Allianz is not the only insurer integrating its divisions
When Allianz announced it would be combining its personal lines and specialty division into Allianz Retail, thoughts automatically turned to tales of reducing expenses and curbing overhead costs.
In the face of an £83m flooding bill, news that personal lines general manager Nick Hall and Allianz specialty general manger Gareth Jones were the leaving the company with John Dye being handed the reigns to their divisions, could logically be perceived as an attempt for the company to maintain profits in a challenging market.
But chief executive Andrew Torrance has steadfastly maintained that is not the case.
The changes, he said, are not a mission to reduce expenses but a move to run business in a more aligned manner to realize the company’s substantial growth ambitions.
Strategically it makes sense for the two divisions to become more closely entwined. Perhaps it was a case in the past of one foot not knowing what the other was doing.
There will obviously now be numerous cross-selling and growth opportunities that were perhaps missed in the past.
Allianz would not be the first to embark on this strategy and according to one analyst it’s a trend likely to continue at this stage in the market cycle.
Three years ago brows were raised when Zurich announced that its public sector division, Zurich Municipal, would converge with its commercial lines business.
The company’s strategy was called in to question with many wondering what the benefits would be of combining municipal and commercial.
Zurich's rational was not all that different from Allianz's.
The two divisions, said Zurich, were similar in size and scope and shared common strategies. The convergence would allow municipal and commercial to share best practice advice and become a multi-niche specialist that could create new markets and growth.
Norwich Union has made similar moves recently with sweeping changes to its operating structure in order to streamline business.
The changes have seen RAC further integrated into NUI business and bring the management of its distribution channels under control of a single director, John Kitson.
The change was touted as an effort to bring greater cohesion between the channels.
Most recently NU’s changes have resulted in the job cuts of 30 director positions as more departments have become streamlined.
Mark Winlow, senior analyst at LECG, said the pattern of insurers merging divisions could be linked, in part, to the current stage of the market cycle.
Winlow predicts, however, integration and alignment have more to do with cost-cutting than chief executive's care to admit.
He said: “As the market softens then there is less chance of increasing rates and so a need to focus on costs. Rather than have claims people in personal lines and commercial lines and high net worth, for instance, why not put them all in a cross-channel claims function and give the overall claims director the task of reducing the overall cost? In the same way you can outsource IT, HR or marketing.”
Winlow said we can expect the trend to turn within three years as the market changes and new CEOs arrive.
