Publication

PA perspective on European insurance - edition 1, 2007

Welcome to 'Perspective on European Insurance', PA’s publication on issues of strategic importance to senior insurance executives.

In this edition we explore the challenges associated with declining customer loyalty, characterised as falling persistency in the Life & Pensions market and customer churn in Property & Casualty.  With tighter margins, reflecting the competition throughout the industry, it is important to forge longer-term customer relationships. 

To achieve this objective we return to a common refrain in 'PA perspective': “how do we create a more customer-centric organisation?”  This has far reaching implications for -

• strategic intent
• business model adopted
• operational configuration

- and we explore these issues in our articles.

Some of this issue's articles are written by senior industry managers who grapple with these issues day-to-day; others are by our own experts throughout Europe, who are working with those in the ‘front line’. We hope you enjoy reading it.

Article summaries

Trends in European insurance: Profit will be hard won
Continued profitable double-digit growth is an ambitious aspiration in the insurance industry even in benign economic conditions: all the more so when there is pressure on margins across the industry.  The challenge ahead is to tackle four key issues: fixing the business model, capitalising on structural change, seeking new growth opportunities, and gaining sustainable competitive advantage. 

Guest article by Mark Hodges, Chief Executive, Norwich Union Life - Why customer persistency is critical to the life and pensions marketplace
There are considerable up-front costs involved in attracting new business and setting up contracts. The industry is prepared to incur these costs because traditionally our products, such as pensions or protection, run for 10 or 20 years, allowing plenty of time to recoup this money. Ultimately, the winners in this market will be the providers who can look beyond a traditional product-based view of the world and find new models that better align consumer, intermediary and provider interests. Such a model will make it easy for customers to access products and services, offering flexibility, support, help and advice in a simple way. Together with consumer education, this will help to rebuild financial provision through trust in financial advice and the products we offer.

Driving innovation in insurance
If the insurance industry is to meet the challenge of providing compelling solutions for customers, a step change in innovation is a must.  In a demanding environment, where customers see little difference between products and providers, competition becomes a matter of finding new and distinctive ways to serve customers. Insurers that act on innovation, rather than just talking about it, will find themselves better placed to win the race.

Welcome to Sweden: the pensions market opens up
The market for the provision of pensions in Sweden is in transition. Historically it has been dominated by a small number of players, with market practice and the regulatory regime providing a barrier to entry for other competitors. EU legislation and changes in the political landscape in Sweden are driving changes in regulation that will open the market to foreign and non-traditional players, improve the appeal of the products, and increase the size of the market.

Stick or switch: understanding the causes of low persistency
The UK Life and Pensions (L&P) industry is living on borrowed time with projected profits appearing unrealistic to many commentators who believe that persistency assumptions are over-optimistic.  Projected profits are based on seemingly unrealistic assumptions, so how should the industry respond?  We believe that effective strategies to improve persistency can only be developed by understanding the root causes of the current situation. In this article we examine in more depth those root causes.

Interview with David Hynam, Chief Operating Officer, AXA Life - Cutting through complexity
We all want to reduce costs and simultaneously improve customer service. In the UK Life and Pensions industry, things are further complicated by scores of IT systems and major change to regulation (the latest being the UK's ‘A-Day’ changes to pension laws). David Hynam, Chief Operating Officer of AXA Life, talks about how he has managed these challenges, reducing the cost base and delivering significant improvements in service to intermediaries and individual customers.

Claims management: scripting the customer experience
It is not a flight of fancy to ‘script the customer experience’. Indeed, in our view it is both possible and necessary to adopt this strategy. And there are systems packages that can be selected now which make this business imperative an operational reality. Moving to an appropriate customer-centric model will drive claims administrative costs down as well as reducing leakage in settlement costs. In our experience the typical benefits can be a 10% saving in total claims costs.

Back to the future: Germany shakes things up
German Life and Pensions companies have had a lot to cope with in recent years.  After decades of near-stasis, the industry has begun to evolve rapidly in response to reform of the industry’s regulatory and economic environment.  It is crucial to manage this resource pro-actively by both setting the compliance strategy and developing a detailed plan. 

PA’s insurance experts launched this occasional publication to provide senior executives with a selection of insights on topics of significant importance in this marketplace.

We hope 'PA perspective' offers you an informative and interesting read - and, of course, we welcome your feedback.

We would also be interested to hear from you if you have any feedback on this newsletter's content, if there is a particular topic you feel we should cover in future editions and if you would like to receive future editions direct, also via insurance@paconsulting.com