Managing the metamorphosis

With the world going, in his own words, "south", Zurich Global Corporate UK CEO David Hall is confident the business is well positioned to achieve its stated goal of securing a 25% share in its chosen markets. He explains to Lynn Rouse how he intends to do this.

Sitting on top of $1.9bn (£1.3bn) of revenue, and tasked with managing it in a profitable and sustainable way, may sound like the stuff of nightmares in the current economic climate. But after 10 months in the job, David Hall, chief executive of Zurich Global Corporate UK, contends that he has "never not enjoyed a single day". Excusing him the double negative for the enthusiasm it belies, Mr Hall is unashamedly geared up to capitalise on the opportunities he believes the radically altered marketplace afford Zurich.

His target over the next four years is to secure a 25% share in its chosen markets - up from the existing 19%. And he believes this is entirely achievable, predicting enhanced regulation and governance of the insurance industry that will prompt a "rationalisation within our marketplace" and a "flight to financial strength".

"As a consequence of our prudent approach to risk management, matching our assets to our liabilities, we have a very strong balance sheet, an excellent solvency ratio and some of the operational transformational activities we are now putting into the business will deliver even greater levels of financial strength to all the customers that we work with going forward," he asserts. "From a Zurich perspective, we are very well-placed; as a business we do not have exposures to risks that we don't understand."

Mr Hall has not always been an insurance man. He spent the first 12 years of his working life as a marine engineer, describing himself as a "logical sort of guy", lured by the possibility of travelling the world and applying his rational mind to the challenges he encountered. But his insurance pedigree now spans in excess of 25 years and four insurers - Royal Insurance, Sun Alliance, Allianz and Zurich - during which time he has held a range of senior positions, predominantly focused on the technical aspects of underwriting, risk engineering and loss prevention. While at Royal he also acquired, embedded and ran an environmental company, "which is where I got a real flavour of the full business side of running an insurance company and managing people".

Irresistible force

Previously director of market management and communication for Allianz Global Corporate & Speciality, Mr Hall was lured to Zurich last June by an opportunity he "just couldn't turn down", citing a great brand, dynamic business model and a board that had a "clear aspiration of where they wanted to go and what they wanted me to do". "In the UK, we are allowed to drive against business plans; we've got the mandate, the responsibility and tremendous expertise."

Referring to himself as a "relational-driven individual" he adds the timing was also attractive. "The world has gone south. There are tremendous issues facing customers, so delivering value and solutions to people who are in difficulties is a key driver of mine. There was also a huge opportunity for me to de-complicate our operation and make it much more effective at delivering those customer solutions." He accepts that, from a broking and customer perspective, "we were a little difficult to do business with".

Zurich Global Corporate operates in three distinct geographies - North America, Europe and Asia-Pacific - generating revenues of $7bn. Mr Hall's division provides risk transfer for "the most complicated and sophisticated" multinational companies domiciled in the UK, segmented by a turnover threshold of £300m. "Anything that sits above that threshold we have the mandate to apply our underwriting philosophy, rules and principles and engage with those customers on behalf of the Zurich group." He directly manages 450 people but also flags up Zurich's 'shared services resource' for a range of functions. "This means that, as a group, we are not outsourcing; we in-source to the One Zurich proposition in order to drive through efficiencies for our customers."

So what is keeping his clients awake at night? "Turnovers are dropping; sales revenues are impacted; people are potentially walking out the door due to redundancies; they've got profitability and governance issues; and can't obtain the same levels of credit." All of which means, he says, that expenses are on the line. Every bit of expenditure and procurement is being questioned and insurance is no exception, prompting conversations with customers as to whether they are buying too much or not enough, whether they can get the comfort they need or whether they want to retain more risk.

As a result, programme design is under intense scrutiny, "which is a huge complication in itself, with the added complication that they do not want to spend any more money. So we can't just replicate what we have always done."

He believes this demands the often-quoted, but perhaps less frequently demonstrated, "truly tripartite" partnership on programme design between client, broker and insurer in equal measure. "I believe that will enhance trust and integrity and allow us the longevity of connection to get everyone through this difficult time."

All of which sounds very wholesome but surely, from an insurer perspective, rates have to be driven up to a sustainable level as they are not immune from rising costs or the ramifications of financial markets turned on their heads?

The right rate

"We are not in a commodity market here, so there is no average rate increase we are trying to achieve," he states, while conceding: "If we do not get the target rates we need to write the risk, and attach our capital to the exposure, then we undermine the whole portfolio."

Optimising capital and protecting the sustainability of his business is arguably Mr Hall's own potential cause of insomnia and he is keen to evidence how times have changed. "In 2008, the investment return for Zurich Financial Services was plus 1.04% - and that was a tremendous result when I compare it to the outside world. Some companies were minus 15 or 20 points.

"If you consider that only a few years ago this insurance market was predicated on the basis that we made our returns and paid for claims out of investment income, prior-year releases and any margin or fat that may have been in the profit and loss accounts, then the year-on-year rate reductions, coupled with rising costs and depleted investment, illustrate the need to adjust pricing."

Mr Hall reveals that, by the end of March, his business had gone "from a zero position of rate increases six months ago to a 6.1% increase across the complete portfolio". So how has that been achieved without damaging his under-pressure customers? One relates to the altered underlying risk of many clients. "If aspects such as revenue, staff numbers and fleet sizes are all falling, there is a legitimate drop off in terms of previously required insurance. So you can reduce the level of coverage - and people are not necessarily paying more, they could be paying the same or slightly less, but we are getting a better rate for the exposure we are attaching our capital to."

Where businesses are largely unchanged, programmes are being re-jigged in conjunction with the broker, he says. "We have stripped out the 'nice to haves' because again it is a three-way view of ensuring continuity. In the last six months, we have worked diligently with customers and brokers to devise the right solution that recognises the concerns of businesses today."

Putting these proud declarations to one side, how does he respond to the recent criticism of insurers made by Julian James, CEO of Lockton International, who bemoaned the current lack of customer-centric debate (Post, 26 March 2009, pp12-13). Mr James argued that a fixation on rate increases, coupled with a lack of evidence that insurers are in tune with the real-life difficulties of clients, demonstrated a disconnect between underwriters and the wider world.

From a Zurich perspective, Mr Hall dismisses this out of hand citing a recent customer advisory board where 25 senior personnel from major UK customers, as well as some from Europe that place their businesses within London, drew up the agenda. "This is part of the relationship model we have in the UK, a tremendous dialogue that means we listen more appropriately than many."

He also points to two specific initiatives that he has "majored on" since his arrival. One is the setting up of an 'insights' team - a group of individuals focused on deepening their understanding of all the customers within the Global Corporate UK portfolio - plus the "pipeline" customers Zurich is intent on securing. The second is a team of business analysts, tasked with studying not only the financials position of those companies but their operational activities, management, governance and the culture of loss prevention - as well as additional due diligence.

"Therefore I believe we are adding more value and a much deeper level of understanding than probably the majority of our peers, creating a marked level of differentiation."

Two further initiatives have been undertaken during Mr Hall's short tenure to make the business "more market-facing and streamlined".

These fall under one of his favourite phrases - that of 'operational transformation'. In the last three months, a 'One Zurich' approach to delivering high-frequency, low-severity claims handling for UK casualty and motor has been established, which he claims is not only driving out cost but also delivering a better level of service to customers.

In addition, six contact points from the broking market have been sifted down to two. "We have blended all of our relational activity - that's to say, connectivity with customers - into one group, and all our deal-making architects and business managers into another. So now there are only two points of contact - one for customer and one for bringing the account together. And the roles and responsibilities we've redefined allow us to work more effectively with the outside world."

The final - and arguably most important - offering Mr Hall cites as evidence of Zurich's differentiation is its multinational insurance proposition, first unveiled in 2006. Its chief aim is to address the complexity of international premium tax and licensing rules for brokers and clients with global regulatory and tax requirements.

The MIP solution was initially focused on property and casualty but has since been broadened out to accommodate financial institutions and directors' and officers' liability in particular.

Mr Hall claims MIP has been the main driver behind Zurich winning some new key accounts, but concedes that it was not always plain sailing.

"It entered the market to quite a lot of hullabaloo and was, I believe, undermined by a few people and businesses in the market," he says. "But over the last few years it has positioned itself as a valuable component part of doing international insurance business. And I think Zurich has finally got the recognition for this that it deserves as a result of the economic turmoil. Many of the financial institutions we now work for have been won during this period of economic turbulence where the MIP solution was seen as the key differentiator."

With Zurich operating in 170 territories, Mr Hall adds: "People today want absolute compliance and there's going to be an onus on tax officials around the globe to chase whatever they can from wherever they can. And if you can't make an insurance programme compliant, or leave one small gap that allows a customer to drop into it, the repercussions on that business brand and operation could be absolutely huge."

Change for the better

He says the client wins are "testimony to the fact Zurich has pioneered something in order to generate operational transformation" and accepts that, "when you are first-footers, you don't have an easy ride".

Last May, Paul Hopkin, technical director of the Association of Insurance and Risk Managers, cited the lack of a "publicly available and authoritative source of global information" as a key hindrance to compliance for its multinational members (Post, 8 May 2008, p14). So would Zurich ever be willing to share the fruits of its MIP solution?

"We have had quite a number of people approach us about buying it," he responds. "But this is a unique value proposition for our customers. Therefore, we would rather absorb that cost and work with our customers to maintain that distinct advantage because you do not get many advantages - and certainly not ones you can hang onto - in this particular market. It's almost a crown jewel and people don't give away their crown jewels."

Returning to his stated ambition to become the market leader with a 25% share by 2013, and belief that a flight to quality will ensure its attainment, Mr Hall concludes: "We put our balance sheet at the customer's disposal many times every day to protect them from risk. And what I would say is this: the reason we are so strong and we can do that - despite having so many major customers - is that Zurich's balance sheet is not used to speculate; it's used to write insurance risks.

"I don't want to come across as arrogant; I just think the proposition will gain globally - the people in the business, the mindset, the strategy, the actions and the plans that we've got in place are all geared to doing exactly that."