Restructuring, reinsurance and risk

Restructuring, reinsurance and risk | Insurance Business

Restructuring, reinsurance and risk
The highlight of 2016 for Suncorp NZ’s EGM – distribution, Cris Knell, has been the ‘monumental piece of work’ that the company restructure has entailed, and still is.

“One of the things I was really heartened by was the sheer resilience of our own people, the flexibility they had to engage with the planning process, and a good few of them have taken on some new responsibilities,” Knell told Insurance Business.

“We’ve brought together the life brand Asteron and Vero and it’s been really positive positioning together those two really well regarded brands in New Zealand so that now the whole is worth more than the sum of the parts.”

He said one of the most exciting aspects of that was having a fresh talent pool of both life and general insurance people to work with, which would in turn invigorate all of their other strategies.

“So how we better connect with customers, how we better provide product to customers for covering exposures that they really want to cover and services that they really need and then just making sure that we’ve got a business that’s future-proof so those emerging exposures we see on both the life and general insurance side can be catered for in essentially a one stop shop,” he explained.

Knell was the first to confess to certain preconceived notions about the life side of the business which he said were immediately disproved.

“I have to say I have been absolutely blown away by the life guys that we have at Asteron, they are just incredibly talented in terms of customer engagement, they really have a great level of customer service,” he said.

“When you get into the NPS scores, they take it really personally which is very different from the general insurance side so one of the things we’re looking to do with our business is take those really good attributes from the life side and somehow bridge those into the general insurance side, and I think we’ll have a much better overall business for it.”

With four-fifths of the business being intermediated, the key focus initially was not only improving connectivity for brokers and corporate partners but adding more product and service to fill a ‘bigger spectrum of need’, said Knell.

Key to that was placing the customer experience at the fore with moves such as introducing the Smart shops in Auckland and Christchurch which meant car repairs were turned around much faster now.

Looking at the biggest challenges facing the industry, Knell said the frequency of earthquake events over the last six years was concerning.

“We’ve been delivered some pretty steep challenges since 2010 with the general insurance market and earthquakes, when you think of the chronology of events,” he said.
“We had a major earthquake in 1931, another one in 1987, then Gisborne in 2007, then it was 2010, 2011, 2012, 2013, I think we missed 2014, and then 2015 and 2016, so that’s a big challenge.

“How do you deal with a landscape where you’ve got a frequency of catastrophe events?

“The real driver for me is putting real focus on making this a sustainable business. I am concerned that if we don’t manage it properly it’s going to potentially threaten the ability of us being able to provide earthquake cover, unless we really handle this in a way that demonstrates to the global reinsurers that we’ve really got our arms around this.”

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The significant size and damage of the Kaikoura earthquake – with Vero looking at an estimated 5,000-6,000 claims with losses in the hundreds of millions of dollars - meant that further similar-sized events would be a real threat.

“Unless we manage this in a way that looks like we’re good custodians of risk I think we’re going to find ourselves with reinsurers’ appetite for earthquakes, particularly in urban centres, being reduced and therefore a lot of the earthquake risk is likely to fall back on to self-insurance or higher deductibles or less limit out there to be able to take advantage of,” he said.

“So it’s a watching brief with a lot of moving parts but the Vero corporate team both here and in Australia is working very closely with not just the big treaty reinsurers but we’re keeping in close contact with our facultative reinsurance support to make sure we’re completely transparent with them in terms of what we’re seeing as exposures and how we’re managing that going forward.”

Knell said they were also conscious of not squeezing policy holders too hard, what with Fire Service levy increases coming through as well.

There were a few things that posed as much of a threat to brokers as to insurers too, he said.

“They have the threat of disruption to their business as we all do, and when I look at the regulatory environment, that’s obviously a key risk for them,” he said. “We’ve got the reinsurer risk appetite which could change the ability to service risk; we’ve got the new technology coming in which if you look at the simpler end of the risk equation, that’s starting to develop a direct marketplace in New Zealand as well.

“To me the key fundamental service that a broker provides is that really valuable advice and advocacy to a customer, it’s to make sure they examine risk, make sure they understand the customer’s specific risk and make sure they tailor the solutions through the insurance products and services to be able to manage that risk appropriately and I think they provide a really, really invaluable service in the insurance market to seeking those exposures and making sure there’s highly specialised programs to support the insureds particularly at a time when things go wrong.

“So we’re looking at the insurance broker market to provide more of the advice and advocacy on risks where there is some complexity and I think our strategy would be to broaden choice so the business that’s flowing into the direct channel we want to be able to find a way to ensure we can compete with that by essentially providing great service to customers whether they come through an intermediary channel, corporate partner channel or a direct channel.”

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