The ultimate risk-taker eyes growth

Zurich’s boss tells James Waterson how car insurance can pay if there are no crashes

MARTIN Senn seems unusually enthusiastic about the impending destruction of a large part of his business. But the mild-mannered chief executive of Zurich is excited about what a world without car crashes would mean for his company’s motor insurance operations.

“Self-driving cars are, technically, absolutely possible. This is potentially a killer application for insurance – but it will create new risk. Who is responsible if something goes wrong? Google? The car manufacturer? You have new sorts of risk, bringing new sorts of opportunities,” he explains.

Even in a world where we are driven around by GPS-guided vehicles there will be a chance of something failing – and where there is risk that needs insuring, Senn’s company sees an opportunity to get involved.

But in the short-term, while humans remain behind the wheel, he is more interested in harnessing technology to modernise a traditional industry.

“In Japan our customers have a barcode on the windshield. If they crash they dial the call centre, put the phone on the barcode and transmit it to the call centre. If it’s a minor accident the agent will let them chose to take a set offer on the spot or drive to the nearest garage.”

So why can’t Britain’s drivers enjoy this slick paper-free claims process?

“Because you have laws in place, such as the data protection act, which makes it harder. Eventually you will deal with that.”

Sitting in his company’s office just off Fenchurch Street, Senn exhibits many of the qualities that make Zurich a successful business: he is steady, reliable and reluctant to make rash commitments. But in an industry that rewards careful decision making, there is always the danger that prudence can stifle innovation.

Senn is unrepentant about preferring steady profitability over rapid expansion: “We buy all the risks in the world: political risk, car risk, cyber risk, the risk of your apartment burning down. We have to be sure we are not becoming the risk by pricing appropriately. Our strategy is not to grow for the sake of growing.”

Instead he focused on cutting costs to mitigate Zurich’s stagnant European business, while targeting improved performance in emerging markets such as its Latin American joint-venture with Santander. “Last year’s growth in international markets was £1.5bn of premiums, compared with a £300m slowdown in Europe. So international markets are more than five times offsetting the slowdown in our European portfolio.”

And while the chief executive insists the dotcom crash was worse for Zurich than the current financial crisis, he says continued low returns on fixed-rate investments such as bonds threatens the industry’s entire model.

“If you told me these interest levels are going to persist for the next 20 years then that would be a very big challenge for the industry which has a dependency on these products.”

Of equal concern are continued delays to the EU’s new Solvency II industry reforms – if they take any longer “there is the risk that national regulators start implementing their own regimes” – as well as finding ways of partnering with the public sector to solve the funding crisis affecting elderly care.

He also backs the UK government’s plan to clamp down on ambulance chasing lawyers and spurious whiplash claims: “You have a situation where claims farming makes the process of insurance cumbersome and expensive. It is not in the interest of people in the UK to pay inflated premiums because of this situation.”

But Senn insists that ultimately a strong insurer relies on being boring – combining a strong underwriting performance with good capital management. “In the long-term economic realities will always prevail – having a strong balance sheet is an asset in its own way.”

CV: MARTIN SENN
Born: 1957 in Switzerland.

Education: Basel Business School, INSEAD, Harvard Business School.

Career:
1976: Began career with Swiss Bank in Asia where positions included treasurer in Hong Kong; regional treasurer for Asia and the Pacific based in Singapore; head of the Tokyo office.

1994: Credit Suisse, treasurer for the head office and Europe; also turnaround manager of Credit Suisse Group Japan.

2003: Chief investment officer of insurer Swiss Life Group and member of the corporate executive board.

2006: Joined Zurich as chief investment officer.

2010: Appointed worldwide chief executive of Zurich Insurance Group.