Aviva 2001 Annual Report Download - page 23

Efficiency Norwich Union Insurance’s expense ratio – which broadly
measures expenses before commission over premiums – was 10.5%
at the end of 2001, one of the lowest among the large UK insurers.
This is after investment in our market-leading technology and
processes on a scale that only companies of our size can achieve,
and reflects how integration of the business has driven down costs.
We have established a combined infrastructure for claims
management to obtain the greatest overall benefits from our size, and
continue to develop a culture around Total Incident Management
(TIM). We recognise the stress that often accompanies a claim, and so
aim to get things back to normal for the customer as soon as possible.
Extending TIM to around six million policyholders who would benefit
in the event of a claim has generated greater value for money for
Norwich Union. Through agreements with approved suppliers, we
settled over half of the claims in 2001 with repairs or appropriate
replacement items at lower cost than by issuing a cheque to the
customer. Following this advance, our challenge is to export the TIM
culture, sharing learning and processes with other parts of our general
insurance business worldwide.
We aim to use new technology for as many processes and
transactions as practicable in the interests of improving service levels
and reducing operating costs.This has resulted in Norwich Union in
the UK becoming the leading user of remote image inspection
technology in Europe. Our engineers use digital video cameras to
assess damage to vehicles, which enables us to handle motor
insurance claims more quickly and accurately without the
need to visit locations.
Similar initiatives are under way in our other general insurance
operations. For example, Delta Lloyd in the Netherlands is testing a
process for assessing motor claims by accepting digital pictures sent
by customers via the internet.
We have piloted a web-enabled policy administration system and a
new website for intermediaries, which are being developed in the UK
as part of our partner self-service (PaSS) programme.This programme
will connect intermediaries and corporate partners directly into
Norwich Union’s systems through web-based technology and will
create a market-leading platform for delivering improved service to
our business partners.
Driving innovation is a key part of our long-term strategy. With this in
mind, the group is investing in new motor vehicle technology to help
change the way motor insurance is bought by our customers in the
future. Pay As You Drive insurance uses a black box installed in the
vehicle and linked to satellite tracking technology to provide accurate
data about vehicle use. We have talked extensively to customers,
vehicle manufacturers and technology providers, and intend to begin
a long-term study using this in-car technology to provide a more
tailored Pay As You Drive premium charge to our policyholders.This
research and development project will put us at the forefront of
European insurance offers.
France recorded a strong recovery in its general insurance result to
£58 million in 2001, through rate increases, improved underwriting
and lower weather-related costs. Net premiums written rose by 8%.
Operating profit from our other European businesses improved to
£108 million (2000: £37 million) reflecting the benefits of our strategic
focus, disciplined underwriting and rating actions.
Our Australian and New Zealand businesses reported lower
operating profit of £69 million (2000: £82 million),primarily reflecting
the sale of State Insurance in New Zealand, which contributed
£10 million to the 2000 result. Canada achieved an operating profit of
£72 million (2000: £78 million) after an increase in the level of prior
year bodily injury claims. Our other international businesses returned
an increase in operating profit at £48 million (2000: £34 million).
Underwriting and pricing In each market the integration process
saw us move business written on to single operating platforms for
personal and commercial lines business. A restructured and re-rated
product portfolio reflected our groupwide focus on personal lines and
small to medium business exposure.
In the UK, our underwriting strategy is clear – we have strict control
on risk selection. We have further developed our underwriting policies
and procedures to ensure we provide for the insurance needs of small
to medium businesses while moving away from big commercial risks.
This approach, coupled with the creation of an underwriting academy
in the UK to develop the professional skills of our key people, is
realigning our business to deliver consistent performance and
sustainable long-term advantage.
The launch of a common pricing platform for our UK motor business
in July 2001, using over seven million policyholder records, is helping
us to ensure fairer quotes for everyone.This uses Norwich Union’s
huge insurance database (40% larger than that of our nearest
competitor) to enable more accurate selection and pricing of risk,
and is a significant move towards tailored pricing for individual
customers. A similar arrangement for household insurance will
begin during 2002.
In view of the frequency and cost of severe weather across the UK,
the issue of flooding remains high on the agenda for Norwich Union.
We are taking a market-leading stance with a campaign aimed at
placing the onus on government and industry bodies to ensure
adequate flood defences, funding and planning controls. Over time,
this should mean better protection against flooding and reduced
claims for the insurance industry to meet.
We have commissioned the production of detailed relief maps of the
UK, indicating land heights above sea level.This data will enable us
to develop a flood model for incorporation into our new pricing
platform for homeowner and commercial property business.
This unique information will ensure that Norwich Union can price
even more accurately for each individual case.
In the Netherlands, Delta Lloyd recovered from a small loss in 2000
to profit in 2001 as a result of underwriting action and pricing
adjustments across all business lines, and a more critical approach to
larger risks. Motor rates were increased and stricter underwriting
criteria introduced, with certain classes of business no longer covered.
£945 million
operating profit
19%
UK market share
No1
in Ireland
21 CGNU plc