RICHARD HARVEY, chief executive of Aviva, the UK’s largest insurer, is three months into his new role as chairman of the Association of British Insurers, one of the most dangerous jobs in the industry. Of the past ten chairmen, seven have left their day jobs within months of completing their tenure at the ABI.
Harvey’s predecessor, Mike Ross, quit Scottish Widows last month, two years ahead of his expected retirement and less than two months after he handed over the ABI chairmanship.
Is it the strain of holding down two jobs that taxes these insurance bosses? Or is the stress of representing an industry that is seen as rapacious and amoral by consumers and government?
Harvey seems unfazed about the complications of holding layers of responsibility. Despite holding almost every job going in insurance, from marketing manager to technical actuary, he says that the role he relishes most is that of chief executive, which he first experienced as head of Sun Alliance’s operations in New Zealand. “The multifaceted nature of the role is something I enjoy, and the extra fun comes when you get to the top of the parent company when you’ve got huge responsibilities directly to your shareholders.”
A passionate theatre-goer, he loves plays that have complex structures. He cites Tom Stoppard’s Arcadia as his favourite, because it is “the one that combines gardening, mathematics, poetry and two time zones”.
So if the complexities of effectively holding down two jobs do not unnerve Harvey, perhaps the forthcoming battle with the Government will.
The introduction of stakeholder pensions in 2001 highlighted the difficult relationship the industry has with government. Despite protests from insurers, the Government pressed ahead with introducing a 1 per cent cap on the amount they could charge a year for the pensions. The result is that every insurer has stopped marketing pensions to individuals, and savings rates have gone into freefall.
Harvey says: “The industry and Government need to work together because we both have exactly the same objectives. They want to get people off their balance sheets and onto mine. And so far I have to say the record is pretty bad on co-operation. I’ve never seen two people with the same objective co-operate less on achieving it.”
The Treasury is considering plans to implement a new range of stakeholder-style savings products, devised by Ron Sandler, who produced a report into retail savings. The same objection is being put forward by the industry that was ignored during the consultations over stakeholder pensions — set the price too low and the industry cannot afford to sell the products or offer advice to consumers.
As Harvey says: “It isn’t practical to design a product, specify the features and then set the price without any reference to what it will actually cost to produce that product. It’s like saying you’ve got to produce a Seven Series BMW, and by the way, you have to sell it for the price of a Ford Focus.
“Reverse logic applies. Funnily enough the higher the price, the more we can sell, and that is a very strange thing to have to convince people of.”
This battle will be key. Insurers have already lost a large swath of their traditional markets — individual pensions — and they cannot afford to lose any more products from their range.
But is Harvey the man to convince the Government that the insurers have cleaned up their act and can encourage the nation to save? Opinions about Harvey are polarised between those who work in an insurance company, who believe he is bordering on the maverick, and outside observers. One senior executive at a rival insurer says that Harvey worries insurance types by being outspoken: “We tend to prefer people who compromise more.”
Insurance chief executives tend to have grown up in the industry and, like Harvey, come from an actuarial background. This leads to accusations from outsiders that as a breed they are excessively institutionalised and lacking in the dynamism that appeals to investors. One analyst says: “Insurance chief executives are not a great bunch. But of all of them, Harvey is the least likely to elicit an opinion.”
Harvey possesses the ability to evade difficult questions, which could be useful at beating the politicians at their own game. On his controversial pay award, which saw him reap £1.4 million in 2002 despite a £200 million fall in operating profits and a dividend cut from 38p to 23p, Harvey talks a lot and says little.
Harvey’s first key role was as chief executive of Norwich Union, ahead of its merger with CGU. He became deputy chief executive of the merged group in 2000, gaining the top job in 2001. But after university, he might have become a nuclear physicist. “ I was interested in nuclear energy, but there was huge competition because of all the people who had been making bombs, all the really great scientists. It’s easy to despise them now, but this was not all that long after the Second World War. All those great brains returned and there was no chance of getting in, so I thought, ‘oh well, I can’t do that, I’d better be an actuary’.”
Harvey’s affable optimism could just see him survive the apparent curse of the ABI. “It’s always surprising how climbing the next mountain always seems more fun than just stopping where you are.”
CV: RICHARD HARVEY
Richard Harvey was born in Gloucestershire in 1950. After grammar school in Stroud, he gained a degree in maths from the University of Manchester, before joining Phoenix Assurance as a trainee actuary.
He rose through the ranks to become general manager of Sun Alliance’s operations in New Zealand in 1987, staying in the country until 1993 with the last two years spent as Norwich Union’s chief in the region.
He returned to the UK to become general manager of the group’s finance department, before becoming finance director in 1995 and chief executive in 1998.
Harvey was instrumental in orchestrating the merger with CGU, becoming deputy chief executive of the combined group in 2000, under Bob Scott, the head of CGU. The two executives famously wrapped themselves in a Union Jack to announce the merger. Harvey took over from Scott in 2001, and was responsible for the highly criticised decision to change the merged companies’ name from CGNU to Aviva.
Harvey’s remuneration last year was £1.4 million, including a £691,000 basic salary, £258,000 annual bonus and an award for the successful completion of the merger of £320,000.
He is married with three children, with homes in Chelsea and Gloucestershire.
