7 – 13 February 2001

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One insurer, one global force

Aon Insurance, operating from over 100 countries, is, by far, one of the top two insurers in every country in which it operates – a mean feat by no means. One of the keys to attaining such a track record is to continually move, if not ahead, than in-line with today's technology and social limitations, Joe Cutajar, Aon Malta Managing Director, recently explained to David Lindsay…

What are the origins of Aon Malta and in what areas does it operate?
Aon Malta forms part of the Aon international network, which is one of the biggest insurance brokers in the world and is listed on the New York Stock Exchange.
Aon Malta is a wholly owned subsidiary of the Aon Corporation, as are most Aon offices around the world. Aon international employs some 50,000 employees in over 100 countries, from more than 150 offices.
Aon means one, or unity, in Gaelic. The word "one" as a unity signifies that, notwithstanding our size, we are a unified team for the benefit of our clients.
Aon has evolved, over a relatively short period of time, into what it is today via a series of large mergers.
Aon in Malta has had a presence, through previous names, since 1976. At the end of 1998, the Aon Corporation bought out all other shareholders, making the Malta branch a wholly owned subsidiary.
Additionally, in nearly every country that Aon operates, Malta included, we are either the biggest or the number two in that country. For example, in Europe we are number one in every country, with the exception of the ex-communist bloc and two other countries, in which we are number two.
Aon's operations consist predominantly of two areas - insurance broking and risk consulting. As insurance brokers, we represent and consult the client in the purchasing of insurance.
Brokers, as opposed to agents and insurance companies, are in a position to provide clients with the greatest spread of policy options by shopping around for the clients' specific needs, the real fulcrum of why you buy insurance, is that the broker helps you to settle claims. The real need of a broker is when you have a claim. The good thing is that brokers don't pay claims out of their own pocket, they get companies to pay claims for them.
Secondly, the broker is 100 per cent loyal to no one but the client. In fact, it is overwhelming to see the statistics, which demonstrate that the percentage of brokering activity 20 years ago constitutes hardly a fraction of brokers' activities today.
People are now appreciating that you simply have to have a broker to buy insurance because you have to have a shoulder to lean on when a claim comes up and someone to advise you on what you should and shouldn't buy.
The advantage with a broker is that, if you buy your insurance direct from any company or agent, you pay exactly the same amount as you would if you had to buy that policy from a broker. Brokers' commissions come either from the company or the agent.
Brokers are paid by the companies but they work for the client. Realistically, it might sound an anomaly, but in real life we actually do a great deal of administrative work for the companies and that's why they pay us. Then it's a question of us running our systems effectively enough to cover our costs by what we get from the insurance companies and not charge the client. It is very much a weight and balances act.
On the risk management side of operations, the fundamental feature is that we advise the client on how to handle his risk. Be it a motor vehicle that you're driving, be it a factory in which you're producing, there's always an element of risk behind anything. We advise the client on how to reduce exposure to risk.
While risk management is a separate mechanism from the insurance side of operations, it is still closely intertwined. After having gone through how risks can be controlled to the minimum, there's always going to be an element – be it large or small – that can't be reduced, transferred or eliminated completely.
That's where insurance comes in, to pick up those risks which you don't want to handle, can't eliminate completely but are too dangerous not to have another party providing financial back-up if the eventuality occurs. Insurance is what I call one-ninth of risk management.

How does Aon's global computer network assist in Aon Malta's operations?
When one has such a massive source of knowledge as provided for by 50,000 employees, you have to have the tools with which to exchange that knowledge and to transfer it to our clients. We have an Intranet system through which, from a click of a button, anyone within the global Aon network is able to communicate on-line, make enquiries, discuss, elaborate and retrieve knowledge from the other 50,000 Aon employees.
With this advantage in mind, it is very much a question of a client coming in with the strangest of requests and, within the Aon Corporation, we are bound to find an individual who is an expert in that field.
The usage of the system ranges from day-to-day operations to the regular exchange of what we call think-tank mechanisms, through which a wealth of ideas are generated every day.
The whole network has only one scope – for us to be in a position to give the optimum advice to our client base, wherever that may be. Accordingly, we bring the entire group's expertise to each and every client in Malta.

Could you elaborate on Aon's groundbreaking initiative for the local insurance market, which is in the pipeline?
As an operation, our forte is very much in the industrial sector - with the corporate concept client. However, we do carry out, on a scheme basis, a great deal of personal inclined business - such as home and motor – an area we want to strengthen.
However, our approach toward doing that will not be in the manner that everyone else does it - not for the sake of being different but for the sake of being as upmarket as possible in the level of service we provide. One has to continually move, if not ahead, than in-line with today's world – with its technology and its social limitations. People can no longer afford to take a half-day's leave to cater for their insurance needs. That luxury simply does not exist anymore.
Telecommunications, as in many sectors, has changed the way in which we operate, the way we buy and the way in which products and services are supplied. We've thought of combining an extremely successful concept, which has flourished tremendously across the globe. It had been initiated a number of years back in the UK, from where it took the rest of the world by storm.
We will be launching a new concept for the purchasing of insurance in Malta, which basically involves buying insurance over the phone.
As opposed to the traditional method of purchasing insurance, which necessitates visiting an insurance office or sub-agent in your locality, the entire process, through our new process, will be conducted over the phone, from the convenience our clients' office or home.
One simply phones in and it's all done over the phone, including the monetary transaction. The whole range of services would follow by post – ranging from the policy, the certificate of insurance, the road licence, road assistance services, etc…
We're starting the initiative on motor business, which is very much the mass production side of the industry.
We will, as is our function as brokers, be providing a wide range of quotations instantaneously – through technology – and clients would have a series of quotations over the phone and we would advise clients as to which policy best suites their requirements and lifestyle.
Therefore, the individual will receive individual attention and individual protection.
The service is over and above anything available on the market today – not just in terms of the way in which it is bought, but also in terms of the protection that clients receive.
We've invested in technology, staff training and recruitment and from the indicative demand and interest that we're receiving, we expect the initiative to be largely successful when it is launched later this month.

What are your views on the local insurance market?
The Maltese insurance market is undergoing a number of changes. Change is healthy and admittedly, change is needed. Change in the local insurance market is coming in partially as a result of international mergers and take-overs, which will have a tail-end effect on their operators in Malta.
A second means of change in Malta is what is known as the feasibility pressures. When an underwriter is not doing well, he can't afford to have a large spread in a very competitive market. Accordingly, we had, just last year, a number of insurance operators who either withdrew or were made to change providers, as their providers withdrew from operating in Malta, which is a good example of the effect of international moves having a direct effect on the local market.
It must be noted, however, that, apart from overseas mergers, there were also companies who withdrew from Malta as a result of commercial restraints.
Secondly, there are also the intra-market pressures, which result in market consolidation taking place.
In the insurance sector, you have companies who are either consolidating their own operations to improve their service or acquire a better market share. Additionally, you have companies who can't survive because of a lack of infrastructure or investment and they have to consolidate their costs with other companies.
Over and above all this, insurance is a very peculiar trade in that you have large trade risks, as the trade itself insures the risks of the clients – over and above the normal trade risks associated with any enterprise.
So you have an added reality in which the business could go sink or swim depending not only on how it is run, but also on how the clients run their own risks. That is a constraint in its own right, which is bringing about a change.

As a risk manager, what is your view on health and safety in the workplace, have working methodologies in this respect improved over the years?
In terms of employee health and safety concepts, I am very glad to say that we have seen, over the last 25 years since we've been operating in Malta, the scenario change very significantly, particularly over the last decade.
I recall having been to sites in which you would be looked down upon for wearing a safety helmet. However, that the scenario has today very much changed and has, in fact, reversed itself.
The reason being that people are realising that it's simply not worth the risk any more. It's not worth the pain and suffering for you and your family – people are coming to terms with that reality and safety in the workplace is very much becoming a practice that is both understood and accepted.
Over and above that, all parties concerned have to keep pushing for further health and safety measures. as there is no limit as to how safe a workplace can be. As the Japanese say – if it's perfect, do it better. The same reality exists with health and safety at work. There are operations, which unfortunately, because of their very nature, are prone to a higher degree of risk. There are intrinsic trades that provide an exposure to potential injury and these are the trades that need to be pushed.
In Malta we have changed the concept of employer-employee relations when it comes to health and safety. Until a while ago, we had a situation in which the employer should provide health and safety equipment to employees and should also ask them to use it. If the employee is provided with the equipment and doesn't utilise it, the employee is partly negligent because he did not wear a helmet, for example.
I'm very glad to say that this has changed to a scenario in which the employer is held ultimately responsible. If the employee does not use his safety equipment, then the employer is completely responsible – he has to be made to utilise it. If an employee chooses not to wear safety equipment, then it's the employer's responsibility to take all actions necessary to ensure that he does and if he persists in not using it, then he's not the right employee to have as part of the employer's operation

Photo by Paul Blandford

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