Structural changes revealed at Zurich Insurance Group late last week are nothing radical, according to the CEO, who says the simple intent is to organize the company “around the customer” and ease its path to customer innovation.

Delivering on his promise to simplify a “famously” complex operational structure, Chief Executive Officer Mario Greco addressed members of the media on Thursday, explaining details of a move to regional business leadership and the appointment of Kristof Terryn as the overall group’s first chief operating officer.

Greco, the former CEO of Italy’s Assicurazioni Generali SpA, took over at the helm of Zurich in March.

Terryn had been CEO of Zurich’s General Insurance division since Oct. 1, after previously serving as CEO of Zurich’s Global Life unit, and also having held prior COO roles for Zurich’s Global Corporate and General Insurance division.

But divisional distinctions like General Insurance and Global Life are fading away as Greco, who has also served as CEO of Zurich’s General Insurance and Global Life divisions during his career, institutes a plan to reorganize by region rather than product category.

Although Zurich’s written announcement didn’t indicate this specifically, Greco, during the media call, also suggested that Zurich Global Corporate and Zurich’s General Insurance divisions would be going to market in the future as a unified commercial business.

While the new CEO described the Group COO appointment as an “innovative solution for the insurance industry,” when he offered a characterization of the structural changes, Greco said, “I would struggle to see this as a radical change.”

“This company is in good shape and does not require radical change that will transform it or dramatically change the balance sheet or the capital position.”

That doesn’t mean there is nothing more to happen at Zurich, however.

Greco had promised during a first-quarter earnings conference call last month, and again last week, that full details of Zurich’s go-forward strategic plan will be announced during an Investor Day scheduled for Nov 17.

A media representative wondered about the need for the Investor Day update. “What will you be telling us about in November,” he probed. “What is left?”

“Do you want to have a preview of the presentation in November now?” said Greco facetiously. “Come on. This is just the organizational structure. Would you think that we would come to November with just an organizational presentation?

“Everything else has to be set. Financial targets, objectives, the strategy—[in other words,] what is the company aiming to achieve—[and] market focus. All these things are completely neutral for these organizational changes,” Greco said, noting that financial targets and strategic objectives “are the things that will shape the future of the company much more than a simplified structure.”

Still, the structural changes “were important to make because it gives a signal… that we’re focusing on customer service [and] customer innovation,” he said. “We’re focusing on the markets and we are simplifying and reducing the famously complicated structure of Zurich insurance. But there is much more to be developed internally and communicated….”

Focus on Customers, Not Costs

Greco said the decisions announced on Thursday were “a response to the changed dynamics of the industry and the turning point at which Zurich finds itself in.”

Giving an overview of the structural changes, he said: “We are combining…life and nonlife, and moving to a regional structure with the CEOs of each region reporting directly to me. Each country will report up to the region. The structure is so simple and will have a clear line of sight to the people looking after our customers.”

Describing the changes from the perspective of Zurich’s customers, Greco said each customer will have “one interface with the firm, engaging with an expert who truly understands their circumstances… can deploy the full range of Zurich products and services” to meet their risk management needs.

“The new structure will promote innovation and will meet the evolving expectations of customers, employees, and shareholders and the broader society in which Zurich operates.”

He continued by noting that the “prospects for the insurance sector are strong in a world of proliferating risks,” noting, however, that Zurich has been challenged to “adapt to remain effective in helping customers manage those risks.

Media representatives asked for more specifics about cost savings related to the structural changes and about whether they will lead to more cuts in management level jobs or staffing changes. In particular, referring to a February statement from Zurich’s chairman indicating that 8,000 positions across Zurich could be impacted by the use of “new technology, lean processes and the offshoring and near shoring of some activities” by the end of 2018, they wanted to know if the structural reorganization changed that picture.

Greco responded to several questions along these lines in a similar vein, stressing the cost savings and job reductions were not the factors that drove the organizational changes.

“We did not think about this for cost reduction reasons…. We started from the way we serve the customers, from the capacity that we have to be quick and innovative with the customers, and we thought that unifying the customer interfaces and simplifying customer ownership within the countries, and clarifying accountability will help us compete in a better way in the market in reaching the customers better.

“Then, for sure, …this has an impact on our cost basis. There will be redundancies for sure. But we need to work on that. We need to discuss it. We need to prepare and make choices, and then we will be able to quantify it,” he said, noting that Zurich cannot give any indication of cost savings until September.

Between July 1 and Sept. 1, Greco said the organization of countries and region will be studied. With second-level managers set to be chosen and actively working on their responsibilities by Sept. 1, the impact of organizational changes on costs will be clearer, he said.

Continuing, he tackled the subject of workforce reductions head on.

“I hear too often talk of job cuts and layoffs…In reality, this [re]organization gives us an enormous benefit in terms of unifying required investments, he said, explaining that with too many silos and disconnected units in the countries and regions in the past, Zurich often repeated investments in operations unnecessarily.

“I expect significant benefits of this new structure from unified choices on investments to be taken and this is a much bigger number than anything related to labor costs and workforce,” Greco said.

No More Internal Competition

While Zurich’s written media statement and Greco’s comments to reporters referred to the combination of life and nonlife businesses within the regions under the new structure, Greco confirmed a media representative’s speculation that the unification of life and nonlife business is primarily happening on the retail side, not for corporate and commercial insurance business. “Corporate and commercial are sold through different distribution channels and so integrating the offer doesn’t help that much,” Greco said.

Providing from further clarification later in the call, he noted that Zurich does intend “to unify the targets, KPIs, the incentives and the Zurich priorities in every country including Global Corporate.” This means “we will unify the priorities on commercial business and we will have the Global Corporate colleagues going in a coordinated way down to the commercial business.

“So Global Corporate will grow and develop further. We’ll do it in a coordinated way inside the countries, where before, on the commercial business, we had Global Corporate and General Insurance units acting independently. This is not going to happen anymore.

“People who have the best skills for that will grow into the commercial business,” he said, noting the benefits of unifying the structure and simplifying interactions with customers.

Earlier in the call, Greco noted that the existing “fragmented structure,” reaching customers through too many different touchpoints, didn’t just add to costs; it also complicated relationships with customers, sometimes to the point where different units within Zurich ended up competing against each other.

“Our strong belief is that by simplifying the relationship, by giving customers ownership and clear accountability, our market position could become better…

…This also has benefits on the cost side. I am aware of the high cost position of Zurich [and] these organizational changes will help the cost position of Zurich

But we did not make this decision…because of cost targets…

My focus is to get Zurich back to be competitive in the market, to be leading product and services innovation…

It’s also about breaking silos…Zurich has a lot of organizational silos which work independently of each other and sometimes even competing,” he said, noting that the reorganization means that underwriters cannot compete internally.

“There is a big market out there and we want to compete in the big market. We don’t want to compete inside the house,” he said.

Redefining COO

Greco, when asked why he considered Terryn’s appointment to be an innovative step, noted that the combination of responsibilities at Zurich that have been assigned to the new role signal a departure from the usual delineation of COO duties in insurance companies.

While industrial firms give COOs responsibilities over fundamental business functions, in insurance, it’s been more common to have one person in charge of IT and operations and someone else overseeing underwriting, claims and pricing. This separation “creates business conflict and doesn’t help push [fast] business innovation,” Greco said.

“The industry needs a lot of business transformation. Insurance is an old industry. Today with technology services and the changed customers, there are a lot of things that need to be done, and they need to be done very quickly,” he said, suggesting that combining IT, operations and fundamental insurance business activities under one person’s leadership will give Zurich a leg up—”a competitive advantage on innovating and transforming the business in the way the market needs this to be done.”

With Terryn taking the COO role, which encompasses oversight of IT, operations and also core insurance business functions, Robert Dickie, chief operations and technology officer, will be stepping down from a position he has held since March 2014.

Good-bye Consultants?

Both Terryn and Greco (and other members of the executive team) are former McKinsey consultants. But when asked if the structural changes and COO appointment could free Zurich from a perceived overdependence on outside consultants, Greco said it was a fair conclusion.

“We want to work with our knowledge and capacity. We know this industry much better than consultants or anybody else.

“We have lots of ideas, lots of skills. We don’t need anybody to tell us what to do…We also want to protect our distinctive knowledge and ideas,” he said.

The Executive Slate

In addition to announcing the structural changes, Zurich said that the Zurich Executive Committee, effective July 1, 2016, will be formed of the following members:

• Mario Greco, Group CEO
• Urban Angehrn, Chief Investment Officer
• Jeff Dailey, CEO Farmers
• Mike Foley, CEO North America
• George Quinn, Chief Financial Officer
• Cecilia Reyes, Chief Risk Officer
• Gary Shaughnessy, CEO EMEA (Europe, Middle East and Africa)
• Kristof Terryn, Chief Operating Officer