Patrick Snowball Question and Answer

Patrick Snowball, erstwhile boss of Aviva UK and now the CEO of leading Australian financial services group Suncorp, gives his perspective on the UK and Australian insurance industry for Post Magazine as we build up to the 20th Anniversary of the BIA.  

To celebrate the 20th anniversary of the BIA, Insurance Post will be speaking to previous winners about their opinions on how the industry has changed over the past 20 years, as well as asking them to share their best BIA memories.

A former brigade major with the 24th Infantry Brigade, Patrick Snowball has long been associated with acquisitions, whether it was Norwich Union’s takeover of ITT London and Edinburgh, or CGU’s diversification with the move for RAC. He helped establish and develop Towergate, before diversifying his portfolio and moving to Australia to become CEO of Suncorp, a financial services brand that offers general insurance, along with life and superannuation services.

How has the face of insurance changed since you won the Achievement Award? 
I won the award in 2007, before the recession, and not surprisingly the impact of that event brought about seismic changes within the industry. These changes include regulation – the Financial Conduct Authority has become the dominant force in the industry; low investment returns, which have changed the skillset among management teams, requiring them to become experts in both moving capital around; and being better at managing capital on behalf of shareholders. Also, insurance chief executives have been far more fixated on cost cutting, and they have needed to champion pricing and underwriting discipline in order to protect their balance sheets. This has ensured the survival of the industry, despite some scares, but overall insurance has lost a lot of its confidence and become cowed by politicians and regulators.

You are a figure who has long been associated with mergers and acquisitions. How has the M&A market developed over the past 20 years? 
M&A is an ever-present feature of our industry, but in recent years consolidation among the big insurance providers has taken a back seat, as management teams have switched their attention to running efficient businesses. The world is very different from where it was in 2006/2007, with regards to both the price and the availability of debt and also the whole leverage issue. I’ve always believed that in the long term, the UK requires an international general insurance champion to rival Axa, Allianz, and Zurich on the global stage. Prudential under Tidjane Thiam has been a tremendous success story in the life sector, but there are no players of a similar scale in GI.

You were at Aviva for almost 20 years. What were the highs and lows of your time there? 
Running Norwich Union, both GI and life, was a tremendous privilege. It was a fantastic brand and commanded a leadership position in the UK - not just in terms of scale and profitability, but in the many pioneering initiatives we sponsored such as digital flood mapping, pay-as-you-drive insurance and offshoring. In acquiring RAC we also began to put into practice concepts such as the lifetime value of the customer. Many of the people who worked in my team have gone on to very senior roles in other insurance companies, and that is a great testament to the culture of NU and its enduring influence on the UK general insurance industry.

How has the broking community changed since your time at Towergate? What are the biggest challenges facing it?
 The decline of broking has been long-prophesied but has never come about – and 
that is because broking attracts some of the cleverest, most innovative entrepreneurs in our industry. People like David Ross [CEO at Gallagher], Dominic Burke [CEO at JLT] and Dominic Casserley [CEO at Willis] are just the latest in a long line of really smart people who will re-invent broking models. It has always 
attracted the most interesting people in insurance, and will continue to thrive because of that.

Is the Australian market – where Suncorp is based – similar to the UK?
 The major differences are twofold: customer and market structure. In terms of customers, Australians tend to have a great sense of community pride. Generally they remain very loyal to brands and are concerned about quality products and cover, with price being less of a factor. No small part of Suncorp’s success is due to the ‘One Company. Many Brands’ strategy, which means we have a suite of brands, each representing a different community. The market structure in Australia is also very different. Australians live in a very concentrated geographical area, primarily in the three major cities of Brisbane, Sydney and Melbourne. While this concentration presents risk challenges, it has also provided us a great opportunity to create a fully vertically integrated supply chain in our motor business - Suncorp authorises more than 500 000 car repairs each year with 120 000 of these managed by our joint venture repair shops. Integrating our business in this way has delivered material cost savings, improved quality and timeliness and enhanced our customer relationships.

Australia has a much smaller price comparison market than the UK, where it has grown substantially since the BIA started - what affect do aggregators have and what is your opinion of them? 
Aggregators have not built up a great deal of momentum in Australia. Roughly 70% of home and motor insurance policies in Australia are bought direct from the brands Australians already know and trust. As such, Suncorp and our main competitor have not felt the need to participate on aggregator sites. To date, this has not been to our customers’ detriment and we haven’t seen any great loss of market share to challenger brands that are using aggregators as key distribution platforms.

You have a reputation for being a proponent of outsourcing. Over the past 20 years many brokers and insurers have tried their hand at it – do you think this will continue for the next 20 years?
 There are two questions to ask in relation to outsourcing: if an activity in your business is not creating value for your brand, then you need to consider whether you are the best person to do it. Secondly, how much of your fixed cost base can you and should you move to a variable basis? Chief executives will pose these questions, and outsourcing will continue to provide an option.

How has the rise of technology over the last 20 years affected insurance? 
Until quite recently technology posed a huge cost to insurers. None of the big insurance mergers – including Norwich Union and CGU – ever got completely to grips with technology, because it was so expensive to change anything. So legacy systems have always held insurers in check. The emergence of mobile technology means new products can now be built and market tested via apps for a fraction of the cost. Insurers will no longer be hamstrung by legacy and cost, and this will revolutionise our industry.

What has the impact of fraud been on the insurance industry?
 Fraud has a significant cost impact on insurance and a significant impact on premiums. In common with a lot of other so-called ‘victimless crimes’, the authorities offer up less of their time to catch and prosecute offenders. Insurance fraud has not always been a priority for police, but there is evidence now that it is moving up the political agenda, especially for motor, with increasing co-operation between the police and industry bodies.

How has regulation, such as Solvency II and the gender directive, affected the insurance industry? 
Increasingly, insurance takes its cue from national and international regulators. Business models have altered to account for the need for increased capital requirements and for more regulatory and legislative oversight. The regulatory response to the financial crisis has transformed insurance management – compliance, governance and successful de-risking of balance sheets are increasingly the yardstick by which high-performing teams are judged. However, care needs to be taken to avoid tipping the balance too far. It is not sustainable for customers to be immune from taking all responsibility for buying a financial product and assuming that they’ll always be bailed out if things go wrong.

Why is insurance a great industry to work in? 
Firstly, it is one of the last great people businesses. Without insurance, people have no way of financially protecting their assets and livelihoods, so it’s an industry with a high degree of responsibility. Pooling risk enables us to support people getting back on their feet after they have experienced the unforeseen. Suncorp’s response to the Queensland floods in 2010/2011 was an exceptional reminder of why we exist as a business, and I was incredibly proud to be the chief executive at that time.

Where do you keep your Achievement Award?
I am proud of the award and have it at home in my flat.

What is your best memory of the BIAs?
The BIA is just about the only occasion during the year when the whole industry comes together in one place. I’ve always enjoyed going, and am sure the 20th anniversary event will be tremendous.

Career highlights: Patrick Snowball

2009 to present Group chief executive officer, Suncorp Group

2008 to 2009 Non-executive director, Jardine Lloyd Thompson

2007 to 2009 Chairman, Towergate Financial

2006 to 2008 Member, Financial Services Authority practitioner panel

2005 to 2007 Executive chairman, Aviva UK

2001 to 2005 Group executive director, Norwich Union

2000 to 2001 Managing director, NU Insurance

1970 to 1987 Major, British Army