We haven’t spoken to you for a couple of years Declan, how has business been for AIG?
2016 was a great year for AIG in Ireland. We reached two important milestones during the year, AIG’s 40 year anniversary in Ireland and it was the first year we exceeded €300m non-life gross premium written, for a market share approaching 10%. 2017 has also started really well and we have continued to grow our business and profile in the market, with great support from our broker partners, clients and employees. Two of our employees, Simon Russell and Frances O’Fiachain reached their own milestones celebrating 40 years at AIG Ireland. It is great to have such experience on our team.
AIG is very much part of a global group. How relevant is this to your relationship with the broker channel?
It is relevant of course, but insurance is a people business, so the most important asset an insurer has is its people on the ground and the service they provide to brokers. Being part of a global group like AIG is very positive for brokers. The network brings tools that allow both the local AIG team and brokers better serve our clients. These tools are not limited to high capacity and financial strength. AIG’s unrivalled global footprint allows us to issue policies and pay claims around the world. AIG’s global engineering team works with clients to improve safety globally. AIG in Ireland and its broker partners can tap into the global group expertise, from catastrophe modelling in California to regulatory rules in Saudi Arabia, from property claims in China to product claims in France and from travel assistance in Africa to law suits against Irish directors in the US.
AIG and many other insurers went through major global cost saving initiatives, has this impacted service to brokers?
The current global environment is difficult. A sustained low interest rates environment has resulted in low or no investment income and increased focus on underwriting results and cost reductions. Like most global insurers, AIG has gone through a major multi-billion euro global restructuring and cost saving initiative. This has principally focused on non-customer facing areas. AIG has delegated increased decision making from regions to countries, which has improved the service we provide to brokers and clients. We have continued to invest and innovate locally to continue to improve our service to brokers and clients.
AIG’s recent decision to relocate its European Regional HQ to Luxembourg, with Dublin as the under-bidder, was disappointing to brokers and indeed the financial services sector as a whole…can you comment on this please?
In the aftermath of the decision, it is very much business as usual here and it is important to note that the decision will have no impact on our service to brokers. While a relocation of its EU HQ would have presented an opportunity to grow AIG’s footprint in Ireland, the reality is that in an organisation like AIG, there will always be opportunities to expand.AIG has more than doubled in employee numbers in Ireland in the last 3 years, with the acquisition of Laya Healthcare, the centralisation of its Global Treasury Operation to Dublin and the expansion of its IT shared services team.
How relevant was the recent Supreme Court decision on the Setanta Insurance case and what lessons can we learn from this and other collapses?
We were delighted with the decision. If the decision of the lower court had been upheld, Ireland would have been an outlier in developed insurance markets by requiring motor insurance collapses to be funded directly by competing insurers and not by a compensation fund. The decision helps industry maintain credibility as well as sustainable and stable pricing.
The principal lesson learned from the collapse of insurers like Setanta is the value of an insurer with strong financial strength. A common denominator of collapsed insurers in Ireland is the lack of a strong financial strength rating from a credible agency.
AIG’s partnership with Supervalu has disappointed many in the broker channel…..indeed many smaller brokers feel it is killing them on Personal Lines. Can you comment on this please?
Smaller brokers have a great advantage in offering a personalised service and a holistic approach to the insurance needs of families and businesses. However, other customers, particularly millennials, prefer a digital experience when buying insurance. Many insurers have partnered with major retailers in the past with varying degrees of success. What is changing is that retailers now have greater data analytics through their customer interactions; they are gaining a deep understanding of their customer needs, behaviours and tastes and can target different segments with more personalised offers. For certain segments of the market, the future is digital. Successful providers will require market leading self-service technology, a great brand with a large marketing budget and excellent data analytics. Different customers will prefer different channels of distribution and we need to be able to cater for their preferred channel.
The decision helps industry maintain credibility as well as sustainable and stable pricing. The principal lesson learned from the collapse of insurers like Setanta is the value of an insurer with strong financial strength. A common denominator of collapsed insurers in Ireland is the lack of a strong financial strength rating from a credible agency.
The industry faces many challenges over the coming years, what do you think the principal challenge is?
The principal challenge will be to restore stability, sustainability and consistent pricing to the market. We have seen huge increases in average injury claim pay-outs and a higher frequency of claims. The insurance market has gone through a sustained period of underwriting losses. Hundreds of millions of insurance capital have been injected into the market to keep it afloat. Bodily injury represents over 70% of insurance premium in certain classes and increasing bodily injury claims have had an enormous impact on premium in these classes. Many people and businesses are struggling to afford insurance and the industry is being heavily criticised.
Is your business challenged with disruption due to the emergence of fintech?
The industry has been relatively slow to embrace change and innovation. Increasingly, the industry is facing threats of disruption from nimble fintech companies. It is a very exciting area and we don’t see it as a threat but an opportunity. At AIG Ireland, we have been working hard on innovation, improving our online proposition for brokers, www.RapidCover.ie and on our telematics products. Telematics has allowed us take a fresh look at the market and enter new segments. Last year, we launched a telematics pilot with a number of brokers, specifically targeting the young driver demographic. We monitor driver behaviour, reward good drivers with lower premium and cancel the policies of young drivers who excessively break speed limits. We have also piloted telematics on a commercial fleet and used gamification technology to improve driving behaviour.
Brokers are spending more and more time getting insurers to pay covered claims quickly, do you think there is an issue in the market?
Our claims team is the back-bone of our operation. Delivering on our promises, providing certainty quickly, having the right technical expertise and local payment authority differentiates us from many in the market. Behaving with professionalism and integrity creates confidence and a real partnership with brokers and clients. I often hear insurers talking about their ability to pay claims but willingness to pay claims is just as important. We are very proud of our record of paying claims quickly. For example, we recently incurred four major property claims and, in all cases significant multimillion payments were made within 30 days from the date of loss. Early resolution of claims has led to huge positivity for AIG with brokers and clients.
AIG did some research on the public view of compensation awards, what did your research reveal?
To get an idea of the public view, we commissioned an independent survey of the compensation culture, focusing on whiplash and fraud. We surveyed 1,000 people and we were not surprised with the results; 78% of those surveyed felt the average whiplash award of €15,000 is excessive. When we asked the respondents what they felt is a fair amount, the average response was €3,600, less than a quarter of the current average whiplash award in Ireland. According to the research, 21% of those surveyed are aware of someone who has exaggerated an insurance claim while a further 15% know someone who has falsified a claim. 80% agreed that premiums are affected directly as a result of these false claims. The message is clear, the public believe awards are too high and a very high percentage of the public has personal experience of fraud and exaggeration of claims. The survey was generally welcomed.
We are very proud of our record of paying claims quickly. For example, we recently incurred four major property claims and, in all cases significant multimillion payments were made within 30 days from the date of loss. Early resolution of claims has led to huge positivity for AIG with brokers and clients.
AIG in Ireland and its broker partners can tap into the global group expertise, from catastrophe modelling in California to regulatory rules in Saudi Arabia, from property claims in China to product claims in France and from travel assistance in Africa to law suits against Irish directors in the US.
Do you feel the work done by Minister Eoghan Murphy and the Cost of Insurance Working Group will improve things?
The Cost of Insurance Working Group chaired by Minister Eoghan Murphy did some trojan work last year and made many sensible recommendations. If some of the standout key recommendations are implemented, insurance costs will stabilize and reduce over time. The new Minister with responsibility for insurance, Minister D’Arcy, will face some powerful vested interests, particularly when he starts trying to execute on reducing minor injury claims down to European averages.
Successive governments have a poor record in this area and Irish insurance costs remain among the highest in Europe. Twenty five years ago, in a debate in the Dáil on insurance costs, Des O’Malley said ‘Premiums in Greece and Britain are only a fraction of what they are here. However, the claims and awards in those countries are also only a fraction of what they are here, inevitably one reflects the other and will continue to do so.’ For the sake of the many thousands of customers who are struggling with insurance costs, I hope the government succeeds this time.
Cyber crime and digital attacks are growing at an alarming rate. High profile data breaches include Twitter, Paypal, Spotify and LinkedIn. As a market leader in this area, how important is Cyber Insurance? Are you surprised at its growth and how can you encourage brokers to consider this risk for ALL clients, both large and small?
All clients, both large and small, are at risk of data breaches and cyber-attacks. Virtually all company risk registers include cyber risk at the top or near the top of the list. The cover is not just about financial protection; it is also about the practical response to data breaches. At AIG, in addition to financial protection, we provide forensic IT services, legal services and PR support from local experts to policyholders to ensure they can contain and control an attack quickly. AIG has been writing cyber insurance for the last 15 years and I am not surprised by its recent growth, if anything I am surprised it took so long.
The AIG Brand seems to be going from strength to strength with a strong link to sport?
Our brand in Ireland has never been stronger. Our awareness among consumers has grown from virtually nil in 2013 to over 80% today and trust levels are high.
AIG was associated with some of the biggest sporting events in the last 12 months. The Dubs retained Sam in a replay and Ireland had an historic victory over the New Zealand All Blacks at the AIG sponsored ‘Rugby Weekend’ in Chicago. Teams sponsored by AIG featured in many of the most watched TV programs in Ireland in 2016. We also support grassroots sport and have strong links with golf and tennis. We integrate corporate social responsibility campaigns such as ‘AIG Heroes’ into many of our sponsorship activations and the team here are very proud of the work we do.
We expect 2017 to be equally strong with exposure from the AIG supported British & Irish Lions tour. We will also be bringing hurling back to Fenway in Boston later this year, this time with 4 teams, to build on the success of the AIG Fenway Hurling 2015 which was attended by close to 30,000 people.
AIG has a new global CEO, Brian Dupperreault, what does that mean for the Irish operation?
Just 3 weeks after his first full day back at AIG, Brian visited the Irish office in June. It wasn’t Brian’s first visit here, he was a board member of AIG Ireland from 1991 to 1994 and visited the office in the 1980s and 1990s. Brian spent 21 years at AIG and led its non-US Property Casualty business. He left AIG to become just the 57th employee and CEO of a boutique Bermudian insurer called ACE, a company he transformed into a major insurer. He later joined Marsh as CEO during the financial crisis and led a major turnaround. In 2013 he set up Hamilton Insurance Group, a company that uses technology, including artificial intelligence and machine learning to help inform underwriting.
Brian has been very clear that he is back at AIG to grow the company. He favours pursuing both organic growth and non-organic growth, particularly outside the US. He plans to reduce the pace of share buybacks. He wants to build a more balanced commercial business through underwriting discipline, growth and diversification. His plans include the use of technology to help AIG operate more efficiently and to get the best information into underwriters’ hands quickly. He understands the broker perspective very well as a former CEO of Marsh and is very focused on improving service to brokers. Brian is an inspirational leader with an unrivalled track record; we are excited about the future of AIG.
What do you hope for the rest of 2017?
Continued support from our broker partners in Brokers Ireland, good weather, execution of insurance reform by Government and the Dubs for a three in a row!
All clients, both large and small, are at risk of data breaches and cyber-attacks. Virtually all company risk registers include cyber risk at the top or near the top of the list. The cover is not just about financial protection; it is also about the practical response to data breaches. At AIG, in addition to financial protection, we provide forensic IT services, legal services and PR support from local experts to policyholders to ensure they can contain and control an attack quickly.
