Stephen Lewis and the Zurich UK exec team

Zurich irritated brokers last year. The UK’s ninth largest insurer hiked its prices in motor to the point where it effectively left the market, wiping £200m – around 25% – off its personal lines premium base. Add to that its baffling matrix management structure and its tendency to have different underwriters for different lines, and it’s not always an easy insurer to work with.

But that’s all about to change, chief executive Stephen Lewis and his management team tell Insurance Times. In December Lewis, who had been in post a little over a year, split the UK business into three, represented today by their managers David Smith (commercial broker), Anne Torry (Zurich Municipal) and Karl Bedlow (personal lines). The idea? To make Zurich easier to do business with. It also plans to rebuild its presence in personal lines.

But the team reveals an uncompromising vision: growth will not come at the expense of profit. This seems to run deeper than the “profitable growth” platitude parroted by others. As they showed last year, Lewis and co are willing to walk away.

At 42, Lewis is younger than many of his fellow chief executives. Maybe that’s why he’s buzzing with energy. Zurich is known for impenetrable jargon, but Lewis speaks clearly despite a stint at its head office from 2004 to 2009.

He kicks off by explaining the restructure. It started with a reshuffle at the top of the global group, under worldwide chief executive Mario Greco. That led to a review of the general insurance business and the buzz phrase ‘global to local’. Lewis says: “It’s a recognition that we need to leverage globally, but deliver at a local level. It also involved stripping out some of the complexity that had built up over the years.”

Lewis has given the business heads responsibility for everything from sales to claims, hoping this will make it easier for brokers and customers to deal with Zurich and for it to respond. “The purpose is to make big beautiful,” he says. “We’ve got to become easier to deal with.”

But the job is far from over. Lewis pinpoints three battlegrounds: ease of doing business, expertise and scale. The first is the reason for the restructure and is a tacit admission that Zurich has not always been the most customer-friendly organisation. “We’re a big organisation with many routes in, and we’ve got to continue to work to make it easy for our customers to get the access they require and to give our people the tools to do the job,” Lewis says. As well as the restructure, this means an overhaul of Zurich’s legacy technology systems.

The second area, expertise, is self-explanatory. “We plan to invest in building the right technical capabilities,” he says.

Finally, scale – a touchy subject for Zurich after last year’s withdrawal from motor. Lewis is sticking to his guns, though. “You need scale in a market if you want to be influential. Yes, we were fairly draconian, but the average combined operating ratio on motor for the whole industry was 123%. We were burning capital – we had to respond.”

But did Zurich let its brokers down? “There’s an element always of baby and bathwater,” Lewis says. “But we’re in the process of refining that and giving the right access to our regional partners. Let’s make sure we’re comfortable, then we’ll be ready to provide the capacity. Just because we step back, it doesn’t mean we won’t be back there, supporting our distribution over the medium term.”

But don’t brokers value consistency? “Absolutely,” he says, “but our consistency is our technical discipline.”

It’s a clever spin – but it remains to be seen whether brokers agree. Zurich will certainly be looking for their support in its quest to expand: “We see opportunities for growth,” says Lewis. “But it will be profit before growth.”

Bedlow hints at plans to re-enter the motor market in the second half of 2011. Which businesses will Zurich be looking to write? “The profitable bits,” he quips, adding: “It’s about controlled re-entry to deliver growth and navigate this market in a profitable way.

“This is no longer what it was five or 10 years ago in terms of just a pure scale play – you’ve got to do everything well.”

While Zurich’s personal lines business dominated headlines over the past 12 months, it would be wrong to overlook its substantial commercial and public sector segments. Indeed, the normally smiley Lewis sounds a tad defensive as he points out: “We shouldn’t lose sight of the fact that if I take our commercial footprint – £1.3bn – together with global corporate in the UK, getting close to £0.9bn, we’ve got £2.2bn of commercial business in the UK. By any measure, this is a top-quartile business, and has been for five to seven years. We’ve got some work still to do in retail, but we’ve got a very credible play.”

On that note, commercial boss Smith outlines his plans. “The industry is gloomy, but we’re not,” he says. “We’ve got a new contractors’ combined proposition coming out. We will be recruiting around the country, and there will be a continued focus on acquiring SME portfolios. Growth isn’t easy and we won’t slavishly pursue it – only where we can add more value to the market to enable us to extract a higher price.”

Public sector – largely local government – business is a significant string to Zurich’s bow, but an increasingly tricky area. Just two days into her job at the helm of Zurich Municipal, former chief operating officer Anne Torry is grappling with the challenge of public sector cuts. This centres on making sure local authorities don’t take a short-term view and slash their expenditure, creating problems in the long term. “Our role is to help our customers understand the total cost of risks, and to help them make the right trade-off calls,” she says.

It’s going to be another tough year for the insurance market, but Zurich is unlikely to provide any surprises. Lewis has his hand firmly on the tiller and has recognised and reacted to criticisms. Will it be enough? “You will never get everything right,” he says, “but when something is actually wrong, you have to move to stop it. I would rather take 10 decisions and get two wrong than take no decisions at all and not move forward.” As management speak goes, that’s not too bad.

David Smith, commercial broker managing director

An engineer by trade, these days commercial broker boss Dave Smith is a Zurich man to the bone. He’s been with the insurer for 20 years, and is its best-known public face. Today, he’s eager to praise the restructure that has seen him handed full responsibility for all things commercial, from claims to distribution.

“The buck stops with us [the three MDs],” he says. “We don’t palm it off to anyone else. It’s clear accountability, and there’s no hiding.”

As the man in charge, then, Smith has to face the accusation that Zurich is tricky for brokers to deal with – and he admits it. “I’ve got to hold my hand up to that one,” he says. “We’ve made a conscious decision that there’s a trade-off.

“You could send a single underwriter in to write all lines of business and it would be worse than useless. If you provide expertise in different customer segments, by definition you are slightly more complex. But in my view, a broker values talking to an expert underwriter who can make decisions. So, yes, we veer towards expertise rather than ease of dealing – particularly in commercial lines, where it’s more important.”

Like his colleagues, Smith is insistent that Zurich’s hard-headed technical expertise is a selling point. “You can’t be all things to all men – as others have gotten more complex in their value proposition, we have gotten simpler,” he says. “Fair remuneration, access to great propositions, and more and more contact with expert underwriters – we just focus on those things.”

Limited growth is on Smith’s agenda this year, in midmarket, professional and financial lines, and selected SME. But his message is clear: “Growth isn’t easy; we won’t slavishly pursue it.”

Anne Torry, managing director of Zurich Municipal

Ouch. As swingeing public sector cuts dominate the headlines, Anne Torry has moved firmly into the firing line: she’s just been appointed head of Zurich Municipal, having previously been Zurich’s chief operating officer. There will surely be tough times ahead but, today at least, she’s smiling and sounds confident. “This year, the market is changing dramatically,” she admits. “The era of austerity brings massive new challenges and a real potential for short-termism.”

Zurich, which has a near-monopoly on local authority business, is positioning itself as a consultant and risk adviser to help authorities work out where to cut – and where not to. It has also introduced new products, and is working with authorities on cost-cutters, such as risk sharing. Chief executive Stephen Lewis chimes in: “The reality is that local authorities are going to become more commercial: they are going to have to deliver the same services for substantially less. That means substantial transformation.”

Then there’s Big Society: prime minister David Cameron’s vague but oft-repeated vision for greater civic involvement and responsibility. What does the Zurich team think about that? They smile, and pause. Over to Lewis. “I think we all agree that it requires further definition,” he answers, poker-faced. But Zurich Municipal is already developing new low-cost products for the voluntary sector – they tell an anecdote about an old chap wanting to mow his church lawn – and be in no doubt: “Zurich are big supporters of the Big Society”. Whatever that may be.