Plans to separate Aviva into life and general insurance departments and cut 1,800 jobs are being led by its new CEO Maurice Tulloch, who aims to cut-costs within the business as a priority.
Aviva's Colm Holmes said he supports the FCA proposals, but warned against too much of a crackdown (Credit: Aviva)
Aviva must be cautious that splitting its life and general insurance businesses and making 1,800 job cuts does not negatively impact its customers in the UK, according to one analyst.
The warning comes after Aviva yesterday (6 June) announced it will “simplify” its operations by splitting its life and general insurance business into two separate departments, as well as axing 1,800 jobs in a cost-saving initiative.
Aviva job cuts could impact net promoter score
Yasha Kuruvilla, general insurance associate analyst at data and analytics firm GlobalData, believes both moves could threaten Aviva’s high net promoter score – a measure of customer satisfaction.
He said: “Aviva has not said which areas of its business will be receiving job cuts, but it has said that cuts will be worldwide.
“In the UK, one in four households is an Aviva customer. Across its personal and commercial lines, Aviva has greater than market average net promoter scores for 11 out of the 12 products we examined in our 2018 General Insurance Consumer Survey and 2018 SME Insurance Survey.
“While cutting costs is welcomed by investors, customers’ experiences are paramount to the success and longevity of the business.
“Aviva must ensure that its job cuts do not lead to less touch points for customers when purchasing a policy or initiating a claims process, especially for sensitive products like life insurance or critical illness, which can negatively impact customer experience and have knock-on effects to its market share.”
Aviva is currently the biggest insurer in the UK, holding 17% of the country’s life insurance market, as well as 10% of its general and health insurance market.
Aviva plans to split insurance business and make 1,800 job cuts
Yesterday, Aviva confirmed widely-rumoured plans to reverse a 2017 move made by former CEO Mark Wilson to merge its life and general insurance businesses.
It also announced that it will cut 1,800 jobs from the business over the next three years in a move it hopes will save it £300m a year by 2022.
Observers close to Aviva expected the news after its CEO Maurice Tulloch told staff at Aviva’s annual meeting that “our cost to income ratio is higher than it ought to be”.
The firm says cost-cutting measures will include lower central costs, savings in contractor and consultant spend and reduction in project expenditure, among other efficiencies.
Aviva chief executive Maurice Tulloch said: “This is the first step in our plan to make Aviva simpler, more competitive and more commercial.
“Reducing Aviva’s costs is essential to remain competitive, and this means tough decisions and job losses which I do not take lightly.
“We will do all we can to minimise redundancies and support our people through this.”