Tower is planning a major overhaul of its on-sale products in a bid to lower operational costs by reducing them from 150 to 20.
The overhaul was part of CEO Richard Harding
’s plan to reduce complexity within the business, which he outlined recently to Insurance Business
Harding told shareholders at their annual meeting this morning that it was crucial for the company to get the basics right, which included simplifying the number and complexity of Tower’s systems, products and policies.
The announcement comes on the back of Tower’s FY2015 results, which saw the company report a net loss after tax of $6.6 million in the year ended 30 September, following an increase to its Canterbury event provisions.
“We currently have 350 different policy versions and 150 different on-sale products across three different IT platforms,” Harding said. “This has a significant impact on our cost base.
“Our frontline staff do an amazing job navigating this maze, but it takes time and is certainly not conducive to developing a high performance customer service culture.
“We are going to progressively reduce the number of on-sale products to approximately 20.”
Harding said it was complex work and would take time but a cumulative improvement could be expected.
“For example, within the claims process, the immediate benefits of product rationalisation will include reduced call times, staff training, auditing, and claims leakage.
“In the longer term, as call processing times reduce, there will be significant productivity improvements – and commensurate cost savings.
“And these are just the benefits associated with the claims process; there are a raft of other benefits affecting sales relating to customer retention and cross-selling potential,” he added.
The benefits of the product rationalisation could be expected in FY2017, Harding said, while some other cost reduction measures would have immediate effect.
“We have completed a bottom up review of discretionary spending within the business.
“This has identified a number of easy-to-implement measures including simplification of processes, better procurement policies, reducing costs by increasing online communication, better claims management including being tough on fraudulent claims, which will all collectively – and quickly – strip out unnecessary costs from the business,” he said.
“The end game is all about growing and retaining our customer base, and cost reduction is a vital part of that story.”
Harding said the company also planned to sharpen its focus on underwriting and pricing, by increasingly using data to more accurately price risk.
Shareholders also voted on several resolutions, including the re-election of David Hancock and Steve Smith as directors, the election of Warren Lee as a director, and the reappointment of PwC
as Tower auditor.