s personal lines strategy has focused on a low-cost business model offering stripped down and simplified products online.

Talking points …

● What areas will Zurich focus on if it continues to scale back its UK personal lines business?
● How will the insurer’s cut-backs affect brokers outside of the business outsourced to Broker Direct, Endsleigh and Wessex Group?
● What is competition like in the personal lines market, with more companies such as Chartis Insurance UK cutting back their operations in that area?

Pass notes: Zurich

What has been Zurich’s approach to lowering its cost base?
Zurich has made a number of staff cutbacks over the past few years, slashing 243 roles, including 149 last year. But it is not alone. Chartis Insurance UK announced up to 130 job cuts in the first half of this year, RBSI has cut 2,000 posts and closed 15 offices in recent years, RSA made 1,200 redundancies, and Aviva announced in October that almost 1,000 staff in Ireland and Europe would go.

What has Zurich’s personal lines track record been like?
In 2011, Zurich performed a U-turn after dropping Zurich Connect the previous year. It brought back the aggregator six months later after rates hardened and it recognised the chance to regain market share, with Endsleigh carrying out sales, servicing and premium collections. Zurich’s personal lines managing director, Karl Bedlow, said at the time: “The new low-cost model recognises the reality of an aggregator-dominated direct personal lines market in the UK.”