£60m saving target fades as Zurich's IT plans falter

IT staff report low morale after failed outsourcing deal and swingeing job cuts at UK insurance giant

IT staff report low morale after failed outsourcing deal and swingeing job cuts at UK insurance giant

Several major IT projects at Zurich Financial Services in the UK have run into delays or been scrapped, raising fresh concerns about the IT strategy of the insurance giant.

A new insurance claims system, which Zurich expected to deliver more than £60m a year in cost savings, was due to be rolled out by the end of this year, according to internal documents seen by Computer Weekly.

But an insider said the system is running behind schedule, despite Zurich's claim this week that the project, for the general buisness, was "constantly evolving" and had been set no date for completion.

The system will play an important part in helping to reduce the cost of processing insurance claims - one of the main overheads in the
sector.
A spokeswoman for Zurich UK said that progress had been made on early implementations of the new claims system but refused to elaborate further.

"There are different workstreams within [the claims system project]," she said. "It is constantly evolving and is not seen as a simple job."

An internal Zurich document dated last October, however, outlined a clear timetable for rolling out the system. Key deadlines included installing a motor claims system at two Zurich offices by January this year. However, this milestone was missed, according to sources inside Zurich.

A separate project, to build a new IT system for Zurich Municipal's building guarantees insurance arm, which provides cover for about half of new-build houses, was deferred indefinitely earlier this year after months of work.

After the collapse of outsourcing negotiations with IBM, estimated to be worth about £400m according to Zurich sources, nearly 200 IT staff were laid off in January this year - more than one-third of full-time IT staff in the general business division's IT department.

News of the missed deadlines comes in the wake of the abrupt departure of Zurich's IT head for the general business.

Ian Marshall resigned recently after two years in the position. He had introduced a controversial "broker" system for Zurich's general business IT department.

Based on the principle of establishing an internal market for IT services, the broker system relied on a handful of management consultants to liaise between Zurich's business units and the IT department.

A Zurich spokeswoman said that Marshall's departure had been agreed by both parties and came after he had completed his review of the company's IT strategy.

The broker system was similar to the way business units were run throughout Zurich, she added.

Late-running and cancelled IT projects, as well as the 11th-hour collapse of the proposed outsourcing deal with IBM after seven months of negotiations, led to pressure from Zurich UK's chief executive for Marshall to resign, said one senior company insider - a claim Zurich has denied. Zurich has appointed a replacement for Marshall.

The broker system also attracted accusations of cronyism from IT staff, because Marshall appointed consultants with whom he had worked previously, to key positions at Zurich.

Marshall was not available for comment.

Zurich's catalogue of difficulties
  • New claims system, designed to save Zurich UK £60m a year, behind schedule with no completion date set
  • New system for Zurich Insurance Building Guarantee's business deferred indefinitely after work had begun on project
  • Abrupt departure of Zurich UK's chief information officer (CIO) for general business

  • Zurich IT staff attack "cronyism" of broker system set up by former CIO.

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