Zurich Australia General Insurance CEO Daniel Fogarty has been riding high since taking the reins in May 2012. IRP takes a look at what else he can pull from his bag of tricks.
James Chalmers: How would you describe your first 18 months in the role?
Daniel Fogarty: We had a great 2013 at Zurich, especially winning NIBA’s General Insurer of the Year, which has to be one of the proudest moments of my career.
The NIBA Convention in 2012 was my first Convention as CEO and I was presenting the Broker of the Year award. It’s the last award of the morning session and up before that they announced the three finalists for Insurer of the Year and Zurich wasn’t one.
I went out to my staff straight afterwards and asked ‘What’s the story here? We only distribute to brokers. We should at least be in the best three.’ I put that challenge to them.
I wanted Zurich at least on the podium the next year and hopefully win it after that.
When they announced Zurich as the winner in 2013, I couldn’t believe we had won straight away. It’s a great vote of confidence from brokers in what Zurich’s doing. It’s quite humbling too.
But we know there is more we’ve got to do to make sure we’re servicing our brokers the best we can.
JC: You told IRP last year you planned on improving the business model to better suit brokers. How has progress been?
DF: At Zurich we develop our products
and services to make sure they suit brokers and we’ve stepped up to that challenge.
Over the past 12 to 18 months, we’ve certainly started getting traction in a number of places. Our SME offering is one that brokers really like. They know if they send us a request on the Z.StreamXpress platform, our people will get back to them straight away electronically, or if it does need to go away for referral they’ll get a fast response. Brokers know we’re ready to deal with their business straight away.
The other bit of feedback we’ve had from brokers is that Zurich listens. We’ve run a number of focus groups with brokers, getting them around a table and asking them to tell us what they think we’re doing right and what we need to improve.
We’re prioritising our investment based on broker feedback so that we can become even easier to do business with.
I see brokers giving business to the very insurers that are competing with them and I wonder why are they doing that?
JC: What sort of changes can brokers expect in 2014?
DF: We’re looking at processes, to see if we can complete our underwriting more quickly and if there are better ways to match our appetite to what brokers need.
We’re also looking to add more products on Z.StreamXpress. In 2013 we’ve put marine and corporate travel on Z.StreamXpress and in 2014 we want to add more products.
It’s really a question of how do we make the SME business easier for brokers to conduct electronically.
For case-underwritten business, where it’s a little bit more complex, we’ve been looking at the underwriting process and asking how the underwriters can spend more time with brokers and working on the underwriting, rather than sitting there doing the admin. It’s still something we need to work on to get completely right but I’m confident we are getting into the right space, which means we can get
back to brokers more quickly on a range of products.
JC: What do you see as the key opportunities for the industry in the coming year?
DF: 2014 is going to be a very interesting year. You’ve got two commercial insurers coming together and that creates an opportunity for the other insurers. Before coming to Zurich I was at a company that was going through a merger and I know what it’s like. There are a lot of things going on in the company and competitors will use that opportunity whilst those companies are focused internally.
I’ll be encouraging my team to look externally and find new opportunities to grow our business and there’ll be other people doing that too. It will continue to be a competitive market.
We’ll see a lot of things happening on the broker side as well. Steadfast will complete its first full year as a listed company and the guys at Austbrokers are also doing a great job.
In the internationals there are some people changes. I see it being a very competitive market but hopefully very rational.
I think it’s a good environment for us. We’ve already made some changes in our business and to me 2014 is about leveraging those changes and expanding our business through brokers.
JC: What sort of challenges will have to be faced?
DF: Catastrophes are always a challenge. Even as we approached summer, we had the fires in the Blue Mountains and hailstorms in NSW and Queensland. That’s our moment of truth. That’s why
people have insurance, so that we can step up and get them back to where they should be. It’s always something we’ve got to make sure is priced correctly. Continual alertness to catastrophe is one thing but the other is rational pricing.
One of the big challenges we have as insurers is that investment returns have been going down and down and that’s been a challenge here and in other countries. Without returns on investments, we need to continue to push to have underwriting profits and that means managing price. In a competitive market it’s hard to manage price to make sure you get an underwriting profit. I think the whole pricing scenario, particularly in a low investment environment, is going to be a challenge.
The insurance industry has made good profits in 2013, so they’ll all sitting there wondering ‘Well, how do we grow?’
We also need to look at how we attract more talent to the industry. It’s something I’m passionate about and something I’m working on the ICA-NIBA subcommittee with Rob Whelan and Dallas Booth. We want to get some more initiatives happening in 2014 so watch this space.
JC: Underinsurance continues to be a problem. What sort of role do you think insurers have in raising awareness of the issue in the broader marketplace?
DF: This is an issue for the whole industry and for brokers as well. What always surprises me is how little take-up there is of business interruption insurance.
If there’s a fire or some disaster that impacts your business and you don’t have business interruption insurance then you can’t continue to pay your employees and all those other unexpected costs, unless it comes out of your own pocket. This is one thing that I believe brokers could be advising to all their commercial clients. There is more opportunity to cross-sell.
Insured businesses are looking at their costs and doing what they can to keep them down, but when they have to claim no-one is complaining about the cost of their premium.
We see a lot of different claims situations and those customers with business interruption insurance are thinking ‘Great, I can pay my employees, I can get back into business’. It’s in our interest as the insurer and obviously for the insured to get back into business as quickly as possible.
JC: How does Zurich assess the threat of direct insurers moving into new markets?
DF: As an underwriter it is something we obviously need to continue to watch.
One of the challenges with the direct market is that customers don’t get advice. Brokers are in the advice business and we’re in the underwriting and claims business. If customers decide they don’t want that advice then that’s a challenge for the customer and for the broker.
We still see there is plenty of business for us to deal directly with brokers and brokers are supporting us.
Alternatively, if you want to go direct, you’ve got to spend a lot of money on marketing. You need to be able to attract people to your website or call centre and that costs money, just like paying broker commissions costs money. Over time you have to look at whether you’re getting value and whether the customer is getting value.
Here at Zurich we’re growing nicely and brokers are responding to the fact we are an intermediated business only and it’s something I would like to see more of. I see brokers giving business to the very insurers that are competing with them and I wonder why are they doing that?
We only work with brokers and that is the core of our business.