In conversation with Kathleen Savio, two themes often emerge: sustainability and building resilience.
For Zurich North America, those practices can take on a variety of forms, from its risk selection and business goals in 2020 to its environmentally focussed business practices, both public-facing and internal.
“When we think about sustainability at Zurich, we’re defining that as doing things today that will help safeguard tomorrow,” says Savio. Where many insurance-industry executives may be quick to make such statements, however, the insurer – and its North America CEO – are truly walking the walk.
When considering Zurich North America and its goals, it’s helpful to first understand the current state of its business. In February, Zurich Insurance Group posted a 16% rise in business operating profit for full-year 2019 to $5.3bn, partly due to strong underwriting results within its Property & Casualty segment. Its North America operations were an important contributor to those results, delivering about 30% of the group’s 2019 business operating profit.
“We saw our underwriting results improve through strong rate achievement over the loss trends that we’re seeing, and that occurred in multiple lines,” Savio notes. “Our overall rate increase was more than 7%, which for us was more than double what we saw in 2018.”
Savio says its North America strategic initiatives for 2020 align with Zurich’s overall strategy, which she defines as being “customer-led.”
“That means not only talking about customers but really talking with customers, listening, and then acting on that feedback. Finding ways to be simpler and more effective, driving innovation, enhancing our customer experience,” she explains. “That’s going to come in multiple ways, but at its centre it involves taking client feedback and translating that into new products, services and solutions.”
Another key area in which Zurich is focussed is strengthening its capabilities and presence among middle market clients and prospects. “That is one of our top priorities,” says Savio.
“What middle market customers really want and need is a packaged solution, and we want to make sure that we bring that to them,” she continues. “What we’re also looking to do as part of that value proposition is to bring products and solutions together in an approach we refer to as ‘one storefront,’ so that the middle market can have a single place of contact. It’s about a broad and deep value proposition for targeted middle market customers.”
Confronting climate change
Environmental responsibility has become an integral part of the conversation around both the greater group’s and Zurich’s North American operations. In 2019 Zurich was the first insurance company to commit to the UN Global Compact Business Ambition for 1.5°C Pledge, and has also pledged to use 100% renewable power in all of its global operations by 2022.
“There’s no way to get around the fact that severe weather events are occurring with greater frequency and more severity,” she says, citing the findings of the 15th edition of the World Economic Forum’s Global Risks Report, produced in collaboration with Zurich Insurance Group and Marsh & McLennan. “Failure of climate change mitigation and adaptation” ranked the No. 1 risk by impact and No. 2 by likelihood in a global survey of decision-makers from the public sector, the private sector, governments and academia.
The near-term impacts of climate change, the report states, “add up to a planetary emergency that will include loss of life, social and geopolitical tensions and negative economic impacts.”
“In terms of climate risk overall, I would say that we’d be using the phrase ‘all in,’” she continues, adding that Zurich North America is making climate change and sustainability a top priority “as we work purposefully in what we do to further protect our climate for future generations.”
Savio points out that Zurich recently updated its position on carbon-intensive fossil fuels. “There are several components there,” she says. “First, we were the world’s first insurer to no longer underwrite or invest in companies that generate more than 30% of their revenue from mining thermal coal or oil shale or from extracting oil from oil sands. Similarly, we will not underwrite or invest in companies that generate more than 30% of their electricity from coal or oil shale.
“That’s a bold position and we know that, but we think it’s really important to be in line with the principles that we stand for in terms of sustainability,” she adds.
In practical terms, that translates into Zurich working with its clients to help them transition over a two-year period. “If they can do that, we will continue to insure them,” says Savio. “We also offer them climate risk advisory services; we want to do all we can to enable those customers to make the transition. But we will stand by that principle, if after that two-year period they cannot.”
Zurich’s high environmental standards are likewise reinforced internally: the insurer has eliminated all single-use plastics in its operations. At a Zurich office, you will find no plastic water bottles, no plastic cups, no straws, no plastic silverware in the cafeteria, no plastic clamshell containers for a salad eaten at an employee’s desk, Savio says. “All of those things are completely eliminated. It’s a huge change, but it’s a really important one.”
The carrier’s ecologically minded efforts also include reducing its paper use by 80%, which might sound impossible for an insurer but it has been company policy for more than a year. Savio admits she had to adjust to the change, but knows it has paid dividends from a corporate-responsibility standpoint.
“Personally, I was a paper-intensive person,” she recalls, but transitioned to having no paper in meetings or print-outs to read and learned to take down and store all her notes digitally. “You find that once you start operating that way, though, it’s actually quite freeing not to have to carry paper files around. It does take a while to get used to changing those behaviours, but if I can do it, anyone can.
“I’ll tell you a story,” she relates. “I sit on another board, and it happened that the conversation was very focussed on sustainability. It was my first time participating live in the board meeting. When I arrived, I saw people handing out all of the materials, putting papers around the table, there were coffee cups, plastic cups for soda. And it was the first time it really struck me that, I haven’t seen this at a meeting in a year. But you can imagine what a difference it would start to make if every company in the U.S. began to operate without paper and plastic. For Zurich, it’s a global commitment.” Even when Zurich employees host a meeting at a hotel or a conference, for example, the same standards are applied.
“It’s a mindset change. It’s a behavioural change,” she adds. “But when you provide your people with the tools they need to be able to live up to that commitment, you find a lot of ancillary benefits as well, to say nothing of what it can do for the environment and sustainability."
Wildfire resiliency in action
Zurich recently collaborated with DuPont and the nonprofit ISET-International to publish “California Fires: Building Resilience from the Ashes” (Zurichna.com/CalWildfires), which suggests practical actions that individuals, businesses and communities can take to bolster resilience in fire-prone areas of California and elsewhere.
“One of the things that we do is make sure that we’re building and then sharing risk knowledge,” says Savio. One of the ways in which data and insights are gleaned, she adds, is a post-event review capability, or PERC. Zurich North America has performed 16 to date, including post-disaster analysis of events such as 2017’s Hurricane Harvey in Houston and Louisiana and the 2017 and 2018 California wildfires.
“Every single time we do one of these PERCs, we’re able to build upon previous learnings. Out of that, we take the learnings and the insights and help our customers manage climate-related risks going forward,” she says. “Wildfire is a complicated issue. What a lot of people in wildfire-prone areas just don’t realise is that residents, individuals, can play a very real role in building resilience in their own communities, on their own properties.”
The report offers practical, cost-effective ways for individuals in wildfire urban interface areas to take action. “For example, you can enclose the eaves on a building, or actually build with enclosed eaves, which actually doesn’t cost that much more. You can remove all the brush. Remove cedar chips or dry mulch landscaping, which creates a defensible space around the building.”
Savio points out that Zurich North America is relatively insulated from the wildfire losses in California, as its business mix is skewed more toward being a commercial insurance provider. But that doesn’t make the learning process around wildfire prevention any less critical for the organisation.
“The fires currently haven’t impacted our business, but I think if the actions aren’t taken and you ask me this question later, my answer could really be quite different in the future.
“What we’ve found in our research is that for every dollar that you invest in those fire hazard mitigation measures, you can actually save $3 to $4 in the future loss cost. It’s easy math to see that investing up front is really the way to go. So we’re trying to work with communities and policymakers to make sure we’re placing more emphasis on risk-reduction components, preparedness and resilience up front so that the costs of recovery or rebuilding can be greatly reduced.”
‘The future of work’
Zurich’s forward thinking also applies to what Savio refers to as “the future of work.” In January, Zurich North America was one of 58 companies in Illinois named LGBTQ-friendly by the Human Rights Campaign. While the insurer offers transgender inclusive benefits for employees and their dependents, Savio believes that isn’t the only reason why the company made that list.
“It’s really nice to be recognised on a subject that’s as important as this,” she says. “We want Zurich to be a place that lets people be themselves. We want our people to feel heard, to feel value for the unique perspectives that they bring.”
When soliciting employee feedback, one topic that management heard loud and clear from its people was “the importance of caring for their family, no matter how you form your family,” says Savio. The company listened to that feedback, took a step back, and expanded its paid family leave policy.
“When you welcome a new child to your family, whether that’s through birth, through adoption, through foster care, either parent can take up to 12 weeks of paid parental leave at 100% of their salary,” she says. “That really came from listening to them, and learning what mattered.”
Zurich’s leaders also heard from employees about the need to care for family members with serious health conditions. Now, she says, “people can take up to two weeks of paid leave at 100% of their salary – and you don’t have to take that all at once. It gives people a lot of flexibility to make things work for their family, whether it’s balancing with their partner’s leave time or perhaps with siblings if you’re all trying to care for a parent.
“These are some of the policies that really help our people,” she adds. “They are examples of listening, and we think it’s part of the reason that we do get recognised for things like being LGBTQ-friendly.
“Embedding diversity & inclusion into how we do business is vital for so many different reasons, not the least of which is I believe diversity in all of its forms gives us a competitive advantage,” says Savio. “It improves the outcomes that we deliver. It drives innovation, and at the end of the day it’s helping us better serve our customers.”
Up next: Insurance Apprenticeship USA
Four years ago, Zurich North America launched its professional apprenticeship programme with the goal of attracting fresh, diverse talent to the insurance industry. It became the first insurance apprenticeship programme to be certified by the Department of Labor, and the insurer became a founding member of the Chicago Apprentice Network.
In the programme’s fifth year, Zurich is on track to exceed its goal of hiring 100 apprentices by the end of 2020 – and CEO Kathleen Savio sparked an industrywide expansion of apprenticeship that the American Property Casualty Insurance Association (APCIA) is poised to launch: Insurance Apprenticeship USA. Savio believes this new initiative will have an impact beyond its own ranks.
Late last year, Savio shared Zurich’s apprentice model with the APCIA with the vision of creating a national platform for insurance industry apprenticeship. Now the APCIA is launching Insurance Apprenticeship USA this year with Zurich as the programme’s founding business partner. IAUSA ambassador companies include Zurich, The Hartford and Aon, all of which were early adopters of apprenticeship.
“It’s a really important topic and a way to bring more people into our industry from diverse backgrounds, diverse ways of thinking, attracting people in a different kind of way with real opportunity that I think can be game-changing,” adds Savio. “It has been for Zurich, and it can be for our entire industry.”
This feature was originally published in Reactions.
