Twelve months into the global pandemic and despite a “roadmap to freedom” it is clear the impacts of Covid-19 are here to stay.
Some (re)insurance industry firms have already confirmed they are going to allow working from home on a permanent basis, most noticeably Aviva, which has also consolidated some of its physical office space.
Serious questions are now being posed to management boards throughout the industry. Is working from home a practical long-term solution? And if so, what about the considerable expense invested in physical offices?
Paymentshield, a Southport-based insurance administrator and distributor, has already gone the route of long-term working from home and the firm’s CEO Rob Evans says this made natural sense to their overall growth strategy.
“It was always in the offing for Paymentshield to reduce its office footprint, but with lockdown mandating homeworking and our lease poised for renewal, we had a prime opportunity to implement these plans on a more ambitious scale,” says Evans. “From a 33,000 sq ft office with meeting rooms, desks and a canteen, to a 11,000 sq. ft space with around half the occupancy, this has been neither a half-hearted effort nor a temporary cost-cutting exercise, but a strategic downsizing built to last.”
For Evans, this decision was not only practical but in line with the culture he is instilling at the firm.
“How we use and value office space is entirely different,” adds Evans, “Employees no longer see the office as just a workplace that they come to out of routine, but a collaborative space to work on projects as and when they need to.”
Difficult decisions
Many insurers have yet to make a firm decision about their long-term stance on working from home and the repercussions this would have on their overheads. It is becoming apparent that, until there is greater clarity over what the rest of 2021 and beyond could feasibly look like, more firms prefer to settle for flexible approaches.
Recent research commissioned by Duck Creek Technologies, an insurtech provider, revealed 71% of senior insurance executives would prefer a flexible approach to work. Starkly, only 2% of respondents said they wanted business to continue as usual with no change.
“Companies are going to reshuffle the pack,” says the firm’s managing director (Europe) Bart Patrick. “The speed of the reshuffle will depend on the nature and length of the current leases companies have. To my mind, it is unlikely that all leases will be renewed; however, it is likely that existing spaces designed as collaboration spaces will survive, and those which are administration offices will be either repurposed or disposed of.”
Some businesses may be reluctant to do away with their offices, usually the largest physical assets on a balance sheet. This is why Mel Newton, KPMG’s head of financial services people consulting, also expects hybrid patterns to emerge.
“Most organisations are set to adopt a hybrid arrangement and few have plans to ditch the office completely,” says Newton. “A hybrid approach allows organisations to become more agile while meeting the needs of workers who wish to continue working flexibly. This involves investing in the right digital tools for employees, while retaining but reorganising the office as a space to facilitate collaboration.”
The prospect of selling valuable physical properties may be difficult for some insurers to comprehend, but the financial benefits of this are clear. Working from home still has a price and many businesses have had to invest heavily in infrastructure that employees can use remotely.
“Once CFOs across the (re)insurance sector see the advantages to the P&L of continuing distributed working, this way of balancing home and office working will continue widely even when restrictions are eased,” says Patrick. “We all miss face-to-face networking, but the thought of going [to the office] every day is not only unnecessary, but also unappealing to many.”
Much of the City, especially EC3, is dominated by highly valuable office space owned by insurance companies. Justin Davies, head of EMEA at insurtech provider Xceedance, expects the traditional London office model to come under extreme pressure and extra capacity could cause shifts in tenant/landlord relationships.
“With significantly fewer (re)insurance firms returning completely to their offices, there will undoubtedly be plenty of unoccupied office space,” says Davies. “Tenants will be in a strong bargaining position and I’m sure when renewing contracts, many will be negotiating for longer rent-free periods, shorter lets, and other amended conditions.
“If landlords are not prepared to be flexible, they could find themselves with large swathes of empty office space. No one can be sure how this will play out, but life and work in the City of London won’t return to exactly the way it was before the pandemic.”
Returning to the office
However, there are still detractors of remote working, and working from home is synonymous with lockdown for many as a challenging period of isolation. Daniel Sharpe-Szunko, managing director of Chester-based health and life insurance specialist iamINSURED, found his employees struggled during the first lockdown and has since ensured they can work in the office.
“During the first lockdown, we had a few people working from home and they said it was quite difficult from a data protection perspective and the challenges of using their own devices,” says Sharpe-Szunko. “We mainly work with people with underlying medical conditions. We had people at home talking to customers about sensitive information, potentially with family in the background. That doesn’t work.”
The firm is fortunate to have a 2500 sq ft office to itself that allows employees to work in a socially distanced way, while still benefitting from face-to-face interaction.
“You have to be careful and considerate, and good communication is key for any business leaders considering returning to the office,” says Sharpe-Szunko.
He says that apart from the HR considerations there is “nothing to refer to, which makes it such a strange situation”. “You just have to make your own decisions as a business owner,” he adds.
“Mental health is a big issue and I would rather people be in that environment where it’s a bit healthier and normal,” Sharpe-Szunko continues. “If we can maintain our own safe bubble where people can keep their minds active then that’s a big deal for me.”
