September 30, 2013 by Daryl Angier
On a sunny November morning, RSA Canada president and CEO Rowan Saunders sits for an interview in a boardroom in the almost-finished building at 18 York Street in downtown Toronto. While he is talking, the window blinds opposite him move up and down every few minutes, as an unseen motorized hand reacts to the changes in daylight caused by the sun tracing an arc behind the buildings in view. The adjustments subtly modulate the amount of natural light and heat in the room; just one of the eco-friendly features of the 26-storey, 600,000 sq ft tower that will be RSA’s new Canadian corporate headquarters in January. The new building is pursuing gold LEED certification for meeting stringent standards of environmentally-friendly construction and operation. Approximately 500 employees will move here from the 60-year-old 10 Wellington Street East building a few blocks away that RSA is in the process of selling.
This radical change to the corporate setting is an important key to achieving the company’s ambitious goals and growth targets for the next few years, says Saunders. After going through some tough times—along with the rest of the industry—in the early 2000s, RSA Canada has completely turned around, moving from the 10th largest Canadian insurer in 2004, to the third largest at the end of Q2, 2011 (as measured by gross written premium). The company has effectively doubled in size since Saunders was made CEO in 2003, and his goal is to double that again. To do so will require unique strategies for each of the company’s operating divisions. RSA is one of the few insurers in Canada that offers a broad spectrum of products across the range of commercial lines, as well as a suite of personal lines products, supported by multiple distribution channels. While RSA’s personal lines strategy has generated the most discussion in the broker community recently, it is actually the commercial side of the company that will play the more significant role in reshaping the Canadian insurance industry. Achieving the goals Saunders has set for RSA will require a continuation of the significant growth it has enjoyed recently in its commercial portfolio while drawing on company resources around the globe. The growth plan is bullish on Canada’s economic future, one where Canadian companies will increasingly need to reach beyond our borders for business opportunities, and for the resources and expertise in risk management to help them realize success. Also central to RSA’s plan are top-performing brokers who are building deep and rich relationships with both their clients and the insurers they partner with.
New Home, New Goals
Saunders has spent his entire career with RSA Canada, moving from underwriting to finance, and then through a series of increasingly senior management positions. Now, following RSA’s announcement in November of a global realignment, Saunders will sit on a UK-based global executive team of four regional leaders. The “Canadian region” of the company and the Scandinavian region combined (the UK and Emerging Markets are the other two global divisions) now contribute approximately 45% of RSA’s global premium volume and an even higher percentage of the group’s underwriting result. To continue that forward motion, the company is moving to the new building on York Street in a bid to shake up the corporate culture.
“To further differentiate ourselves and further outperform the market,” Saunders explains, “we realized we have to work more collaboratively and create an environment that enables faster decision making, where people are open to test the boundaries, be more innovative,” and enable the company to bring products to market faster. Through simple changes to the physical environment—more natural light, a more flexible floor plan—information can flow up and down the silos of the organization more quickly, argues Saunders. It will be easier to create “virtual work teams,” with representatives from finance, marketing, IT and underwriting working together on a project or product launch.
Saunders was inspired to make the move by visits to the campuses of fast-paced tech companies like Google and Cisco, observing how less management layers and structural governance are required in an open, less hierarchical environment.
“If you look at the innovations that [Cisco and Google] bring together, it’s amazing compared to the tweaking and the slowness that you typically find in the insurance sector,” he points out.
Getting to this point meant learning some difficult lessons during the turnaround stage. These included learning to carefully select “the battlefield,” in terms of segments and lines of business, and how to differentiate in those areas. It also meant understanding the “criticality of talent.” That means attracting the best people in the business, motivating them and rewarding them, and also “moving out people that really aren’t the A players,” he says.
When pressed on whether his goal for RSA to be “the best insurance company in Canada” means being the biggest, he responds: “We don’t articulate it in size. We just articulate it in being very significant, a market leader.” That means being the best to customers and employees, as well as outperforming the competition on financial metrics such as market share growth and profitability. “To me personally, it does mean being a Top 3 player,” Saunders admits.
Cementing RSA’s place among the Top 3 means achieving different objectives for each of the company’s divisions. RSA’s business can be roughly divided into thirds: one third of revenue comes from commercial lines, another third is in intermediated (broker-based) personal lines, and the final third in direct personal.
In the intermediated personal lines space, Saunders underscores the importance of the “advice-based customer,” (or “ABC”) to RSA’s strategy. “This is the customer that has more complex insurance needs, … that values and is prepared to pay for the advice, expertise, and advocacy that a broker brings.” Growing this area of the business means broadening the company’s geographic footprint across the country. RSA’s purchase of insurer CNS in 2008 allowed the company to increase its presence in BC. In Quebec, on the other hand, Saunders has struggled with how best to re-enter the marketplace and build back share.
“I do think that the (Quebec) market is more conducive for a re-entry now following the AXA acquisition (by Intact),” he says. Without revealing any details, Saunders says that RSA is “in fairly advanced discussions with a number of brokers on our re-entry plans” for Quebec.
Equally as important as the geographic expansion is a differentiated product offering. Here, RSA will be going after the high-value homeowner with a product that will feature more nuanced underwriting and high-touch service on the claims side.
“The risk selection, the pricing, and particularly the claims experience has to be unique and appropriate for this subset of customer expectations,” he notes. “We’ve brought underwriters in from Chartis and Chubb that are very experienced in this,” as well as created a sub claims unit that is dedicated to supporting this line.
The Canadian personal lines market is changing rapidly, says Saunders, and insurers need a multi-pronged strategy to adapt to those changes. Consumers are showing increasing interest in online, self-serve “e-channels” that don’t necessarily require the involvement of a broker, while corporate partners are looking for “white-label solutions” to expand their brand offerings. Indeed, RSA subsidiary Johnson Inc. recently entered into an agreement with retailer Canadian Tire to offer P&C personal lines products under the Canadian Tire Insurance Services name. The move has drawn criticism from some in the broker community who see it as further erosion of the broker space. However, Saunders defends the strategy by pointing out that “Canadians purchase insurance in different ways depending on individual needs … Our multi-channel distribution channel is what makes RSA unique and competitive in the Canadian P&C market, and it’s working well for us and for our shareholders. We are absolutely committed to brokers.”
Personal lines insurers are also challenged on the regulatory side. He singles out provincial legislators for an “invasive” approach to regulation that has made it difficult for insurers to segment portfolios and hit targets for revenue and profitability. Consequently, companies like RSA are looking to other areas of the business to achieve significant growth.
“I think that with true underwriting expertise, the commercial area is where you can differentiate,” he says.
Over the next five years, Saunders wants to greatly increase the proportion of the company’s total business in commercial lines well beyond the third it accounts for today. RSA is unique in Canada for the range of its commercial offerings.
At one end of the spectrum, there’s the small-to-medium sized business segment. Here, RSA is looking to a technological solution called E-Policy to grow the business. The offering was built in response to brokers’ needs for a platform that is simple and responsive. “We’ve broadened the appetite, refined the rating algorithms, and made it quick and easy for our underwriters and brokers to issue (a policy),” says Saunders. RSA has written $1 million of new business on the platform since a soft launch in October, and will complete a rollout across the country by the end of 2011.
But by far the biggest part of RSA’s 20% overall growth in the past year has come from the 2010 acquisition of GCAN. Its $300 million portfolio in large, complex commercial and specialty lines almost doubled the size of RSA’s commercial business and solidified its position as a leader in marine and equipment breakdown (EBI), says Saunders. Moreover, it has allowed RSA to attract new talent to its large commercial division (the company has hired 15 senior product line leaders this year).
Additionally, RSA’s global realignment will help build on the acquisition by drawing on resources and knowledge from centres of excellence elsewhere in the group. The Scandinavian division, for instance, is a leader in renewable energy, and some of those human resources and knowledge have been transferred here to build a position in that niche. Likewise, the Canadian division is strong in specialty lines and that expertise is being exported.
Strengthening the company’s commercial business will be critical for success in the Canadian market in the coming years for a few reasons. For one, size matters more than it ever has before. Following RSA’s purchase of GCAN last year and Intact’s purchase of AXA this year, the top five Canadian insurers now control over 40% of market share in all lines, while also shifting more of their business into the commercial space.
“You do need a big balance sheet,” argues Saunders. “You need access to international reinsurers to provide you with the capacity to be a significant player for the bigger commercial risks, and not just follow somebody else’s line.”
Even more importantly, however, Canadian insurers like RSA are bulking up their commercial capabilities because customers today are looking for more than capacity at an attractive rate. They are increasingly sophisticated and demanding resources in loss control and risk mitigation. Most of all, they require a deep understanding of their business by their brokers and the insurers they partner with, says Saunders.
“I think that’s where you see the good brokers truly understanding their customer, … understanding the inherent risks that are emerging with evolving business models, as we become more of a global trading country.”
For brokers to get to a deeper level of understanding of their clients’ businesses and keep them for the long term requires building deep and rich personal relationships that will allow for access to more intimate data and strategic plans. Similarly, Saunders believes that an equally important key to success for brokers today is the relationships they build with insurers, and points to the example of RSA’s relationship with its top brokers in Canada to illustrate how those deep relationships can lead to long-term profitability.
“Our top 40 brokers in Canada give us $450 million of business as they get closer and they trust us,” he says. “I think the relationship is both at the executive level where you’re talking strategy and the front line level. Our larger closest brokers do get access to our best talent, do get differentiated service. It’s no wonder that both the broker and RSA enjoy superior market growth and profitability.”
Copyright 2011 Rogers Publishing Ltd. This article first appeared in the December 2011 edition of Canadian Insurance Top Broker magazine.
This story was originally published by Canadian Insurance Top Broker.