Getting CGU back in the game

Getting CGU back in the game

Jarrod Hill has a plan to get the insurer’s mojo back and realise its potential

By John Deex

After a tough period of remediation and underperformance, IAG’s intermediated division believes it has the team and the strategy in place to head into the post-covid era with confidence.

Group Executive of Intermediated Insurance Jarrod Hill arrived in September last year, enticed from the country president role at Chubb for an opportunity he couldn’t resist.

Changing perceptions: IAG’s Jarrod Hill

Mr Hill started his career at Commercial Union, which in 1998 merged with General Accident to become CGU, and admits to always having had a soft spot for the brand.

So not surprisingly he was intrigued by the idea of leading the business “back to where it should be”.

“I had no driving force to leave Chubb,” he tells Insurance News. “I have the utmost respect for that organisation and always will.

“But just hearing [IAG Chief Executive Nick Hawkins’] ambition for the business, his passion… How do we make this the best intermediated business in Australia? How do we get CGU back to where it was?

“And really the opportunity to work in the largest insurer in Australia. Those were a couple of the key drivers.”

IAG announced last year that the intermediated side of the business – CGU and WFI – had “underperformed”, launching a turnaround plan targeting $250 million of insurance profit by FY 24.

Mr Hill says a lot of the foundational work is already complete, with a new distribution model, team and structure in place.

He says ruefully that CGU has had a reputation for being “good at doing business with ourselves”. He’s put key measures in place to step away from that and drive a more external focus.

Firstly, a “really clear underwriting appetite”. Mr Hill says the establishment of an underwriting office under EGM Underwriting Darren O’Connell (formerly a senior executive at Suncorp) has enabled a “stepchange” in capability.

“What do we want? What are we going to take a really close look at and maybe not do a lot of? We have confidence to engage with our broking partners about our risk appetite, the business we want to do, and then really go after that, and shape very structured discussions and be very outcomes-focused with our broking partners.”

CGU is moving out of the remediation phase, and will look to grow some parts of the portfolio, including the larger account space.

“The reality is, we haven’t been writing a lot of business over $500 million in asset value,” Mr Hill says.

“We’re really going to step back into that space. Darren O’Connell will be a big part of that, building a team and a capability under him.

“But that’ll be all based under the CGU banner. We feel it’s really important for the industry that additional capacity is brought back into that space.”

CGU is also exiting some personal lines portfolios that weren’t delivering their margin, enabling acceleration in other areas that were.

It’s also re-underwriting its agribusiness across both WFI and CGU, and is now returning to growth in that area too.

After appetite, there’s pricing. Former PwC partner Christa Marjoribanks has joined as EGM Product, Pricing and Governance, bringing “deep knowledge in actuarial practice”.

“It’s about really building out a strong pricing capability so we can be confident in the prices that we put within our models, and having a much better and more refined product offering.”

Mr Hill says too many products can replicate work.

“We’ve got products all over the place at the moment. We’ve talked about doing business with ourselves, and we get stuck looking after a product, making this or that change, but then we have to do it five times.

“It’s really about simplification…a lot of clarity around pricing and product offering, being really clear on underwriting appetite, and then having that go-to market strategy.”

The final piece in the puzzle is digitally enabling the business – an area where Mr Hill accepts CGU is “behind the pack”.

Previous investment hasn’t delivered the desired outcomes, but there’s now a clear path forward.

“There will be significant investment. That’s broadly across the group, enhancing digital enablement. From the intermediated side, CGU and our brokers will feel the biggest positive impact from that because of the under-investment in recent years.”

Coming from the back of the pack might not be such a bad thing, given the pace of change in recent years.

“I think that gives us the opportunity to step ahead. And if we build this out right and deliver, stay ahead.

“We see with our broking partners [that] there’s pressure on margins. There’s going to be pressure on commissions and other things.

“So it’s going to be imperative we remove frictional costs from the process and deliver better outcomes for the end customer. We still touch a lot of our package business. We’re still touching some of the things that are transacted on the big platforms too much. How do we automate that?”

There will, of course, be challenges along the way. Mr Hill singles out pricing for perils as an issue the whole industry is grappling with.

Average claims costs are continuing to rise, with every year seeming to be worse than the last.

“What’s the long-term average?” Mr Hill says. “And what do we have to price in for weather-related events? That’s probably the biggest single challenge facing the industry for pricing now.

“Is this global warming? Is it a long-term change? Is it the La Nina impact? What are we seeing right now and how do we price for that?”

IAG is taking a lead on helping governments to make decisions around mitigation. But Mr Hill says the group isn’t keen to see the Federal Government’s upcoming cyclone reinsurance pool extended to cover all flood risk.

“We don’t believe it should be extended. It hasn’t even launched in regard to cyclone yet. Let’s be very specific and get the pool to work for what the Government wanted it designed for, which is Far North Queensland’s cyclone capability, where they believe the market hasn’t met customer needs.

Targeting growth: Mr Hill says CGU “won’t shrink to greatness”

“People will have their own views on that. But I think it needs to get structured for solving that issue first.

“The flood issue is a much broader, far more complex issue than that. I think it would be fraught with danger to extend that pool to include other perils outside of cyclone.”

Other areas requiring attention include some longtail classes of business and expense ratios.

Analysts have honed in on the issue because IAG’s expense ratio in the intermediated business is higher than that of its direct competitors.

“How do we create efficiency in our business, and start moving or reducing our expense ratio?’ Part of that’s growth. So that will start coming through and flowing through our business.”

Mr Hill is proud of CGU’s claims service, which he says has strong supply chain arrangements in place to deal with surges like the current flood catastrophe.

But he says there’s never room for complacency.

“With claims, it’s imperative we always remember that’s all we sell – a promise to pay. So we’d better deliver on that.

“We’ve got amazing capability in our claim space. I think we probably see that best at catastrophe event time, and that’s right across IAG. That’s not just our intermediated capability.”

Mr Hill says claims teams were quickly on site in places like Lismore and Brisbane supporting customers, but adds there are “things we can improve”.

One example: “Those simple claims and those dayto-day claims that still take too long to get through.

“So how do we improve the process where an Australian business can lodge the claim, and we get that through the system really quickly?

“Whether it’s a cash payment or we’re getting someone on site to fix the issue in a far quicker timeline so we’re not taking people away from their business. That’s the whole goal at the end, to minimise the impact on a business and get that person back operating as they should – whether that’s a simple claim or something more complex.”

Competition from new sources is also on Mr Hill’s radar, with the potential for non-insurance entities to come in and try to disrupt the industry.

That’s why he says it’s so important to remove frictional costs.

“We need to get capacity to the insured in a cheaper fashion that meets their needs. That’s probably a challenge ahead for the entire industry.”

Mr Hill says growth for CGU is vital.

“Growth through this year has largely been a result of rate but new business acquisition has been improving and we anticipate we will start growing customer numbers as a driver of premium growth.

“The way we’ll get there is by growing. We’re not going to shrink to greatness. We’re not going to shrink to $250 million [insurance profit].

“It’ll be a combination of stepping up into that larger account space, but also improving our engagement with our brokers and being really clear about appetite and what we want, and just being more out in the market with our broking partners.

“I don’t want to hear that comment, ‘you’re good at doing business with yourself’. I want it to be recognised that CGU is easy to do business with, that we’re a good partner, and we find solutions. That’s the expected outcome in the next two years that our broking partners will see from us.

He says CGU has “great talent” in its ranks. “My job is to bring that talent forward and enable that talent to really fulfil their potential.

“I always say I don’t have to bring about major change, I’ve just got to bring the talent forward to be really successful.

“Six months on and I’m more excited now than I was when I joined when I look at what we can achieve.”