Zurich Insurance Group is undergoing a reorganization that will align the life and non-life business units geographically. The goal is to minimize the cost of sales within a region and facilitate the sale of additional coverage lines to business and individual clients. Zurich panel counsel members will want to take note.

Zurich Panel Counsel UpdateManagement teams will be created around the new regional structure, and Zurich will appoint a new chief operating officer to streamline operations globally. The former Chief Operations and Technology Officer, who joined Zurich from AIG in 2014, will be leaving the company as part of the restructuring effort.

Zurich announced earlier that they are targeting $1 billion in cost cuts by 2018, with a goal of $300 million in savings for 2016 alone. Staff cuts are expected, according to the new CEO Mario Greco, but details are not specified.

The company, which has $60 billion in revenue, is responding to charges by critics and financial analysts that Zurich’s “combined ratio” (a measure of premiums compared to the cost of claims and operating expenses) is one of the highest in the industry for the general insurance line.

Zurich Focuses on Claims Management

Zurich announced in September, 2015 that they were in the process of taking steps to address performance in the areas of underwriting and claims. The Global Corporate (GC) North America property and auto liability business line was specifically identified as a “problem area.” Construction liability is another area that is targeted for improvement, according to Bloomberg reports.

In addition to claims management, other general expense categories being targeted include information technology and marketing.

The direct impact, if any, on the Zurich panel counsel program is not reported at this time beyond the overall corporate goals.

Zurich’s main U.S. claims office is located outside of Chicago in Schaumberg, IL. According to the Zurich website, other U.S. claims offices are located in California, Florida, Georgia, Indiana, Kansas, Massachusetts, New York, New Jersey, Pennsylvania, North Carolina, Tennessee and Texas.

Zurich Commercial Lines Business

Zurich claims to be the fourth largest commercial lines insurer in the U.S., and the second largest cross-border insurer to multinational corporations through its Global Corporate franchise.

Zurich’s North American Commercial (NAC) division is organized by five major segments identified below.

  • Commercial Markets: Standard P&C and industry specific specialty lines for targeted customer industry segments.
  • Specialty Products: Sophisticated products for nonstandard risks.
  • Programs: Business distributed through Program Administrators targeting niche markets as well as captives.
  • Direct Markets: Business distributed through direct sales force targeting the auto dealer segment.
  • Global Corporate: Standard P&C lines for large customers with global exposures based in North America.

Zurich Personal Lines Business

Zurich ranks itself #7 in the top eight for the U.S. personal lines market, based on 2015 direct premiums.

Rank Carrier Market Share Percentage
1 State Farm 18.8%
2 Allstate 9.7%
3 GEICO 8.0%
4 Progressive 6.4%
5 Liberty Mutual 5.6%
6 USAA 5.4%
7 Farmers (Zurich) 5.3%
8 Nationwide 3.7%

Zurich’s U.S. personal lines business is distributed over three categories: 41% auto liability, 28% auto damages, and 31% homeowners insurance.

Farmers Exchanges is the #3 personal lines insurer in 29 “core” states in the western U.S., according to Zurich. Farmers plans to grow its personal lines business, which also includes some commercial lines, in the eastern U.S. Farmers Insurance includes the Foremost Insurance Group and Bristol West Insurance

Zurich sees market pressure on rates, especially in property lines and workers’ compensation. It plans to use predictive analytics in the workers’ comp market to better predict and manage high value claims. External and internal data (both structured and unstructured) will be used in the predictive analytics process to develop distinctive risk insights.

Zurich acquired RCIS, the second largest U.S. crop insurer with almost $2 billion in 2015 gross written premium in a deal that closed on March 31, 2016. The crop business is viewed as being largely uncorrelated with wider P&C market, which could be a helpful counterbalance. The firm plans to use predictive analytics to enhance performance within its expanded crop insurance division.

Insurance Industry Trends

Key insurance industry trends highlighted by Zurich in recent investor presentations include the following:

  • Management information and execution is critical
  • Rate environment is challenging, but manageable
  • Scale matters – largest carriers able to invest in information-based advantage (e.g. predictive analytics, automation of knowledge work)
  • Industrialization of processes differentiate competitors
  • Individual judgment not sufficient: institutional insight with underwriter expertise will win
  • Continued “barbelling” of distribution channels to large and small

Impact on Zurich Panel Counsel Program

Current members of the Zurich panel counsel program, and those who aspire to join its ranks, will want to be aware of the strategic initiatives within the carrier. Zurich is in the process of realigning units, cutting costs, cutting unproductive clients, and increasing its use of technology. Proactive insurance defense law firms might want to demonstrate how they can contribute to these reorganizational efforts.

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Contact Margaret Grisdela at 561-266-1030 or via email. Connect with Margaret Grisdela on LinkedIn.