The Summit that Mattered – General Insurance Seminar Insuring Tomorrow

PLENARY ONE – CHALLENGES FOR TOMORROW’S INSURERS

Plenary One kicked us off with the big picture perspective. Estelle Pearson channelled CEOs, and reported that what keeps them awake at night includes challenger brands, the influence of social media, and the balance of power between insurers and their customers. Geoff Atkins spoke for the FSI – which has diligently included general insurance in its focus but hasn’t found anything dramatic to say about it. Vicki Mullen from the ICA focused on the consumer perspective – including the ‘left of field’ requests for coverage (motor scooters, tattoo parlours). Last, Siddharth Parameswaran evaluated the industry from an investor’s angle.

PLENARY TWO – TOMORROW’S PERILS

In contrast to the G20, the G14 had Climate Change – and perils more generally – firmly on its agenda. Plenary Two brought these topics into focus. Andy Pitman from UNSW’s Climate Change Research Centre got things going with a mesmerising 20 minutes on the science of perils and climate change. Frankie Carroll of the Queensland Reconstruction Authority gave us a vivid picture of what can happen when ‘perils meet politics meet policyholders and prices’. We also heard from Ty Birkett (Willis) on long-term trends and the role of reinsurers, as well as Karl Sullivan from the ICA on the industry’s response to perils.

PLENARY THREE – A WORLD OF DATA

We saw Big Data from two perspectives in this session – (1) the cautious: “what data are we allowed to get, how do we keep it private, and can we insure ourselves in case we don’t?” and (2) the confident: “wow – what can we do with all of this data?” On angle (1) we heard from Richard Bergman of PwC, Jeanne Fennell of Marsh and Justine K Brindley from Suncorp. The findings: careful + insurance = comfort. And things got even more exciting for angle (2). Richard Enthoven, CEO of Hollard, shared his insights and enthusiasm – and offered us all jobs. Finally Paul Ormonde-James (ex-Australia Post, now “I can’t tell you yet”) gave us practical advice, presented with oomph (big data isn’t useful unless you know what you’re doing).

PLENARY FOUR – CAPITALISING ON RISK

The last session of the conference saw us contemplating the central issue of capital – how much does an insurer need, and how do you link it with the organisation’s risk profile? Stuart Bingham from APRA introduced the session by reminding us of APRA’s requirements and expanding on APRA’s current big topic: risk management. Next up was Andy White from QBE, discussing the value – and the challenges – of having your own internal capital model. The debate got going with our third speaker Anne O’Driscoll, who has had senior roles at general insurers and is now a non-executive director. Anne gave us the directors’ view, including hard-hitting questions that Boards must face: How much capital is enough but not too much? What if it’s less than APRA estimates? How do you link capital with risk profile? Which bucks stop with management and which with the Board? Questions and comments from delegates flowed, despite this being the end of two big days.

MONDAY NIGHT GALA DINNER

After day one, delegates spruced themselves up in Gatsby style – think feather boas and top hats, and at least one weapon in a violin case – for the conference dinner at Doltone House Hyde Park. What a room!

The G14’s attention moved to military spending during the mid-meal entertainment. Andrew Smith gave a demonstration of the potential impact of military budget cuts as he keenly fought a sword fight with a balloon. Ash Evans (representing – what country?) showed a more menacing approach as he launched a sword at a European’s head.

The positive effect government can have on society became clear when Australian Government Actuary Peter Martin stepped forward to accept his richly deserved 2014 Actuary of the Year award. Peter’s acceptance speech was humble, gracious and demonstrated a fantastic spirit of collaboration across actuarial borders. His First Lady Marie-Ann was proudly by his side.

As is traditional at all high level summits, in the later stages of the evening the delegates split into two camps – the enthusiastic dancers taking advantage of the live music (think Angela Merkel in the nightclubs of Brisbane), and those who kept talking – admittedly on topics of reducing strategic importance as time went on. Happily, there was no shirtfronting.

CONCURRENT SESSIONS

As the G20 had side meetings, the G14 had concurrent sessions – 33 of them. There were no translators on hand to convert ‘actuarial speak’ into plain English, but fortunately most of the delegates were bilingual.

Here are a few highlights from the sessions our reporters attended. The materials for all 33 sessions are of course available on the Institute’s website.

• Getting to Truth with Your Customers – The Power of Human Centred Design. This session started with each attendee being asked to take a piece of A4 paper, hold it behind their back, and tear it into an elephant shape. This symbolised the ‘elephant in the room’: that the typical company isn’t using all of the skills and tools within the organisation. Companies should take the time to use their people; while rationality drives good business outcomes, creativity and empathy create great business outcomes.
• Hybrid, Electric and Driverless Cars. Premiums are already falling as fewer accidents happen off the back of technology such as ABS, traction control and active breaking systems. Driverless cars will remove driver error altogether, though they’ll introduce technology error instead. But who will be responsible for accidents – driver, manufacturer or software developer?
• Big Data: Implications for the General Insurance Industry: We heard about the ‘data lake’ which contains all data, deletes nothing, and allows you to run any queries against all history. There was talk of ‘interactive’ policies that customers would beabletoturnoffandonviaanappas their needs change. Brave new world indeed!
• The Royal Commission into Institutional Responses to Child Sexual Abuse: How can insurers reserve for molestation claims, given the lack of data, information, and widespread under-reporting? And the redress scheme (report due early 2015) will influence outcomes and required reserves. Insurers are still a few steps away from estimating the ultimate financial impact.
• The 2nd Global Customer Insurance Survey 2014 (50 questions, 24,000 people, 30 countries) discovered that insurers are less trusted by their customers than banks. Conclusion: insurers need to rethink and take control of ALL customer relationships.
• Cyber Threats and the Insurance Response. Cyber attacks are an increasing concern for business, and governments have been slow to respond with appropriate legislation. The worldwide market for cyber insurance is currently US$2-2.5b and will grow quickly over the next five years (only US$150m in Australia). It’s hard to price this business due to sparse data and secrecy around reporting.
• Robotic Reserving – Are We There Yet? The answer is no – we’ll still be doing valuations for a while yet! Standard statistical measures of fit aren’t useful for models that extrapolate, so we humans may still be required even after the robots rise up and overthrow the human race.
• Gold Standard Underwriting. The underwriting departments of most local and international insurers were assessed as having ‘significant room for improvement’. More automation and effective tools can help us to take a truly holistic view of underwriting opportunities and risks. Australia lags the rest of the world in predictive analytics and distribution (mainly because of our immature direct channels).
• Actuarial Offshoring – Will you be here in 10 years’ time? If the robots don’t take over, will cheap overseas labour do the job? Conclusion: we may be here, but possibly not in the same roles and functions. Offshoring is moving up the value chain, and as actuaries we will need to differentiate ourselves by adding value and thinking strategically and innovatively.
• Superimposed Inflation – Study of Impact on Premium Rates. An investigation of the superimposed inflation allowances in premiums across seven CTP & WC schemes found that the total cost to policyholders across the schemes is nearly half a billion dollars!

DANIEL SMITH THANKS OUR GIS SPONSORS

AND THEN IT WAS OVER

After two intense days, it was time to dismantle the security fences and return from high level meetings to everyday life. The committee, sponsors, Institute staff (including tango choreographer Liz Gemmell), and Michael Pascoe – our excellent plenary facilitator, who had found something to scare him in every session – all heaved a sigh of relief and sank into the nearest comfy chair.

Delegates headed off, feeling inspired and with new learnings to apply, clutching their satchels and copies of the daily Taylor Fry newsletters. The G14 was brief, it was great, and it cost a lot less than the G20’s whopping A$400 million. Once again, actuaries do it better!

Watch what went on at GIS2014.

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