Devitt and Lawton - Upping the ante

Despite some difficult circumstances, Aaron Devitt - RSA's sales director, UK commercial - and Mike Lawton - RSA's UK business director - are relaxed and happy when I meet them at RSA's head office in Leadenhall Street. After all, this is the day of the G20 protests, their boss Paul Donaldson (who replaced Brendan McManus) is in hospital following a heart operation (they assure me he is doing fine after having visited him the previous day) and we are in a little bit of a recession.

Despite this being the day of the G20 being held in London, dressing down to avoid the attentions of protesters is not on the agenda for Devitt and Lawton and there is no postponement of their all-day senior strategy meeting; this is in sharp contrast with much of the City, which had closed down in preparation for riots and in the face of an outpouring of anti-City sentiment, leading to tubes packed full of bankers wearing jeans. They are perhaps also relieved that the seemingly yearly RSA job cull is out of the way - 1,200 this time in order to save £70m in costs by the middle of 2010 - and that they can return to focusing on what they prefer: winning over brokers to their underwriting methodology and philosophy.

Last year, RSA re-branded with a new name and logo (a relief to many that found it hard to decide between Royal SunAlliance, R&SA etc.) but in a very low-key way and, although there was some prominent advertising at the British Insurance Brokers' Association conference in Glasgow, you could have been excused for missing it. The change is a great contrast to Norwich Union's remarkable marketing blitz this year to herald its name change in June to Aviva; few will not have noticed the firm's hiring the likes of Elle Macpherson and Bruce Willis to drive the point home. One large difference is that RSA's UK consumer brand, More Than, has kept the same name. Now, 12 months on, RSA seems ready to talk about strategy.

The appointment of Paul Donaldson to replace Brendan McManus, now chief executive at Willis UK, was a surprise to many, however he has been working quietly to develop relationships with brokers; it was he that promoted both Devitt and Lawton to their current roles in a reshuffle in November last year (see box, p.33). Both admit that the insurer has not been known for great sales and they concede that the industry's service has not been good enough. It appears they want to rectify this by focusing on the brokers that see the benefit of having an agency with RSA and, if that means fewer of them, so be it. Regional underwriters with authority and autonomy have been established in cities such as Leeds and Manchester, allowing brokers to be given access to those all-important decision makers.

Devitt says: "We have trading floors where the brokers can enter the offices. We are pipelining and prospecting risks and giving brokers opportunities to grow their businesses with us." Lawton interjects: "There is a buzz around the offices with people excited about doing business: there is a sales culture."

Ambition

Small to medium enterprise is one area that RSA is targeting heavily and Paul Donaldson - managing director of Commercial - said it has moved away from being a leader to a follower but that it has plans to address this: "We thought prices were too low. Also, we weren't necessarily a leading player in bringing SME propositions with the right technology to market. The group board has committed an investment over the next 18 months to change that. We moved from a leading to a following position but we still see it as a heartland. Part of the £80m (put aside for investment) will go towards making sure we re-establish ourselves."

Devitt and Lawson are candid about having given out too many quotes over the years and not having won enough business in turn but they have been developing detailed plans to change this. They are bringing in regional and local account managers, in other words creating a set of individuals that understand each broker's business whether in the global, mid-market or SME space. The duo think that brokers want tailored offerings rather than becoming part of clubs - perhaps referring to NU's latest offerings; they say also that they have the surveys and listening 'criteria' to back this up, something they call the Broker Offer - its version of a focus group.

Devitt says: "Brokers have said that they need to contact decision makers more quickly and we are creating microsites for brokers through which they can see their sales teams." However, there is still much work to be done because, although this is the initial aim for 25 of the insurer's largest strategic partners, there is the potential for far more depending on what brokers want. By the time of publication, 22 websites with brokers will be in operation, including Marsh. Lawton continues: "Bespoking is a cliche. Tailoring a relationship with Marsh is different from (doing it with) Willis. Paul Donaldson wants us to look at it through the broker's eyes: for every decision, we want to see how the broker feels about it. The results should be more business and more support on cases." He adds about the microsites: "They are there to detail the RSA team that leads the servicing of their accounts. This is a board of senior individuals across our business with the responsibility and empowerment to make the required changes inside RSA to give our brokers the support they need from us. They provide an up-to-date contact list for the brokers' staff to allow them to access the right decision makers quickly, speeding up the service they offer to their customers. The sites will also be a receptacle for propositions we are developing with them jointly."

Renewed effort

Lawton concedes that his insurer has not been hungry enough for business. He says: "We receive a hell of a lot of quotes - many are not really even in the market to be won, some are just brokers looking for indicative quotes; as such, we simply don't convert enough of them. As a result, we have introduced the Broker Promise, which means that, within three hours of receiving the details of a risk from a broker, we will make contact with a broker and take a decision if we want to progress with a quote. We will be able to do this for all commercial business, whether it is for property or combined liability. We want to quote less and win more."

He continues: "The aim of Broker Promise is to offer an exceptional service for renewals and new business to brokers where we have a strong trading relationship, as well as where we believe we can win a fair amount of business for the increased level of service we offer. In the pilot we ran in Croydon, this has focused on 85 brokers.

"However, the scheme is not quite finalised yet; it is expected to be ready in August. We have completed the rollout of this work in our Croydon office - our customers are seeing a real difference and a recent survey of brokers showed an increase in satisfaction with RSA of over 20%. We plan to move this initiative to the British Insurance Brokers' Association conference in Manchester in May 2009 and expect the rollout there to finish in August."

RSA is not doing badly at the moment given that it has over £1.5bn in gross written premium on its books, although it has lived consistently in the shadow of Norwich Union. The hiring and subsequent sudden departure last October of Bridget McIntyre from NU as UK chief executive has been the source of much speculation across the profession: the official line is that she wanted to spend more time with her family. She was replaced as chief executive by Adrian Brown, who surprisingly agreed to increase its underwriting of Towergate-owned Fusion's book soon after stepping up to the top job. At group level, chief executive Andy Haste, who took over from Bob Mendelsohn in April 2003, appears to have put behind the 'American years' that saw RSA's formal exit from the US on 5 March 2007, which followed some disastrous US acquisitions and being caught up in the events of September 11, 2001. Haste has also shored-up the share price by cutting jobs and disposing of non-core assets, which has made the business a good acquisition target in the opinion of many. Zurich and other international players were rumoured to have been looking at buying the business last year and its share price spiked as a consequence, though no offer was ever put on the table formally.

Recessionary pressures

RSA is cutting 1,200 jobs jobs in the UK and answering questions about this is not a happy part of a job for a senior manager, though it does come with the territory. RSA has announced that it is to close its Bristol operation - where 500 staff are stationed - by the middle of next year, although a trading office of 40 will remain open for its commercial brokers. Devitt explains the rationale and, given Haste's track record, it is perhaps easy in some respects for him to be supportive: "Every company has to improve its efficiency because the bottom line is to be more competitive; this is the only way to go." Lawton reflects: "This is a sensitive area because it is affecting people's lives and we promised we'd act with as much pace as we could following the announcement from Andy Haste." The aim is to better the company's expense ratio from 17% to 14% by 2012.

With Chancellor Alistair Darling forecasting a 3.5% drop in gross domestic product for 2009, Lawton gives his view on what effect the global financial crisis will have on the sector: "This is a difficult time for customers. Perversely, rates are going up as the counter-cycle kicks in. Pressure is on businesses and the recession has increased the number of claims for arson and theft; the fraud count has also risen. They are also under margin pressure to reduce risk management costs. Brokers can give the best possible advice. We are watching it closely and tightening underwriting controls where necessary." Is RSA losing customers this year? Lawton replies: "It is too early to say for this year. Profin is one segment of our business that is clearly open to recessionary pressure, however there has been no great volatility overall."

Long-term sustainability

Although not quickly enough for some, rates are clearly already rising across the sector and this is a trend set to continue as investment returns dwindle. In its recent results, RSA cited that, last year, personal motor and household rates were up 6% and 5% respectively; liability up 6%; property rates up 7%; and motor up 8%. Lawton remarks: "There is a requirement for rates to increase over the next 24 months because of increased costs and claims inflation. The sensible businesses won't have to introduce huge rate hikes if they have taken action early enough."

RSA, the financial strength of which has recently been upgraded to 'A' by AM Best, had an underwriting profit of £99m in the UK (2007: £65m), one of the best insurer performances of 2008 and compared to £63m for Norwich Union. Devitt adds: "There is a demand for sustainability because a broker recommends an insurer for the long term."

On that note, Lawton and Devitt leave to chair their management meeting, still ambivalent to any protestors.

RSA's re-brand

Last year, RSA group chief executive Andy Haste said: "During 2007, we resolved our last remaining legacy issue and we are now fully focused on continuing to deliver our objective of sustainable and profitable performance. As we move the business forward, it is now the appropriate time to simplify and refresh our corporate brand and name. In the future, we will no longer be known as Royal & SunAlliance but will instead be known simply as RSA."

RSA Commercial's reshuffle

Paul Greensmith: heads the global division, which covers the UK and Europe, London market-based construction, power and engineering and marine.

Mike Lawton: the former sales director heads up UK mid-market, comprising its core trading units, Profin, property investors, retail, manufacturing, public services and hospitality and leisure.

Ken Norgrove: head of RSA's small to medium enterprise and volume business from Andrew Burke, who moved to the emerging markets division.

Aaron Devitt: a strategic relationship and sales director's role has been created for the former head of the UK Profin business, whose focus is on strengthening RSA's "most important broker accounts".

Paul Hirst: joins as commercial development director for the whole UK operation, while Colin Bradbury and Ian Currie continue to look after underwriting and Motability respectively.