Aviva UK: Insurance Excellence in UK GI
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Transcript of Aviva UK: Insurance Excellence in UK GI
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Insurance Excellence in UK GI
Focus on Profit
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Disclaimer
This presentation may include oral and written forward-looking statements with respect to certain of
Avivas plans and its current goals and expectations relating to its future financial condition, performance
and results. These forward-looking statements sometimes use words such as anticipate, target, expect,
estimate, intend, plan, goal, believe or other words of similar meaning. By their nature, all forward-
looking statements involve risk and uncertainty because they relate to future events and circumstanceswhich may be beyond Avivas control, including, among other things, UK domestic and global economic
and business conditions, market-related risks such as fluctuations in interest rates and exchange rates, the
policies and actions of regulatory authorities, the impact of competition, the possible effects of inflation or
deflation, the timing impact and other uncertainties relating to acquisitions by the Aviva Group and relating
to other future acquisitions or combinations within relevant industries, the impact of tax and other
legislation and regulations in the jurisdictions in which Aviva and its affiliates operate, as well as the otherrisks and uncertainties set forth in our 2007 Annual Report to Shareholders. As a result, Avivas actual
future financial condition, performance and results may differ materially from the plans, goals and
expectations set forth in Avivas forward-looking statements, and persons receiving this presentation
should not place undue reliance on forward-looking statements.
Aviva undertakes no obligation to update the forward-looking statements made in this presentation or any
other forward-looking statements we may make. Forward-looking statements made in this presentation are
current only as of the date on which such statements are made.
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MarketLeadership
Address legacy
Transform
business
model
Exploit UK
synergies
Generate capital
UK General Insurance delivering transformational
change
Aviva is the largest GI insurer in the UK with a market shareof 14.4%
Generated 25% of Avivas H1 2008 IFRS operating profit
Changing the business model to maintain our market leading
position and win in a fast-changing competitive landscape
Igal Mayer appointed CEO, UK General Insurance in July2007
Igal and the team are executing a transformational plan to
maximise the value of this major business in Aviva
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Insurance Excellence in UK GI: 'Focus on Profit'
Our agenda today
1. Insurance excellence Igal Mayer
2. Personal lines John Kitson
Transforming pricing Dan Pickens
3. Commercial lines Janice Deakin
Transforming underwriting Larry Harrington
4. Operations David McMillan
5. Summary Igal Mayer
Questions & Answers
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Purpose
Regional / BU strategies
Vision
Group strategy and targets
Purpose
Prosperity &peace of mind
Strategicpriorities
Manage composite
portfolio
Build global Asset
Management
Allocate capital
rigorously
Increase customerreach
Boost productivity
Targets
Vision
One Aviva,twice the value
98% meet or beat COR
Long Term Savings
growth targets
500m cost savings by
2010
Double IFRS EPS by
2012 at the latest 1.5 2 x dividend cover
12.5% ROCE
UK
Market leadership
Address legacyTransform business
model
Exploit UK synergies
Generate capital
N. America
Double scale
Focus: top 5 inchosen segments
Integrate '07
Expand products,
distribution 08+
Europe
Scale, growth, capital
Seize unique growthopportunities
Leverage scale
Generate capital
Asia Pacific
Scale, growth
Prioritised portfolio Regional operating
model
Investment required
Asset ManagementAsset ManagementAviva Investors
Globally integrated business Transform the investment model Increase third party business
Insurance Excellence in UK GI: 'Focus on Profit'
One Aviva, twice the value
1. Insurance Excellence Igal Mayer
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Market leadership
Address legacy
Transform business
model
Exploit UK synergies
Generate capital
UK
Insurance Excellence in UK GI: 'Focus on Profit'
A clear role in Aviva
1. Insurance Excellence Igal Mayer
Purpose
Prosperity &
peace of mind
Strategic
priorities
Manage composite
portfolio
Build global Asset
Management
Allocate capital
rigorously Increase customer
reach
Boost productivity
Targets
Vision
One Aviva,
twice the value
98% meet or beat COR
Long Term Savings growth
targets
500m cost savings by
2010
Double IFRS EPS by 2012at the latest
1.5 2 x dividend cover
12.5% ROCE
UK
Market leadership
Address legacy
Transform businessmodel
Exploit UK synergies
Generate capital
N. America
Double scale
Focus: top 5 in
chosen segments Integrate '07
Expand products,
distribution 08+
Europe
Scale, growth, capital
Seize unique growth
opportunities Leverage scale
Generate capital
Asia Pacific
Scale, growth
Prioritised portfolio
Regional operating
model
Investment required
Asset ManagementAsset ManagementAviva Investors
Globally integrated business Transform the investment model Increase third party business
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Insurance Excellence in UK GI: 'Focus on Profit'
The UK market leader
Consolidated market top 6 insurers
have over 50% market share
Aviva is the largest GI insurer in UK
Top 1 or 2 position in all our major
classes
Consistently delivering performance
- 98% or better COR since 20041
- 3.9bn operating profit over last 5 years
Aviva14.4%
RSA8.5%
AXA
6.5%
Zurich5.6%
AIG5.2%
Allianz4.0%
BUPA3.4%
HBOS2.5%
Rest of Market
37.6%
RBSI(including
Direct Line)
12.3%
Source: Datamonitor 2007 (1) Excludes impact of 2007 summer floods
1. Insurance Excellence Igal Mayer
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1. Insurance Excellence Igal Mayer
DIRECT BROKERS PARTNERS
#1 in the SME market
Insurer of the year2003 to 2007
over 100 others
Banking AffinityRetail
Powerful brands
3,000
brokers
Insurance Excellence in UK GI: 'Focus on Profit'
Unparalleled customer reach
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1. Insurance Excellence Igal Mayer
DIRECT BROKERS PARTNERS
#1 in the SME market
Insurer of the year2003 to 2007
over 100 others
Banking AffinityRetail
Powerful brands
3,000
brokers
Insurance Excellence in UK GI: 'Focus on Profit'
Unparalleled customer reach
Aviva brand - June 1st 2009
Customer insightsCustomer insights
Combination of NUheritage, trust,safety non-toxic + Avivasglobal, confident
brand
DirectDirect
Re-launch awayfrom expensive,traditionalHappy providesthe bridge
EmployeesEmployees
Build Aviva fromthe inside out
Reposition whatwe stand forglobally
Brokers & partnersBrokers & partners
Global player, notjust parochial SME
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Delivering the Promise of Scale
Sub 11% expense ratio Halve IT costs Exploit UK synergies
Lean Manufacturing
Mass customisation Service & process centre reengineering
Win the Customer
NUD relaunch
RAC membership Partnerships moments of truth
Win the Broker
War for distribution
Building Core Insurance Capability
Sophisticated pricing Rating leadership Price & product optimisation
Claims Inflation Busting
Sustainable benefits year on year
Win our People
No1 for employees Build core insurance skills Pride & passion for insurance
1. Insurance Excellence Igal Mayer
Insurance Excellence in UK GI: 'Focus on Profit'
NUIs 7 strategic priorities
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Win our People
1. Insurance Excellence Igal Mayer
Sen Egan
Chief Information Officer
Igal Mayer
Chief Executive
John Kitson
Sales & Marketing Director
Janice Deakin
Corporate Sales Director
Dan Pickens
Personal Lines Director
Larry Harrington
Commercial Lines Director
Valerie Markham
HR Director
David McMillan
Chief Operating Officer
Insurance Excellence in UK GI: 'Focus on Profit'
Our people
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1. Insurance Excellence Igal Mayer
Revenue5.4bn NWP
Profit855m Operating Profit*
Commercial 49%
Commercial 36%
Personal 51%
Personal 64%
Personal Lines
Marketplace
- Aggregators have grown significantly- Panel operators becoming potential adversaries
- On-line growing
We have a clear strategy
- Relaunch of Direct and RAC
- Partnerships where the partner has a unique moment of truth
- Independent brokers still an important route to market
- Executing pricing sophistication
Commercial Lines
Marketplace- Consolidators have grown but lost momentum
- After lengthy period of soft conditions, positive signs of hardening
We have a clear strategy
- Independent brokers are our distribution, leveraging UK u/w footprint
- War for distribution
- Executing underwriting and pricing excellence
Insurance Excellence in UK GI: 'Focus on Profit'
Summary our business
* 2007operating profit excl weather
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Insurance Excellence in UK GI: 'Focus on Profit'
Our agenda today
1. Insurance excellence Igal Mayer
2. Personal lines John Kitson
Transforming pricing Dan Pickens
3. Commercial lines Janice Deakin
Transforming underwriting Larry Harrington
4. Operations David McMillan
5. Summary Igal Mayer
Questions & Answers
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2. Personal Lines John Kitson
Sales & marketing context
Market snapshot
Crystal clear strategy
Direct
Partners
Brokers
RAC insurance
Summary
Insurance Excellence in UK GI: 'Focus on Profit'
Personal lines
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2. Personal Lines John Kitson
Broker
Direct
RAC
Broker
Direct
RAC
Partners
Working across all classes
Personal
Broker
Commercial
Bringing all the distribution channels together into one
front facing sales and marketing team has put a different lens on how we truly
optimise the multi distribution nature of our business
Marketing
Insurance Excellence in UK GI: 'Focus on Profit'
One portfolio
Partners
2 P l Li J h Ki
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NUD, 45%
Partnerships, 23%
IB, 18%
RAC, 14%
The personal market is 64% of NUIs turnover and c 51% of operating profit
Partners dominate turnover and in particular household, but for 2008 Direct isthe majority of the personal profits
Insurance Excellence in UK GI: 'Focus on Profit'
Share of business
NUD, 16%
Partnerships, 51%
IB, 21%
RAC, 12%
Personal GWP by channel Personal operating profit* by channel
2. Personal Lines John Kitson
Brokers, 21%
Partners, 51%
Direct, 16%
Direct, 45%
Partners, 23%
Brokers, 18%
RAC, 12%RAC, 14%
2 P l Li J h Kit
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Money Supermarket
Confused.com
Google Trends = numbers of people searching on these two terms
Aggregator grip on private car market has
tightened from 8% of total direct market in
2004 to 30% by 2007
Influx of new aggregators
Customers using aggregators to createshopping list
Which criticisms
Panels - giving away commission / net
pricing / claims farming
Spend isnt sustainable
2. Personal Lines John Kitson
Insurance Excellence in UK GI: 'Focus on Profit'
Personal market trends
2 Personal Lines John Kitson
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Insurance Excellence in UK GI: 'Focus on Profit'
Crystal clear strategy
2. Personal Lines John Kitson
Direct is direct
LeverageMembership Panels
Partners:
Moments of truth
Small brokers
Largeaggressive
panels
2 Personal Lines John Kitson
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Personal Motor Competitiveness Index - Motor - Comp cover - 779 risks
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
M
ar05
April05
M
ay05
Jun05
Jul05
Aug05
Sep05
Oct05
Nov05
Dec05
Jan06
Feb06
M
ar06
Apr06
M
ay06
Jun06
Jul06
Aug06
Sep06
Oct06
Nov06
Dec06
Jan07
Feb07
M
ar07
Apr07
M
ay07
Jun07
Jul07
Aug07
Sep07
Oct07
Nov07
Dec07
Competitiveness-cheapestorwithin10%
Budget Direct Line NUD Privilege RAC
price perception and position average
increasing cost to acquire
aggregator growth continues
Direct has not been on the shopping list0%5%
10 %
15 %
20 %
25 %
30 %
35 %
40 %
45 %
50 %
Church
ill
AAInsu
ranc
e
DirectL
ine
Adm
iral
MoreTha
n
Norw
ichUn
ion
Esure
Bud
get
Tesco
PF
RAC
Eleph
ant
Hastings
Dia
mon
d
PostOf
fice
Q1 07 Q2 07 Q3 07 Q3 Ave Q2 Ave Q1 Ave
MOTOR
Percentage of
shoppersgetting a quotefrom eachcompany
2. Personal Lines John Kitson
Insurance Excellence in UK GI: 'Focus on Profit'
Direct
2 Personal Lines John Kitson
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Position in the portfolio
Direct is our core offering into the personal market - underpins ourpricing and systems approach
Competitiveness
highly competitive and no other channel will have a better coreprice
Direct
is a direct offering which means it is not on aggregators
Were so confident about our price well show you
our competitors, even if they are cheaper
2. Personal Lines John Kitson
Insurance Excellence in UK GI: 'Focus on Profit'
Direct strategic principles
2. Personal Lines John Kitson
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TickerTicker Someone like youSomeone like you FullFull like for likelike for like
Web home page
Price comparison examples
Web car landing page
In call centre
During quote stage
Price comparison based on
similar customer profile
New concept
Web price, inbound - facts
Option after NUD price
delivered
Web and phone
Increasing confidence in NUs priceIncreasing confidence in NUs price
2. Personal Lines John Kitson
Insurance Excellence in UK GI: 'Focus on Profit'
Direct price check
2. Personal Lines John Kitson
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2. Personal Lines John Kitson
Insurance Excellence in UK GI: 'Focus on Profit'
Direct advertising
2. Personal Lines John Kitson
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Insurance Excellence in UK GI: 'Focus on Profit'
Direct - Aviva brand
Clear plans in placeSeamless migration
already started
Aviva brand TV
starting 26 Dec
2. Personal Lines John Kitson
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Inbound Motor Quotes & Sales
0
10000
20000
30000
40000
50000
Jul Aug Sep (Forecast)
Quotes
0
2000
4000
6000
8000
10000
12000
14000
Sales Quotes
Sales
Inbound Motor Quotes & Sales
Online Motor Non Agg Quotes & Sales
0
20000
40000
60000
80000
100000
120000
140000
160000
Jul Aug Sep
Quotes
0
2000
4000
6000
8000
10000
12000
Sales Quotes
Sales
Online Motor Non Agg Quotes & Sales
New business sales volumes up 18% year on year
Shopping List
Pre Happy: 7th or 8th
Aim: Top 3
Competitive Position
Aim: Within 10% of the cheapest
22% of the time
Insurance Excellence in UK GI: 'Focus on Profit'
Direct aiming points & progress
Sep
2. Personal Lines John Kitson
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Inbound Motor Quotes & Sales
0
10000
20000
30000
40000
50000
Jul Aug Sep (Forecast)
Quotes
0
2000
4000
6000
8000
10000
12000
14000
Sales Quotes
Sales
Inbound Motor Quotes & Sales
Online Motor Non Agg Quotes & Sales
0
20000
40000
60000
80000
100000
120000
140000
160000
Jul Aug Sep
Quotes
0
2000
4000
6000
8000
10000
12000
Sales Quotes
Sales
Online Motor Non Agg Quotes & Sales
New business sales volumes up 18% year on year
Shopping List
Pre Happy: 7th or 8th
Aim: Top 3
Competitive Position
Aim: Within 10% of the cheapest
22% of the time
Insurance Excellence in UK GI: 'Focus on Profit'
Direct aiming points & progress
Sep
2. Personal Lines John Kitson
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A significant part of the portfolio
Provided significant scale in the personal portfolio; 100 partners Dominated distribution in this channel
History shows profit performance with room for improvement
Distribution ratio is the largest
Some accounts have not been profitable over their life of contract
Motor very hard
Sustainable financials
Clarity on what are acceptable terms
Account managed to deliver them
Retain, renegotiate or exit
Challenge is to make portfolio more profitable
Insurance Excellence in UK GI: 'Focus on Profit'
Partnerships current position
2. Personal Lines John Kitson
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We will focus on Partners who offer a clearmoment of truth:
Customers we cant win on our own
Insurance Excellence in UK GI: 'Focus on Profit'
Partnerships strategic principles
Home Motor SME Creditor
Banks / BSs
Yes
Motor Mans / DealersNo No No
YesNo No
Yes
Travel Rescue
Barclays
HSBC
Abbey
No
No
No
No
Retailers
No No NoNoASDA No
Yes
No
Post Office Yes? No NoYes No
2. Personal Lines John Kitson
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Insurance Excellence in UK GI: 'Focus on Profit'
Partnerships actions to date
No moments of truth
Unacceptable returns
Exit to broking partner
Some Moments of truth
But driven by Aggregators
JV with broking partner
Keep only what we want
Moment of truth
Renegotiate until 2010 with requiredreturn
A&L and B&B present opportunities
No Moment of truth
Broking solution only?
Exit
Long term relationship
Exit all lines during 2009
All about execution
one by one
return by return
Major deals renegotiations completed
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2. Personal Lines John Kitson
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Insurance Excellence in UK GI: 'Focus on Profit'
Brokers
700m personal lines revenue
Take core NUD & offer to brokers through different technology routes
Pull out of aggressive panels
Commercially connected / HNW attractive
Now in execution
2. Personal Lines John Kitson
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Trusted and admired by the motorist
Achieved so far Great integrated Rescue business
with 2.3m members
Synergies
Partnerships grown by 2m
customers & 40m revenue
JD Power no1 Rescue company
How do we leverage RAC into consumer insurance brand?...
Insurance Excellence in UK GI: 'Focus on Profit'
RAC
2. Personal Lines John Kitson
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3 years on
260,000 insurance customers Honed distribution strategy
RAC relaunched as membership &
retail panel player Signed 5 year deal with Budget
Sales & service all RAC staff
Signing up insurers... Launch Q1
Scale via cross sell / aggregators
NU take 30% / 40% of panel premium
All parties not to claim farm
Insurance Excellence in UK GI: 'Focus on Profit'
RAC insurance
2. Personal Lines John Kitson
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3 years on
260,000 insurance customers Honed distribution strategy
RAC relaunched as membership &
retail panel player Signed 5 year deal with Budget
Sales & service all RAC staff
Signing up insurers... Launch Q1
Scale via cross sell / aggregators
NU take 30% / 40% of panel premium
All parties not to claim farm
Insurance Excellence in UK GI: 'Focus on Profit'
RAC insurance
2. Personal Lines John Kitson
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By 2011 our personal lines book will have changed
Direct grows
Brokers grow
Partnerships fall
RAC steady in Rescue but doubles in size for insurance
Motor grows
Home grows
Creditor falls
Insurance Excellence in UK GI: 'Focus on Profit'
Reshaping the book
2. Personal Lines John Kitson
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Insurance Excellence in UK GI: 'Focus on Profit'
Summary of reshaping
Crystal clear clarity on strategy
Direct
Partnerships
Brokers
RAC
Value choices made
Well into execution
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Insurance Excellence in UK GI: 'Focus on Profit'
Our agenda today
1. Insurance excellence Igal Mayer
2. Personal lines John Kitson
Transforming pricing Dan Pickens
3. Commercial lines Janice Deakin
Transforming underwriting Larry Harrington
4. Operations David McMillan
5. Summary Igal Mayer
Questions & Answers
2. PL Transforming Pricing Dan Pickens
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Insurance Excellence in UK GI: 'Focus on Profit'
Transforming personal lines pricing
Product complexity and mass customisation
Risk segmentation a pricing function!
Use of credit
Mass customised pricing
Flight path of initiatives
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2. PL Transforming Pricing Dan Pickens
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Insurance Excellence in UK GI: 'Focus on Profit'
Mass customised product future state
Platinum Cover Gold Cover Value CoverBuildings & Contents
Sums Insured
Specified Inner Limits
Frozen Food
Blanket
Higher Inner Limit
Unlimited
Blanket
Blanket
Higher Inner Limit
Low Inner Limit
400 Limit
200 Limit
Loss of rent and alternativeaccommodation
12,000 Limit
6,000 Limit
Visitors Personal Effect Unlimited
1,000
Sport Equipment 1,000
Single Product Platform
Single Process
One Price List
2. PL Transforming Pricing Dan Pickens
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Insurance Excellence in UK GI: 'Focus on Profit
Risk segmentation
Risk segmentation has been a marketing function!
2. PL Transforming Pricing Dan Pickens
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Insurance Excellence in UK GI: 'Focus on Profit'
Risk segmentation
Defined as ability to quantify and price risk:
Number of pricing cells Rate dispersion
Risk segmentation is a pricing function!
I E ll i UK GI 'F P fi '
2. PL Transforming Pricing Dan Pickens
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Defined as ability to quantify and price risk:
Number of pricing cells
Insurance Excellence in UK GI: 'Focus on Profit'
Risk segmentation
Risk segmentation is a pricing function!
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I E ll i UK GI 'F P fit'
2. PL Transforming Pricing Dan Pickens
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Approaches
Statistical techniques
Insurance Excellence in UK GI: 'Focus on Profit'
Risk segmentation
f(x,y,z) dxyz
Risk segmentation is a pricing function!
Insurance Excellence in UK GI: 'Focus on Profit'
2. PL Transforming Pricing Dan Pickens
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Approaches
Statistical techniques Multi-peril pricing model
Insurance Excellence in UK GI: 'Focus on Profit'
Risk segmentation
Yi = B(1+xi)(1+yi)(1+zi)
Yi1 = B(1+xi1)(1+yi1)(1+zi1)
Yi3 = B(1+xi3)(1+yi3)(1+zi3)
Yik
Yi2 = B(1+xi2)(1+yi2)(1+zi2)
Risk segmentation is a pricing function!
Insurance Excellence in UK GI: 'Focus on Profit'
2. PL Transforming Pricing Dan Pickens
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Approaches
Statistical techniques Multi-peril pricing model
Use of third-party data
Insurance Excellence in UK GI: Focus on Profit
Risk segmentation
- CUE
CREDIT!
Risk segmentation is a pricing function!
Insurance Excellence in UK GI: 'Focus on Profit'
2. PL Transforming Pricing Dan Pickens
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Old RatingMakeSegment (i.e. SUV)
Number of DoorsEngine (Size and Fuel)TransmissionAgeABI Group
Insurance Excellence in UK GI: Focus on Profit
Make / model adjustments
Vehicle Old Factor New Factor
Vogue 1.00 1.00
Vogue SE 1.00 1.05HST 1.00 1.10
HSE 1.00 1.12
HST SC 1.00 1.15
HSE SC 1.00 1.18
Insurance Excellence in UK GI: 'Focus on Profit'
2. PL Transforming Pricing Dan Pickens
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Insurance Excellence in UK GI: Focus on Profit
Impact of credit new rating variable
60%
70%
80%
90%
100%
110%
120%
1-575 576-605 606-626 627-642 643-656 657-669 670-681 682-693 694-707 708+
Credit Score
ClaimRatio
Implemented in June for Motorand September for Household
Personal Motor Results
Worse Better
Worse
Better
11 22 99 1010
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Insurance Excellence in UK GI: 'Focus on Profit'
2. PL Transforming Pricing Dan Pickens
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Insurance Excellence in UK GI: Focus on Profit
Motor credit early results
Combined Inbound and Web Results
First Two Weeks Most Recent Two Weeks
30.4%38520.3%47.7%43.0%30.8%51218.3%34.5%34.4%Summary 6-10
62.4%77416.7%52.3%57.0%57.6%74518.2%65.5%65.6%Summary 1-5
21.7%28421.2%9.8%8.4%17.8%35918.8%6.2%6.1%708+10
27.3%33021.1%10.0%8.6%25.4%45318.2%6.5%6.5%694-7079
28.3%38920.0%9.4%8.6%34.3%56617.4%6.2%6.6%682-6938
35.3%42020.6%9.2%8.2%34.5%58319.2%7.5%7.1%670-6817
40.2%49418.7%9.3%9.1%39.0%56618.0%8.0%8.1%657-6696
47.6%58218.7%8.7%8.5%38.8%55417.7%9.1%9.4%643-6565
52.6%64017.6%9.9%10.3%46.0%61917.9%12.2%12.4%627-6424
57.4%72116.0%10.5%12.1%54.7%72717.6%14.0%14.5%606-6263
65.2%94215.0%11.4%13.9%63.5%88517.9%15.6%15.9%576-6052
83.2%88017.5%11.8%12.3%75.7%85119.9%14.6%13.3%1-5751
%Monthly
QuotedAvg
PremCR% SoldQuoteDistn
%Monthly
QuotedAvg
PremCR% SoldQuoteDistnSegment
WORST
BEST
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Insurance Excellence in UK GI: 'Focus on Profit'
2. PL Transforming Pricing Dan Pickens
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Credit - Motor
Credit - Home
ABI, Make/Model, NCDValidation, and Post Code
Mass CustomisedProduct Architecture
Mass Customised Pricing
Price Optimisation
Q2 2008 Q3 2008 Q2 2009 Q4 2009
DVLA / CUE
Q1 2009
Progress
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Our agenda today
1. Insurance excellence Igal Mayer
2. Personal lines John Kitson
Transforming pricing Dan Pickens
3. Commercial lines Janice Deakin
Transforming underwriting Larry Harrington
4. Operations David McMillan
5. Summary Igal Mayer
Questions & Answers
3. Commercial Lines Janice Deakin
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The jewel in the crown
The market
Distribution strategy
Consolidation
Commission
Winning the crowd
3. Commercial Lines Janice Deakin
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Source: 2007 FSA returns with overseas business removed
Estimated market size based on 2006 data
Includes Healthcare, excludes Marine, Aviation & Transport
Aviva13.4%
AIG
9.8%
RSA
7.7%
Zurich
7.2%
AXA
6.9%
NFU3.4%
Allianz
3.1%
QBE
3.0%
Rest of Market32.0%
RBSI(including
Direct Line)
10.5%
ACE
3.0%
No 1 commercial insurer in the
UK
36% of NU premium, 49% of
operating profit
SME our heartland 18% share
Even after years of consolidation,distribution dominated by brokers
providing local advice
The jewel in the crown
3. Commercial Lines Janice Deakin
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*2007 includes the impact of the summer floods
Data taken from FSA returns may differ from result announcementsData is for commercial Motor, Property and Liability
Aviva v. Market - Commercial lines COR 05-07*
No1 through successful
focus on SME via brokers
Commercial lines are
profitable
This is a priority for Aviva
in the UK
The jewel in the crown
105
75
95
85
2005 2006 2007
Aviva AvivaAvivaMarket MarketMarket
3. Commercial Lines Janice Deakin
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What we believe
Local independent advice is key for commercial customers
Support the independent broker and win the crowd
No to commercial direct
Brokers will continue to dominate with sustainable distribution ratios
Consolidations have peaked 85% of brokers expect to stay
independent
Historically our actions have fuelled consolidation actions today are
reversing this trend
No to buying brokers
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W f di t ib ti
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Protectand
Grow
Consolidators
Reduce premium
Sustainable commission
Strong relationships
Limited delegated underwriting
Brokers Join Networks
Strong relationships with selected networks
but best deal from NU directly
Independent Organic Growth
Differentiated offer to 3000 small brokers
Grow share of business
Self serve for SME
Independent Brokers
Differentiate through 110 broker club
Succession planning
Long term support
Ensuring brokers survive and thrive
Growth through independent and smaller brokers
Less reliance on consolidators = lower commissions
Our strategies to reshape our book
War for distribution
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Winning the crowd
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We can only do this by winning the crowd
Voted Insurer of the year 5 years running
Strongest underwriting footprint in UK, 1200underwriters, 400 sitting in our brokers offices
Consistently provides brokers best service.Improving year on year
"It was the first time in many years that I have left a conference
believing that the directors of an insurer were actually going to do
what they said and that they would also be acting in our best
interests.
"From a brokerperspective it is
brilliant to see thatAviva haverecognised the
need to focus
resource on theindependents and I
truly look forward
to going forwardwith you guys over
the coming years.
"I think if you can
deliver on what
was outlined onFriday and re-
enforced over the
weekend you will
certainly steal a
march on the
competition.
"After speaking with a number of delegates, we all believe there is thecommitment - the "can do" will result in the "will do" - and we verymuch wish to be part of this.
Winning the crowd
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How far weve come
3. Commercial Lines Janice Deakin
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How far we ve come
2007
Unprecedented pace of broker
consolidations Ever increasing trend on commission
Rates going backwards for 4 years
NU-consolidator business growingrapidly fuelling increased commission
NU premium through independentbroker shrinking
NUI No1 for brokers 4
years running
Now
85% of brokers say they are
staying independent
Actions in place to reducecommission significantly
Rate increases of 3% across the
book, plans in place for Q4 and2009
Consolidators business hasshrunk by 4% in 2008
NU premium through independentbrokers up 5% year on year
NUI No1 for brokers 5
years running
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Our agenda today
1. Insurance excellence Igal Mayer
2. Personal lines John Kitson
Transforming pricing Dan Pickens
3. Commercial lines Janice Deakin
Transforming underwriting Larry Harrington
4. Operations David McMillan
5. Summary Igal Mayer
Questions & Answers
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Sustainable profit through the cycle
3. CL Transforming underwriting Larry Harrington
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p g y
Philosophy of excellence in execution at transaction level
Delivered through 1,200 UK-wide underwriters
More than segmented rating action
Exposure recognition
Influence behaviours of underwriters
Monitoring, mentoring, measuring
This is where our future results are made
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Progress
3. CL Transforming underwriting Larry Harrington
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Rating
Cleanse the book
Differentiating ourselves in the SME market
Sustainable profit through the cycle
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4. Operations David McMillan
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Delivering the promise of scale
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The vision for Operations
Footprint consolidation
Lean manufacturing
Right-shoring
Self service
Mass customisation
IT architecture
Delivering the promise of scale
4. Operations David McMillan
Insurance Excellence in UK GI: 'Focus on Profit'
Delivering the promise of scale
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2006
UK best of breed expenseratio
1applied to NUI channel
/ product mix:
(1) Expense ratios exclude CHE and
commission
(2) Based on leading cost performance
in channel, weighted to reflect NUI
mix
Source: FSA Returns (2006)
NUI
Expenses
UK Best of
Breed
Personal Lines
Motor 16.1% 12.3%
Property 11.0% 9.7%
Creditor 1.3% 1.3%
RAC Rescue 27.5% 27.5%
Commercial Lines
Motor 13.8% 8.2%
Property 16.3% 15.2%
Liability 11.6% 11.6%
NUI Total 13.9% 12.0%
Breed Co.2
Best of
Direct Line, Fortis
Direct Line, NU
NU
NU
Brit
Axa
NU
NUI Total2007 13.9% 12.0%
NUI Total Year2008 12.8%
NUI Total Full Year 12.1%Ph1 achieves benchmark..
4. Operations David McMillan
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Delivering the promise of scale
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Inflation
C&E
38m
One-
offs
09 & 10
Inflation
One-
offs
Phase 2
Cost
150m
Phase 1
CostReduction
2007 20102008 FY
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Footprint
consolidation
Lean
manufacturing
Right-shoring
Self service
Masscustomisation
IT architecture
SystemsComplexity
ProcessComplexity
ProductComplexity
OrganisationComplexity
Cost Drivers Key Strategies
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4. Operations David McMillan
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Mass customisation
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Fewer core products 161* to 3
Fewer pricing algorithms 45 to 3
Fewer operational processes 3600 to 720
Fewer IT applications c900 to
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4. Operations David McMillan
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Operational excellence key metrics
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Operations Headcount c10,000 c7,000
IT & Operational Services c2,900 c1,700Headcount
Sites 27 9
Desk Utilisation 73% 107%
Sales Online 35% 60%
Service Online 1% 39%
Core IT Platforms 900 300
IT spend as % of GWP 5.5%
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5. Summary Igal Mayer
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Reshaping the book
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We are leveraging our unparalleled access tocustomers and reshaping the front end of our business
Reshapingthe book..
Protectand
Grow
Consolidators
Reduce premium
Sustainable commission
Strong relationships
Limited delegated underwriting
Brokers Join NetworksBrokers Join Networks
Strong relationships with selected networksStrong relationships with selected networks but best dealbut best deal
from NU directlyfrom NU directly
Independent Organic GrowthIndependent Organic Growth
Differentiated offer to 3000 small brokersDifferentiated offer to 3000 small brokers
Grow share of businessGrow share of business
Self serve for SMESelf serve for SME
Independent BrokersIndependent Brokers
Differentiate through 110 broker clubDifferentiate through 110 broker club
Succession planningSuccession planning
Long term supportLong term support
Direct Relaunch Panel PropositionLeverage Membership
Moments of truthWinning route for commercial via
independent brokers
Sustainable growth andsustainable distribution cost
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5. Summary Igal Mayer
Insurance Excellence in UK GI: 'Focus on Profit'
Delivering the promise of scale
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c900 Applications
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Our agenda today
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1. Insurance excellence Igal Mayer
2. Personal lines John Kitson
Transforming pricing Dan Pickens
3. Commercial lines Janice Deakin
Transforming underwriting Larry Harrington
4. Operations David McMillan
5. Summary Igal Mayer
Questions & Answers
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