Interview - Patrick Snowball

What's your take on the current soft market/hard market debate?There's always been a suspicion that underwriters are greedy for capacity and you've seen that in the London market over the past two to three years. I differentiate between the UK general insurance market that we're in and the London market. We saw people looking at rate increases of something like 100% after the World Trade Center, although I think in the UK ours continued at about 15%, and 30% for liability. Then you see whacking great rate reductions going through within 18 months - 30%, and aviation premiums dropping to around the level that they were before the catastrophe. That just demonstrates there's still a section in our community who look very short term at what is a very long-term business.Among the major players, there is a degree of responsibility for capital management that has not existed previously, that's at a shareholder level and a regulatory level.You just need to look at the personal motor market in the UK, where most people would say that it topped out two to three years ago, and yet rates have not gone down. They've probably not gone up as much as they should have done, but in any other cycle you'd have seen them drop. That's because the majority of the motor business is now written by two or three underwriters in this country. I hope that we can see the same disciplines in the commercial marketplace over the next two to three years.But the motor market is controlled by three big players. The commercial market is more diverse; more consolidation would be needed before the cycle can be controlled.I don't think we ever use the word 'control'. My top line concern is to ensure that for short-term gains, certain under-writers don't now try and chase capacity instead of looking at consistency of return and consistency of delivery.We are in a period of intense regulation, does that raise the bar and make trading easier or does it just make UK companies less competitive than their European neighbours?From a business point of view, particularly if you conduct your business in an appropriate fashion, you feel it's adding cost and you question the benefit to the customer. Certainly broker regulation has been questioned because, firstly, there was no systemic problem and, secondly, the two issues where there was a systemic problem around travel and extended warranty have been excluded. The FSA has broadly taken a very constructive stance in the implementation of regulation, that's not to say I like it ideally, but I guess it would say it doesn't like it ideally either.So CP190 - good or bad?It is important. If it's going to stop something like the Independent [Insurance] happening again, and if it's going to stop some of the smaller insurers taking risks that they perhaps shouldn't, then this is a good step forward.Do investors and analysts understand general insurance, and how difficult is it to convince them to stick there for five years?If they don't understand, that's our fault, not their fault, and one of the huge challenges we have, and this is with my Aviva plc hat on, is to make our life performance more transparent.We are starting to convince analysts and investors of the long-term stability of Norwich Union (NU) insurance and, indeed, Aviva general insurance, in terms of consistency of earnings and lower volatility. So that's why we made the statement that we, during this stage of the business cycle, would drive combined ratio of 100% or better. When people say: "Well is that low enough?", I keep saying "Well look back on the return on equity, that's what drives the decision". If you're getting a return on equity, and across Aviva at the end of last year it was something like 16%, and in the UK it was north of 20%, then that is a good return to shareholders.NU has been clear about its distribution strategy for personal lines (focusing on direct), and this has prompted fears that one day NU will want to own distribution in commercial lines. Does the broker still have a role ten years down the line?A There's a very strong line between advising on risk and carrying risk. I've been saying since 1995 that NU supports the distribution and the market of the future, not the market of the past. The broking community and the insurance community have learned a heck of a lot from the mistakes we made in the mid-1990s. I still believe that we allowed software houses to drive the agenda for the distribution of personal lines business, and we created a third mouth to feed in a very competitive channel.I am still a believer that holding information in itself is not a competitive advantage, I feel that the interpretation and the use of that data is competitive advantage. We are already understanding that standard presentations- apples with apples - is the way forward, but yet we still have a marketplace where I guess there is a 30% to 35% mark up in the distribution of that product between the commercial customer, the broker and the insurer. We have to get that down.How do we do that?One of the areas we should still work on is that if we just held all the data in one place and we all had access to that data, you would get consistency and you would get a much cheaper marketplace.So the answer to your question is I believe that risk advice will be required for the majority of commercial risks going forward, that is the broker's role and that's the one they see fulfilling.Increasingly, most brokers and most insurers would say: "Is there any advice that you're giving on a £600 or £700 combined hairdressing policy?" Now, if the answer's no, then it's a click-and-buy solution, and where does that go? Well, you either click-and-buy a broker's site or perhaps an insurer's site, and I don't think we want to get in a hell of an emotional stand on this: 85% of commercial risks are broked through commercial brokers. Interestingly enough, the big ones [brokers] seem to have lost the medium-sized ones [risks], which demonstrates that proximity to customer is incredibly important still. Again, if you look at NU, we have 44 offices around the country answering that requirement. We have 130 underwriters on site as part of Norwich Union Bonus [aka GA Bonus]. Now, you don't invest in that infrastructure if you don't believe that that's the way forward, but things will change, we just have to understand it. One of the fascinating things is that if you look in Scotland now, outside of Glasgow, we are the only insurer with any offices. But we're the only mainstream insurer in Edinburgh, Perth, Dundee, Aberdeen or Inverness.The great merger: what did you learn?A The first thing I'd reflect on is that it was probably the most successful merger that's ever been executed.We took the learnings of the CGU merger and NU's acquisition of London & Edinburgh, and yes we made mistakes, but bearing in mind that you're never going to get more than 80% right, that great principle of war, maintenance of the momentum was absolutely vital.As far as I remember, having started in May, by September everybody knew where they fitted in the new organisation. I always thank the brokers. I was extremely grateful for the support that we got from the broking community during the merger. We were very open with them but they did have to put up with a lot of difficulty. But it was for a very short period of time, and if you look across the marketplace now you will see a recognition of the primacy of NU as the number one insurer in this country.Critics say that NU is arrogant. How do you feel about that?There is a recognition that in being the market leader, there is always going to be the question between assertiveness and arrogance. I have to say that when I walk into a room, I feel that people want to come and talk to me, I don't feel that people are running in the corners any more. One of them made an extremely nice speech the other night and said we should be very proud to be associated with the success of this company.Some of the smaller people might be turning round and saying: "Gosh, they're too big, they don't care about us", but I keep saying all we can do is sense the direction of the market and make certain we're leading in that direction, not waking up when the markets move.What kind of feedback are you getting from the India experience?There are still mutterings about understanding accents. The way I face it is to say if I set up a thousand-person call centre in the UK and I had the levels of satisfaction and productivity I have in there as I had in India within seven or eight months, I'd be absolutely over the moon.There is very little difference in the standards and, indeed, in some of the claims areas now the level of satisfaction is higher. Where we are feeling our way through is where are the best activities to be allocated within the UK and within India? And what do I mean by that? I mean that culturally we find different things attractive. The Indians are absolutely brilliant at trying to resolve problems, because they have a culture of pleasing, of helping. They also love haggling. So you have the mixture of them wanting to really help the consumer resolve the claim, but also at the same time haggling with the supplier to get the best deal. The volume of people we've got in India trying to work in that area is significantly greater than some of the aspects of selling. We have to understand that, because in the English culture people are more about "try and cut the deal". NU is smaller than Royal Bank of Scotland Insurance (RBSI) in motor. Do you want to be number one?To set that target would be very uneconomic, given the current marketplace. You certainly look for opportunities to increase the number of customers to whom you have access and we've looked increasingly at how you retain that customer. For too long we focused on growing business rather than retaining customers, and if you look at the RBSI retention levels, they are higher than ours, and that changes the economic model significantly. That's certainly something that we're looking at.

What's your favourite film?Pretty Woman. No, no: it's Kelly's Heroes.

What book are you reading?I can't remember the title but it's a book of short stories about boats that have sunk. It's ironic really because I've just got a new boat.