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Thursday, 18th April 2024 |
| Joint ventures hold key to Royal & Sun Alliance’s future |
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| Changing an insurance provider into a multi financial service provider is the aim of Royal and Sun Alliances bosses Bob Mendelsohn and Paul Donaldson. They spoke to Roisin Hogge on how they see the future of financial services and insurance companies in an increasingly globalised market. |
Its all about evolution at insurance company Royal & Sun Alliance. According to Bob Mendelsohn, group chief executive, the company is reinventing itself - and already sees itself as a multi financial services provider.
The almost 300 year old company is loosing its ‘insurance’ tag because Mendelsohn sees the impact of globalisation and consolidation producing a two tier insurance industry - those which are truly global and those that are specific niche players. No prizes for guessing where RSA wants to be.
As Mendelsohn sees it ‘Some significant trends that are going to impact the future of the global insurance industry. Some of them trip off the tongue like globalisation, consolidation, but what does that actually mean when you get down to real world operations? There are two trends that I think are going to shape how the financial services industry evolves. The first of those is about the knowledge level of our customer base.’
‘The electronic world and the ability to transfer knowledge from one place to another puts the customer in a very different position with respect to financial services than they traditionally were. We are dealing today with a much more knowledgeable customer. A customer who has access to information, that in the past they simply didn’t have the time never mind the expertise to acquire, so we’re seeing the ability of the customer to make more intelligent financial decisions.’ And Mendelsohn points to the ability of consumers to comparison-shop across borders in Europe thanks to the euro - all this putting pressure on financial services providers to create value offerings.
‘That in itself is going to segment the financial services industry into companies that can afford to make the technology investment and that have the financial strength, the corporate willingness to do it and then the corporate culture that will let their employees actually utilise it.’
Irish RSA head Paul Donaldson agrees. ‘Culture really is the key to a global company. You have to get your employees to believe that they are part of a global company when they are making a decision in any country.’
The ambition of the company is palpable. The RSA of the future wants to be the agenda setter - to be the one its competitors is always watching. The company writes insurance in about 130 countries with significant operations in 50 - so it is a big job to recreate the company’s systems and its culture to be more consumer focussed.
Integrating systems in order to get employees worldwide operating on the same level, talking to each other and sharing information is behind RSA’s huge technology spend over the last few years - a figure of Stg£150 million per year, so far. An example of the integration process is the fact that over 14 different e-mail systems had to be brought into one.
Mendelsohn said ‘We’ve spent hundreds of millions of pounds over the last number of years dramatically reshaping the technology base of RSA. If at the same time we haven’t dramatically changed the culture - just having the technology doesn’t necessarily mean that people will use it.’
The recent dot.com bubble bursting has been an advantage to RSA Mendelsohn says - allowing traditional companies to snap up the talent that had been attracted to startups. But he says don’t write off the internet and e-commerce just yet - particularly for financial services companies. He expects RSA to be interacting in some way with a substantial chunk of its customers in the years to come - however whether this chunk will be 20 per cent or 55 per cent remains to be seen as around the world customers are still reluctant to do complex financial transactions solely online.
But the advantages of that spend on technology will be seen over the next few years Mendelsohn believes it all goes back to creating a competitive edge and reducing costs.
‘The globalisation trend that I think is important isn’t about companies trading internationally, it is about what companies have the ability to develop things in one part of the world and implement them in another and it generate knowledge in one part of the world and share it in another.’
The group is conscious of its 300th anniversary coming up on 2010 and is making plans for how the company worldwide will look then.
According to Mendelsohn ‘We’re not going to be the biggest and we don’t want to be the biggest - we think we will be selling a full array of financial services products to our customers. We do not think that we will be manufacturing all of those products - we are seeing joint venture models really developing.’
He uses India as an example of how this model works. RSA was the first company to be licensed in India to sell non life products after privatisation of the insurance industry. From that he says RSA has done 5 year joint venture deals with major financial institutions life Citibank, ABN AMRO and American Express. The partnership agreements mean that the banks can sell the insurance products to the customers and that RSA can sell the banking services to its insurance customers.
‘We call that corporate partnership’
According to Donaldson ‘the corporate partnership market in Ireland is an area where we’ve established ourselves and where we want to continue to increase our penetration. We see ourselves as providing long term partnerships with mutual business objectives and an understanding of each others role within that partnership.’
‘Looking out to ten years - we will be selling a full array of financial services products - and other people will be selling our products as well.’ |
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| Article appeared in the July 2001 issue.
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