AXA to insure itself against risks to reputation ----- Financial Times - 29/05/2008

Financial Times - 05/29/08. What are the world's most despised professions? Most people would probably say politics, journalism, banking and the legal profession - not necessarily in that order. But Henri de Castries, the AXA chief executive, believes his own insurance business probably also ranks pretty high on this popular black list. So much so that he has decided to launch a major crusade to try to revive what he readily admits is the dismal image of the insurance industry.

The head of the giant French insurer is quite candid. "When people take out an insurance policy they often feel like a tax payer paying for a compulsory service. And when they make a claim for compensation they tend to feel they are being treated as crooks by the insurance company," he says. This is not only bad for the general image of the industry but is also becoming a significant obstacle to his company's continuing progress and development.

Axa has set itself ambitious growth targets of doubling organic sales by 2012 and seeing earnings per share increase by an average of 15 per cent a year. This can only be achieved, Mr de Castries argues, if Axa increases its share of all the different markets it operates in not only by winning new customers but also retaining existing ones. To do this, the company - after extensive research and consulting around two-thirds of its 120,000 worldwide workforce - has decided it must adopt a new approach to the way it sells and manages the insurance and other financial products that are its bread and butter.

"What our research has shown is that clients very often do not realise what they have bought because they were not given sufficiently clear and careful explanations. This also applies to investment products and the result is that many end up disappointed when these do not deliver what they had expected," he explains. This has given the insurance sector an image of "making promises but not keeping them".

How do you change this image and reinforce customer confidence and loyalty? Mr de Castries answer is to give his customers concrete commitments to deflate the general cynicism that surrounds the industry. The prescription is simple. The company and its employees must be available, attentive and reliable. Unfortunately, Mr de Castries acknowledges, customers often feel employees are not always available, do not really listen to them and are unreliable. This has to change. But Axa intends to go one step further in its new customer-friendly approach by making specific commitments to show it is putting its money where its mouth is. Take car insurance. If a customer has taken out accident or breakdown insurance that includes the company providing a replacement vehicle, Axa will now pay the insured a certain sum of money if the replacement car is not delivered in an hour. Good long-standing customers will also no longer forfeit their no claims bonus in the event of an accident. Axa also wants to make life less difficult for young drivers. For example, for those going out on the town on Saturday nights, it is even proposing to pay for a taxi to take them home if they have drunk too much.

Is this an advertising gimmick? Absolutely not, insists Mr de Castries, who considers his latest campaign as crucial to his company's future and its ability to outperform its competitors. He is also the first to acknowledge the risks. "If we do not deliver all the good things we are now promising, this exercise will backfire and come to haunt us."

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