Gary Shaughnessy became CEO of Zurich’s UK life business in June 2012 at a time of enormous change for UK consumers, intermediaries and employers. In a climate of increased regulation, personal tax complexity and the transfer of health and retirement responsibility onto the individual all taking place at the same time, Shaughnessy tells Ronan McCaughey why change also offers opportunities.
What you learnt in the first six months?
The first thing is the quality of people within Zurich. There are a lot of experienced people and the attitude of the people in terms of their passion for the business and the focus on customers is really impressive.
We are also going through a lot of change and for some of the people that have been part of this, it is about explaining where we are going and for people to understand that.
Inevitably part of the change is to look at our cost base and look at where we can be more efficient going forward, particularly post-RDR [Retail Distribution Review].
Unfortunately, that means we have also announced that we are reducing some of the jobs in the business and taking out some of the duplication of having both pre-RDR and post-RDR products.
That is difficult for any organisation, but I have to say the people in the company have been so professional throughout that process. Now what we trying to do is focus the business on the real opportunity that we have and through that our results continue to be strong.
What will be the impact of Solvency II in the UK?
For me, the strength of the balance sheet comes out as being more and more important.
What we are seeing are companies starting to move between those who have balance sheets and want to act as insurance companies and can act as insurance companies and can take risks, and those who effectively are becoming more like asset managers and more like administration companies.
Solvency II, to some extent, accentuates that [ trend] because it focuses the attention on the level of capital you need to support the commitment that the insurance company makes.
From our point of view, we have a strong balance sheet, both in the UK and globally, and our strategy is about being an insurance company.
I think it is easy to underestimate the sheer cost to the industry of taking that long to make regulatory change.[There is ] the risk that the industry focuses internally on industry issues, rather than externally on our customers and our distribution and advisory partners. That for me is a real worry.
Ultimately, as an industry we will be most successful if we focus on our customers and the longer we spend talking about things that are in Latin as far as our customers are concerned, the less time we are focused on dealing with the very real risks that people and companies have.
Do you welcome Solvency II?
I think being clear about the risks you are taking and ensuring that the company is appropriately solvent to take those risks on is important. But, inevitably, the more capital you have to hold on to, ultimately, it comes back in the price [for] consumers.
What will be very interesting will be to see the degree to which as industry this forces, among other things, innovation in the solutions we have. [ For example], innovation in the retirement income space is long over due, and that’s an area where we are certainly looking at. It is an area where quality risk sharing has a role to play. I think the theme the linking protection and investment together is an area where there is a real opportunity.
Will we ever see really relatively simple and easy-to-access life insurance products in the UK?
I am sure there will be and I am sure that particularly as there is likely to be an advice gap. For me, the important thing is how we can find ways of dealing with the advice gap, rather than people getting no [financial] advice.
So, for me, the workplace becomes really important. There will be an increasing number of people coming to retirement age with a defined contribution pension and where they are making the biggest financial decision of their lives and enabling advice to be there to support them in an efficient and economic way is really important.