Don’t be complacent, Hester tells London market

“If it didn’t exist, would we invent it?” Stephen Hester, CEO of RSA asked his audience at the Airmic Annual Lecture last month. “This challenge can’t be taken for granted and has to be answered every day.”

Hester, who took the helm of the insurer in February 2014, said that the UK and London insurance market needs to get better all the time. Geography means less and less in the modern world, he argued. “Not a single one of these things [that the London market offers] is impossible to replicate elsewhere over time.”

Speaking in the Willis Building to an audience of Airmic members and partners, Hester said that in a world that “is not running out of risks”, insurance was becoming more important and is as essential for the modern world as it has ever been.  The industry is moving forward and modernising, he said. But he added: “We need to have business models that respond to a different prioritisation of issues.”  For example, how effective is insurance? If you take out insurance, does it do what you expect it to do? “Trust, reliability and reputation are particularly important in an area like insurance.”

Hester, the former CEO of the Royal Bank of Scotland, took charge at RSA after a difficult year in which accounting problems surfaced in its Irish operations leading to high-profile executive departures, including the group CEO. Of these troubles, he said that the insurer spread itself too thin: "RSA made some common mistakes. That's why we were not realising our potential. That's why I showed up in the first place."

He blamed the "hunt for growth” and said that in the process of looking for exciting new things the company neglected its foundations. "That's a dangerous thing to do because your foundations become weaker when you’re not looking."

His strategy for turning the company around is simple, he said:  “To only compete where we can win and then to win where we compete”. That, he believes, is the key to success for all businesses in mature industries.

The RSA of the future, he added, won’t look vastly different, “just better” and will make sure “that we are damn good at – and better than we are now – at serving your needs in the UK and the needs you have internationally.”

Talking about the business environment more generally, Hester said that we are living in volatile times. He noted challenges including low growth, terrorism, the disruptive impact of technology and growing inequality.

“For you [our customers] serving your own companies well demands more and more skill and judgement...And the price of you doing your job poorly or failing to have the right influence and leverage within your own companies is escalating…I certainly salute what you all do and how you are doing it better every year.” 

Stephen Hester

Annual Lecture 2015