Guy Munnoch may only be a month into his role as Zurich GI UK CEO but he is already excited about the business' potential. Jonathan Swift discovers his views on pricing, buying brokers, managing talent and, inevitably, Towergate
The insurance career of Zurich UK general insurance chief executive Guy Munnoch has snowballed since he joined the industry in 1992. He also has an insurance career because of a snowball - Patrick Snowball to be precise, the Aviva group executive director and a former army colleague.
"Patrick phoned me up one afternoon and said, 'what are you doing?' To which I responded, 'I've just got home from a cocktail party and am about to go out for dinner, why do you ask?'" explains Mr Munnoch. "I actually thought he was after a room for the night, because he and I had served together. But the long and short of it was that he wanted me to join a company that he was managing director of, Ajax, which was a wholly-owned subsidiary of Norwich Union."
Obviously, Mr Snowball's persuasive charm paid off, as Mr Munnoch joined the company in 1992 in an operations role, and took over as managing director when his friend moved to the parent company.
Following Mr Snowball to Norwich Union years later, Mr Munnoch held a number of roles, including running the claims operation, before being 'headhunted' in 1997 to move to Zurich Municipal and help build up its fee-based services. Since then he has acted as managing director of ZM before, 18 months ago - taking charge of the Zurich Commercial business too as part of a dual role.
Facing a big challenge
Mr Munnoch succeeded Ian Stuart as Zurich UK GI CEO at the beginning of January and is unfazed by the challenge that awaits him, given the restructure of the business late last year. This restructure has seen it split into four business groupings: broker; commercial direct (effectively the old ZM business); corporate partners and affinity; and retail (direct and micro-commercial).
"We have been on a journey for about 18 months now, moving forward as one UK, one Zurich. Even though I have only been CEO for a matter of days, I have been part of that journey from the beginning, bringing together Zurich Commercial and ZM, so we had a single commercial unit to work alongside the personal lines business."
Mr Munnoch believes that structuring Zurich's business model around its target customers is eminently more sensible than product lines. He expands on this with the example of the broking division: "This allows us to face brokers who are trading in both personal and commercial in one go. We believe that this is a natural change that fits with what the market wants."
Dwelling on the ZM business of old, with which he has obvious close ties, Mr Munnoch is at pains to explain that, while the local authority insurer has dropped 'municipal' from the division's name where it sits, Zurich is still intrinsically linked to that market, and will use the term where appropriate.
"The new name allows us to be more flexible; if you take the name 'commercial direct', it comprises not only local authority business, but housing, education, charities and building guarantee. As the traditional ZM has grown and evolved over years it has become more than just a municipal insurer - charities are not municipal."
Another element of the recent changes, which may have been seen as bold, was the recruitment of Rob Allison, previously northern and SME director, to run this business, given that his background is in the broking sector.
"What we do in Zurich is ensure we have the talent to run the business - and Rob was a very strong regional director. So this was a great opportunity for him to step up and run a business in his own right.
"We are always happy to move people across the business depending on the skill sets they bring. So with Rob, it was a powerful move, but it demonstrates his ability. It is all about having the talent, rather than having someone born and bred in a particular division."
Despite praising internal talent, Mr Munnoch concedes that the corporate partners and affinity division still has no managing director, a role that headhunters are currently looking to fill externally. "We are keen to grow this area and wish to bring in an operator from outside, because there is an opportunity to be more creative and draw on experiences and skills from the sectors we are targeting.
"Partnerships is all about building relationships and being able to understand how the likes of motor manufacturers and financial institutions trade with the consumer, rather than worry about running a large organisation that happens to be an insurance company. So we are casting our net very widely across the whole commercial market to fill that role."
Mr Munnoch, however, stresses that this role is the exception rather than the rule, adding: "It is testimony to the talent we have, that we can create an almost entirely changed top team from within the organisation. It demonstrates that we have got great succession plans in place and sophisticated talent management."
Like many of its rivals, Zurich has caught the broker-buying bug of late, striking a deal at the tail end of 2006 to buy the remaining 55% stake it did not own in high-street broker Endsleigh.
"We had reached the point where we were reflecting on our strategy, and had to make a decision about whether taking the full 100% shareholding would make sense. Zurich's strategy is to be the leading multi-niche, multi-distribution insurance provider in the UK, and the acquisition of Endsleigh is very much aligned with that. It is a niche player, in that it has an enormously strong brand among students and young professionals and, as regards distribution, it is a broker. So it was decided that the acquisition was a natural next step."
As to what future plans Zurich has for the company, Mr Munnoch - as with other CEOs who have recently taken control of brokers - is adamant that it will not start channelling more business its way at the expense of rivals. "Our position is to ring fence that organisation, to make sure we trade at arms length, to ensure there are no conflicts of interest," he explains.
Mr Munnoch is also keen to reassure the market that, despite being a brand associated with younger people and students, Endsleigh will not migrate most of the business online and to call centres - the two channels traditionally linked to how its target audience buys insurance - and close its branch network.
"We have 40 or so branches on university campuses, but we also have 80 that are not, and the reason for that is to ensure we can continue to capture the student when they graduate and become part of the normal community. Our plan for Endsleigh is to take an organisation that has done extraordinarily well in the past and make sure it continues to grow. Its business model has worked well since 1965, so there are no designs to tamper with it."
Hungry for more
Asked whether this deal has whetted Mr Munnoch's appetite to make further broking acquisitions, and even perhaps follow Axa into buying commercial intermediaries, he comments: "Zurich is about profitable growth, but our foremost focus is on organic growth. As a group, whether looking at it globally, in Europe or locally, if there is an opportunity that makes sense from a strategic perspective it will be reviewed and a decision will be taken.
"Endsleigh made sense, but we have no plans to go around purchasing any other brokers. We recognise the distribution landscape is transforming but, at the moment, we are happy with that one acquisition. We are not beating a path to the door of brokers, we saw something we knew very well, and it was a natural move."
With talk turning to the changing distribution landscape, it is inevitable the discussion moves on to one of the primary shapers of the evolving intermediary market. Zurich famously turned its back on Towergate's commercial business in 2004, by not offering it an agency - a decision Mr Munnoch continues to stand by.
"We have been very clear how we operate with managing general agents and consolidators and have relationships with many, and we will continue to build and grow those relationships as long as they fit our business model. It is all about making choices and the choices we make are important to ensure we have a model that we wish to defend.
"There was a lot of press in 2004 about Towergate for example, and that demonstrated we are an organisation that is confident about making decisions. In that particular respect we were not jumping on the bandwagon, going the same way as everybody else. It was about us recognising that the business model Towergate was offering did not suit us."
The ratings game
Among the many challenges his company and the overall industry face, Mr Munnoch mentions the rating environment - something that has generated many column inches in the national press of late. He applauds Norwich Union for taking action in the motor market and is hopeful this discipline will be maintained during 2007. As for where his company may take the lead and make a difference, Mr Munnoch comments: "NU is a leading insurer in motor and this allows them to exercise their position, to ensure the market responds accordingly. If you look at employers' liability, we are number one, and if you are a leader in a particular line of business you should be responding and operating as a leader should. If you have the confidence to move, that is what you should be doing.
"It is up to each insurer, depending on the lines they feel most confident in, to take a leadership role. EL is interesting because we have an underwriting rigour, know where our technical price is and can mark our target price - that is, the price it goes to the market - accordingly. You have got to reflect on where the competition is at the moment and, certainly, there are a number of very interesting - one could even say reckless - pricings in the market. We have got to take consideration of that."
The changes within Zurich's GI business have certainly been marked, not just in the UK but on a pan-European level, with former Royal Bank of Scotland Insurance chief executive Annette Court joining on 15 January as European general insurance CEO.
Despite her background with Direct Line and RBSI, Mr Munnoch is quick to stress that brokers have nothing to fear about the group's future direction and he is excited about the prospect of working with her. "Annette brings a wealth of experience and a proven track record, particularly when you consider that, across Europe, the split between personal lines and commercial is 60:40, as opposed to the 40:60 split in the UK. Also, we are the only insurer that deals direct in eight countries across Europe, all the ones we operate in. So, Annette's experience of the direct insurance market arguably makes her an excellent catch for Zurich."
Mr Munnoch may be self-deprecating about his slight stature - joking about the fact that he cannot find ties that are small enough for him - but he certainly has plans to ensure Zurich is seen as a giant among its fellow UK insurers.
"I'm keen to raise our profile," he concludes. "From a personal perspective, I feel that this has been a little dormant over the last two to three years and believe we have a tremendous amount to shout about, a tremendous story to tell. We have not necessarily strutted our stuff as we should have done recently. So this is a good turning point, we have a new team in place and they have all got clammy hands and flared nostrils, ready to go."
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