Off the Boyle

In a recent report following the news that Royal & SunAlliance chief executive Duncan Boyle is to step down, he said: "It is nice to be moving on because we have come through the difficult times." But he laughs along with the subsequent suggestion that he is getting out while the going is good.

His comment referred to the fortunes of RSA rather than UK insurance generally and he enthuses further: "RSA is in great shape and it is the result of the major effort that has been made in the last few years," a fact that RSA's better-than-expected first-quarter results would tend to support.

RSA recorded pre-tax operating profits of £160m for the three months to March 2005 - a 95% increase on the same period last year. Analysts had forecast around £117m. Net written premiums were £1.5bn, compared to £1.2bn for the same period last year. RSA put much of the improvement down to control of costs and annualised savings of £200m with a target of £270m by 2006. The UK business recorded a combined operating ratio of 94.3% compared to 98.2% in the same period in 2004.

Boyle continues: "There has been a cultural change under [group chief executive] Andy Haste and RSA now has a different style and approach. With her skills, Bridgette [McIntyre, his replacement] will complete some of the changes."

Concerning reports that a new venture is in the offing with Haste, Boyle says: "I think some publications have got carried away with their headlines as I will not be working in the industry full time anywhere from the end of the year." Boyle's link with RSA from then will essentially be to run off his involvement

Despite this, when asked if his impending departure might provide a perspective and objectivity that may threaten to suck him back into the business, he ponderously responds: "Maybe." However, he quickly reverts to focusing on his replacement: "I think in terms of fresh perspective, Bridgette will certainly bring that."

With dual nationality - of English and Australian citizenship - Boyle intends to spend some time in Melbourne after leaving RSA but is undecided as to whether he will be permanently stationed in Australia. During his 32 years in insurance, Boyle has spent 12 of them in Australia where both of his daughters live. "I will have things to do after I have had a rest," he says.

Prior to his departure, Boyle's view of UK general insurance and his time in it is clearly crystallising: "There comes a point at which your own ideas can become stale, but it has always been my view that this is a simple business but we tend to over complicate it," he says, adding: "It is about selecting and pricing risk correctly and paying claims efficiently. I do not think there is enough emphasis on getting the right price for the risk and sometimes the salesmen can get carried away with the smell of money.

"My desire for the UK general insurance industry is to see greater professionalism at senior management level. We have seen some pretty irresponsible behaviour by our competitors in commercial this year. My advice to them would be to ensure the focus of what the chief executive officer says filters through the organisation to ground level."

Concerning the soft market, he continues: "Personal lines has been in a different cycle to commercial; it needs rate increases but commercial has been strong and rates are coming off a high peak.

"As we go through the soft market we have a project change programme to reduce our expense base and make RSA more flexible and profitable. This also includes considerable investment in our IT capabilities with new platforms and systems being installed. On the claims side, this initiative is 50% in place and we hope to have the sales and service of the whole of RSA UK re-platformed by the end of next year."

The project has been undertaken with Accenture and features brand-new processes that will further support the changes RSA has had to make in recent years and should ensure the insurer gets the right price for risks, according to Boyle.

"For the market in general, the balance sheets of reinsurers are not as strong as they have been and go against a recovering investment market. I think, therefore, there will be a need for underwriters to write for profit for some time as the era of high inflation and high interest rates covering up the misdemeanours of underwriters is over."

He also has some advice about regulation. "The regulatory focus of the industry needs to be proportional as it can easily become a full-time industry in itself. This can detract from what our focus should be, which is how well we service customers. There is linkage between the two, in effect, treating customers fairly. Generally, the industry looks after customers well, with motor claims providing a very slick service now, but the industry does not highlight things like this or sell itself well enough."

Regulatory challenge

Regarding those that continue to hold serious reservations about the regulator, in particular its powers and how democratic it is, Boyle says: "The Financial Services Authority is undertaking a review of its enforcement procedures and there is adequate opportunity for the industry to comment and be involved. But there is also a recognition by the FSA of the need for continued close dialogue with insurance firms.

There is also recognition among senior officials at the FSA that there is a need for less regulation. And, while this might be at odds with the volume of legislation coming out of Brussels and the EU, the FSA also recognises the need for close engagement with policymakers in Europe."

He agrees that, on the whole, the system of regulation under the FSA is one the industry is accepting and getting to grips with and that high-profile challenges, at this stage, are unhelpful. He continues: "There are not many parallels between regulation here and in Australia, which is about a year ahead of us, but one contrast may provide some food for thought. One of the largest Australian insurers went bust recently and some rather Draconian action is now being taken by the regulator. Also, post-Spitzer, there are also some Draconian actions being taken. So, while I would not say that regulation under the FSA is a 'light touch', it is not being administered in the way regulation is in some territories. Some degree of regulation is appropriate and it is needed but the UK industry generally has a good relationship with its regulator.

"Questions as to whether it is helping customers or whether it is proportional and sensible need to be addressed, but the good thing for the industry is that the regulator knows that regulation requires review. I think regulation will be moderated and reviewed and the regulator is learning. I also think that consumers too will press for this."

Insurance via the internet

"While regulation undoubtedly forces stronger practices and controls, customers do not want to spend longer than they already have to on the telephone to call centres. This could inadvertently drive more customers to buy insurance over the internet."

Since the merger of the Royal and Sun Alliance in 1996, the company has been the subject of much speculation, which continues today. Whether the likelihood of RSA being sold having not shaken its demons is idle banter or represents deeper concerns, Boyle says: "As one analyst recently pointed out - since Bridgette was appointed - RSA would not have hired her if it was going to be sold."

He continues: "RSA has a strong franchise around the world. In addition to its heritage and standing in the UK, RSA is in the top three in the Scandinavian countries and also has a strong stake in Ireland, Latin America and Canada."

Regarding brokers in the UK, Boyle says: "From an underwriting point of view, I want brokers to add value, provide quality of risk and be professional. Brokers should provide a consistent flow of quality business and sustainability for underwriters."

Referring to the last Professional Broking Sentiment Survey results, published in April - in which RSA did not feature in the top five for the first time since the survey's launch in 2004 - he says: "Perhaps many of the brokers that responded to the Sentiment Survey do not have many dealings with RSA as the results contradict what we see. We are well regarded and this is reflected by our broker retention rates, which are in the mid 80s."

He continues: "Despite this, we do not take our position with brokers for granted, we value these relationships and have some excellent staff in place to ensure we maintain them. And, while it is true that we have helped brokers in some difficult times, they have also helped us."

During his career, Boyle has chaired technology companies in Australia, which affords him a unique view of the UK market at present. "There is no doubt there is an explosion of people using the internet with More Than car sales in Q1 2005 up by 110% on the same period in 2004. But, getting the connectivity for commercial business with brokers is more difficult. The imarket project, while laudable - and of which RSA is a supporter - has some way to go. Getting a 'one size fits all' solution to work is like herding cats.

"I think imarket is helping though. Insurance is often compared with banking and people inevitably question why insurance seems to be so slow by comparison, but they are not comparing like with like. Transactions beyond the commodity-end in personal lines with commercial insurance can be very complex and there should be a move to make this less bespoke.

He adds: "Often brokers want to reinvent the wheel with policy wordings when tailoring covers for clients. But the analogy I use is that of BMW cars. BMW produces a 3, 5 and 7-series. Once the desired model has been selected, you can then choose from a wide range of options. It is the same with commercial insurance - there should be a standard product with added endorsements. And this is not over-simplifying the issue, it really is that simple - there is no need to invent the cover from the ground up each time for every client. While there has been much work done to achieve standardisation, the industry would do itself a great favour in cracking this."

Buying habits

About the industry's efforts to embrace the internet Boyle says, to a large extent, history is repeating itself. "Direct Line changed the way personal insurance was bought by customers in the UK. The industry's response to this was that it would fail because many assumed it was under-reserving and that customers really wanted face-to-face advice. The industry needs to learn from this great shift in customer buying habits as it begins to embrace the internet, he says, adding: "Those that treat the Web as an add-on to existing business models are unlikely to realise its potential. To make the most of the internet, firms that devise bespoke processes for that medium will be the ones that attract the customers. The opportunity to devise more sophisticated rating not only exists for the internet but is the key to it, just as it was for direct writers. Those that sought to emulate Direct Line and who tried to adopt broker-based methodology just discounted price and it is happening again with the internet. But the smart operators will be using the great availability of information online to devise new rating factors."

Another issue on which Boyle has strong views, in terms of the future health of the UK general insurance market, is talent. "The industry lost 10 years when mergers were under way as many firms stopped training and disinvested a lot of talent during the 1990s. We have a missing generation and there is a dearth of senior underwriting talent in the industry. The Chartered Insurance Institute is playing its part but I do not think collaborative efforts between insurers are the way to go; after all, there is a war among firms for skilled staff."

CV

1999 chief executive officer, Royal & SunAlliance (UK)

1999 head of commercial, Royal & SunAlliance (UK)

1998 CEO, commercial division; then managing director, Royal & SunAlliance (Australia)

1989 operations director, Royal Insurance (Australia)

1988 assistant general manager, Royal Insurance (New Zealand)

1983 human resources, international head office and territorial manager for Northern Europe, Royal Insurance (UK)

1982 underwriter, Royal Insurance (Australia)

1974 development underwriter, Royal Insurance (UK).