Zurich Chairman Liès: Digitalization is destruction and opportunity

It's been quite an intensive and very interesting year. A successful year, too. A very important step forward in the strategy of Zurich. And for me, the first year of experience as chairman of the board compared to my previous experience as CEO. Nice combination of successful 12 months.

Probably establishing a good relationship with the top management of the company, getting to know my peers on the board, and getting very quickly to understand the difference between a primary insurance company and a reinsurance company. It's the same industry. It's definitely another approach to the risk.

I think the added value of the insurance industry to the sustainability of this planet is something that is poorly understood. It is probably also our fault. We are lacking sometimes the courage of the personality that we should have. We tend to be part of the financial services aligned to the banks when the banks are very popular, disaligned when they are not popular. And I do deeply believe that the insurance industry deserves something more.

That's what I've intended to do also partly at my previous insurance company, and that's what we intend to do all together in Zurich.

I think we should first understand the clients better and not fall in love only with our products. It's an industry in which we have a tendency to invent a lot of products, not always connecting these products to the needs of our clients. We need to know our customers. We need to know what are their fears, what do they want to build in the future, and then we can ensure the sustainability task that we have as an industry.

Yes, but probably because we developed products a little bit in disconnection from client needs. Once you understand the client needs, or more than their needs, their aspiration, you can establish a program and product which fits to their aspiration. And that's something in which the insurance industry has still quite a lot to learn, and I'm very happy to see that the enthusiasm of Zurich in that respect is quite intense.

From a company which was mainly head office driven, we moved to a company with a lot of knowledge of the operating unit at the front, because you cannot pretend that you can understand client needs if you don't have, especially as a world company where each country, each region is different, people who understand the client on the spot. So it was a kind of rebalance between a strong headquarter and local representation which faces the clients. And that has been one of the key pieces of the reorganization which actually did happen before I joined. The key element being that you need also to change management because it's another view of the profile you want to give to the company. It's not something uniquely centrally driven. It's something which captures information on the spot where you want to serve the client and then from this information, you drive your strategy in order to serve them better, and better, and better.

You hear about them. You hear what they want. You let them judge you. You let them tell you the way in which they feel they have been understood by you. You introduce to the top management remuneration parameters which are depending on the way in which they deal with their clients, on the satisfaction of the clients, not only on the financial dimension. And that's a point in which definitely slowly but surely you drive the company to get excited about what they can deliver to their clients. That's something which has been initiated before my time, but it's going very well and the last 12 months I've seen a lot of progress.

I would say that we have the courage to say that one of the key challenges for an insurance company is precisely to become customer driven. And that's the point in which having the courage to liaise remuneration of top people to this element instead of just judging them on the financial result is something which gives us, in my view, a certain advantage.

Digitalization will definitely be the opportunity for many people, be it individual or corporation, to know their own risk better. So it's probably fair to say that digitalization is a challenge to the insurance industry because it is partly destroying a certain level of solidarity, which is the base of insurance. But it helps you to understand much better the risk that people have and that they want to cover. I do believe that digitalization is at the same time a challenge for the insurance industry, but a unique opportunity to move from a pure financial exchange of premiums and claim payment to a better understanding of the risk that people are facing and maybe helping them avoid the risk, helping them to face the financial consequence if they happen, but also going along with them in order to avoid some of the risk which are their concern. So I do believe digitalization is at the same time partly a destruction of the solidarity element that the insurance industry has had in the past, but is introducing a knowledge of the individual risk on which we should be able to jump in order to reinvent partly the insurance industry. We should intervene with our clients not only when there is a claim. We should intervene with them when they express their concerns.

I do believe definitively that digitalization will help us also to understand much better the risk that exist in this type of corporation. One of the key elements is also the ability to have access to data corresponding to failure, to difficulty, which enables us to define the price on which we can help corporations or individuals cover their risk. It's evident that people will not insure in the future their car. They would like to insure their mobility. They would like to move from a situation where they buy a car and need to acquire an insurance policy, to something where whatever I do when I move, I would like to be insured. And we will move into this direction. One of the key directions we've taken already is in travel insurance. Travel insurance is a very interesting part of the industry in which we are following more or less all our clients mile by mile, knowing where they are, what happened to them, and where we can intervene.

If we make of this information something which is positive — and we had a few examples in case of difficulties happening in Europe because of a bombing in Barcelona, for example, in which we had a few clients on which we could immediately intervene very quickly asking them if they needed support — that's valuable. If it's only in order to spy on them, that's of no interest. But if you make of this information something which is an added value to serve them, travel insurance is an excellent way of giving a new flavor to clients about what insurance can bring to them.

Yeah, but on the other hand, if you use what you know about health, there is definitely the disadvantage of this appearance of a certain level of solidarity and more individualization. But that forces us probably to instead of simply expecting that something bad happens to somebody, helping him or her to avoid this something bad. And that's also in this direction in which I believe that health insurance or the support of well-being can definitely be achieved. That's probably one of the main challenges of the industry — to move from simply observing, pricing, paying to helping to avoid risk that people want to avoid, be it corporation, be it individual.

When you do not make too many bets on promising to your client a certain return — which is not the case of Zurich, we do not have this type of product — having an almost zero yield environment is in a way a certain guarantee of technicality. You need to have enough premium to pay your claim. I've seen in my semi-long career quite a lot of people counting on the yield environment to compensate the deficit between premium and claims. At least in this case, you do not have this potential deficit. You need to make sure that the premiums are covering the claims that you will have to pay. So it's not only negative, it gives probably to technical experience and technical discipline a real profile.

Yeah, but it's definitely another industry. It's an industry which is dealing with risk.

Let's use it. Let's use it in order to help them also to avoid the risk that they want to avoid and let's make sure that we understand them much better. And that's one of the key elements on which I believe that the other challenge of the insurance industry is also to penetrate the world a little bit more intensively. It's quite impressive to see that insurance can bring quite a lot even to public sectors. Even states can be insured. When you see what happened in Italy in the earthquake, you didn't have a lot of support from insurance in an event which is a typical event which should be insured. So one of the key challenges is also penetration. Be there when you're needed.

Definitely, and it's another industry. I insist it's another industry. It's dealing with money. It's dealing with risk, and I know banks are also dealing with risk, but I do believe that the key values are different.

A fantastic spot to be able to from this country be active internationally. The enormous advantage of Switzerland is that because of its size, it never had the schizophrenia or the paranoia between being protectionist or being global. It had only the choice of being global, and for the last more than one century, it educated its people in order to be prepared to be global. And you cannot imagine the time we spare by being in this country in that respect.

Thank you.

Well, it's simply also the opportunity to give to women the possibility of making career within the company, and I'm speaking very freely about that because I'm not responsible for that. I may be responsible partly of the mix at the board level, but the executive board is definitely something which has been done by my predecessors and the corresponding CEO. I do believe probably in the risk industry a deep interest in having diverse opinion coming to the table when you want to take a decision. It's not only gender — can be age difference. We have probably in our personnel something like 20% of baby boomers and then 40% X and Y generation. And that's something which is extremely important if you want to be near to your client. You need to have a good representation of the people that you are supposed to insure at any decision level.

Of course. I don't think that we would achieve anything if it would be only recruiting at the board level or executive board level women that wouldn't have known a little bit of the company history. I think it's quite important that there are many levels within the company in which diversity is playing a role. And I insist gender is not the only diversity. You need geographical diversity. You need also age diversity. But you need also, and I can speak by experience, when you have a diverse board you can play it by simply the arithmetic. We had 45% women in our board. It doesn't bring you very far if you do not make sure, and that's the board chairman's role, that the opinions are also brought to the table and that they can be discussed. So diversity needs to be also played — women sometimes have a tendency to be very discreet at the beginning, not all of them. And you need to make sure that it doesn't last too long because their added value is enormous.

I'm quite anti-quotas because it's always an opportunity for people who are on the other side to pretend that people who join an organization because of quota are simply quota hires. So I do rather believe in the pressure by investors or employees or clients. We simply do not believe that a company is responding to what should be the situation of this nice planet — instead of establishing quotas. And what is nice when you speak about sustainability, it used to be for my generation probably something which was resulting from the pressure of my kids. Now it is slowly coming from the clients, not too slowly coming from the investors, coming from the employees. I prefer these kind of pressures than pressure which is established by the rules.

Well, first it comes naturally. If you're an international company and you're present right and left, you need to be sure that you have a human resource department which is making sure also that the dynamic that you have in some places is not only used in that place. And then you need also to make sure that when there are replacements, when there is recruitment, there is always a certain mix in the number of people which are presented for the final choice. There's no guarantee that the final choice will be the most diversified. You may sometimes reach the situation that a good old male Swiss will be the one for the problem you are trying to solve in Malaysia, but you need to make sure that in the range of the people you have to choose from, you do not have only good old white males from Switzerland. And that's something which is not too complicated in an international company.

It's not totally a competitor, it was a client. That's probably also something which did motivate me because I knew the client. I knew the company. We are neighbors. The big difference is that a reinsurance company doesn't spend too much time collecting the risk. They have insurance companies as their client, so they receive the risk by hundreds of millions and they need to make sure that there is a good adjustment between risk, capital, and the risk that they take. And we've worked quite a lot also with the capital market in securitization projects. So we brought a little bit of understanding of insurance risk to the capital market. In an insurance company, you need to understand much better what is happening on the front. You need to understand much better at which speed the society is evolving and that's something that I appreciate. I must honestly say with my character, I would have had probably some difficulty to be the chairman of a company on which I have been the CEO. So the fact that I spent some of the last 12 months learning a little bit more about the industry as such and some of the details that I didn't know like dealing with a network of agents has been extremely important for me to move from an active executive CEO role to a role which is less executive, which is the one of the chairman.

I don't know. We organized ourselves in the past and as soon as you give to operative units a certain level of independence and you do not interfere too often about the way in which they act, you can be seen as a kind of born chairman because you let them some freedom. The problem is that the freedom that you let them as a CEO and the freedom that you let to people as a board member is not exactly the same. But I can understand why this nice statement has been made.

Well, it simply confirms being in touch with the people. You need to be in touch with the people who are in touch with the people. In Switzerland, what is nice is that each second or third person you meet knows about Zurich. So it's probably in a dinner in which you would like to speak about art or football, if there is somebody on the side of the table which wants to speak about his insurance and the fact that he has been frustrated or has been very happy, you should probably be open to that because that's also an opportunity to learn what is happening.

No. Well, sometimes I mean, I wouldn't like to have all my social dinners spent discussing about insurance. But that's a fantastic opportunity in Switzerland to speak with people who are your clients.

Well, not only that. They are quite a lot. The AGMs are also quite a good opportunity to hear and feel the way in which the shareholders feel. But you know, insurance is there is a way in which we should be proud. We should be more proud of what is the additional value that we bring to society. What is interesting in a world in which sustainability starts to be definitely a key dimension — I'm not only speaking about climate change — if there is an industry which is defined by making sure that the world is sustainable, that's the insurance industry. And I strongly believe that there is a moment in which people will speak about their insurance industry in a more positive way than what they do now, in which it is still a little bit bureaucratic. If we can move to something which is much closer to their aspiration, we will have achieved what is my dream.

I'm happy with that salary, yeah, definitely.

It's an excellent question because sometimes people may judge that you are too patient maybe with the kind of salary if you compare with other peers. It is probably something which in my view — I would prefer, as for many other things, let people judge. And I will judge actually the way in which they feel that this salary fits with the added value that I bring or do not bring through the vote. In Switzerland, we have the big advantage of this kind of approach.

As an executive board member, yes, and it is as a board member. Probably the fact that we receive half of this compensation through shares is the nice connection to the market performance of the company. I do not think that there is a need of having something more. I speak about the board which is disconnected from the executive board. I'm not CEO and board chairman at the same time. That's quite different in the countries in which these two functions are merged, which in my view may be sometimes a little bit dangerous. So I like the governance approach of Switzerland in that respect.

I do believe that Switzerland can take advantage and is taking advantage of its position in matters of risk and education. In that respect, Switzerland can play a very important role and it's again an excellent base for a multinational company because there is something which is embedded in the Swiss mentality. I'm not Swiss as you know, I'm from Luxembourg. So in a way I should be much more European Union than Switzerland. There is something fantastic here: because of the size of the country, because of the lack of resources from the subsoil, the bet has been made for more than 100 years that education is the key way to position this country and to position its inhabitants worldwide. And it has been achieved. I think the world will lose time and energy, and I hope it will be only time and energy, in the next debate about should we be protectionist, should we be global. If there is something which did happen in the second part of the 20th century which was nice, this was this conviction that the majority of problems have to be solved globally. Seems that we are losing this approach. And I'm very happy to live in a country which is probably one of the countries in which they believe the most deeply in this approach. That's also one of the reasons why many international organizations are based here.

It's a fantastic company. It's a brilliant company. It's a company which has integrated, also because of the size of their own market, a lot of the digitalization approach in a very, very efficient way. Which brings them probably to a certain level of cost advantage. They have an internal market which is definitely a little bit bigger than the one that European companies have.

Of course we could learn from them. And it's not only because of the size of the internal market. They have an appetite. They started with the appetite on digitalization, this appetite on knowing what they can do, I would say probably 10 years ago, and we started 3 years ago at Zurich. So we have a certain delay and the Ping An energy is not only due to the size of the market. It's definitely due also to a brilliant leadership and a visionary leadership. And when you combine visionary leadership with the insurance industry, it can start to be very successful. That makes me very optimistic.

Thank you.