An aggressive risk appetite and “allowing people to fail” has been key to CEO Richard Enthoven’s success. Here, he speaks to Actuaries Digital Editor Sharanjit Paddam about Hollard’s appetite for innovation, and why actuaries will ‘have a field day’ in the next ‘blockbuster’ moment coming for the insurance industry.
Richard Enthoven looks out at the Chatswood cityscape from Level 12 of Hollard Australia HQ. The South African national first came to Sydney in 1998, intending to stay for two years. He arrived on a brief from Hollard to see if there was an opportunity for non-traditional distribution in the Australian market.
“The plan was for somebody else to come to Australia and take advantage of it if there was,” says Richard whose grandfather Robert and father Patrick set up Hollard Insurance in South Africa a decade earlier.
In 1998, it was completely acceptable for an insurer to receive an order for a policy and issue the documents two weeks later. Most of the ‘Top 10’ insurance companies operating then are no longer controlled by the same owners.
“The really successful actuaries of the future will be able to do all the really hard core [data] analytics, extract the key themes from that and be able to explain it to seven-year-old children.”
“There have been waves and waves of acquisitions…look at GIO, FHF, HIH. The concentration that exists today in the market didn’t exist back then; non-traditional distribution didn’t really exist,” says Richard.
Consumers now compare and select policies at their fingertips, expecting personalised, immediate service.
“They do not judge us by the performance of the other players in the industry, they judge us by other companies from whom they consume products, and their service expectations have gone through the roof,” says Richard.
Nothing to lose
Richard’s appetite for strategic innovation and challenging the status quo was evident early on. He studied economics and international relations, completing a Master’s degree at the London School of Economics, and moved to South America to work for AIG after graduating.
Working in Chile and Argentina, he observed first-hand theories on ‘strategic adjustment’ and the effectiveness of developing nations switching to an aggressive, more market-based economic formula (often imposed by the IMF or the Word Bank in exchange for debt relief or debt).
After a stint in the US working for Progressive Insurance, Richard came to Sydney.
“You need to allow people to fail. You cannot have a culture where failure is not tolerated and expect people to innovate.”
At that time, insurance brokers were offering products chiefly through branch offices and call centres. Hollard obtained a general insurance licence from APRA in 2000 and the business commenced selling home insurance. By 2005, the company started cross-selling basic term life insurance products to its existing general insurance customer base in Australia.
“We never anticipated that the direct life franchise would actually be a standalone business,” says Richard, who was by then managing a team of 30. “We took a view that the opportunity did exist for non-traditional distribution and that’s really a pillar that the business has grown on.”
Hollard is known for its nimbleness and innovative new products. It has successfully challenged major players in the market, growing its own brands, such as Real Insurance, and developing partnerships with the RSPCA, Woolworths and many others.
“When you’re a start-up business you really have nothing to lose so you can afford to have an aggressive risk appetite,” says Richard.
In 2011, Hollard extended its product offering to pet and health insurance.
“I think the thing that has really differentiated us is our willingness to try things – whether it’s direct life insurance, pet insurance or trying white labelling opportunities or bicycle insurance, we explicitly have a high tolerance for failure in the organisation,” says Richard.
Since opening in Australia in 1999, Hollard has issued more than 500,000 policies with more than $16 billion worth of assets insured.
Permission to fail
Richard now manages close to 1000 staff and spends the majority of his working day recruiting, engaging and retaining them.
“Keeping the opportunity pipeline open for everybody and seeing how people respond to that has been the most interesting thing for me,” he says.
“Management’s job is to find the very best people and empower them aggressively. You need to allow people to fail. You cannot have a culture where failure is not tolerated and expect people to innovate.
If I look at the successful people in Hollard they tend to be self-starters: people who like to have a broad mandate; responsibility and accountability for the decisions they make.”
Disruption of all
Looking to the future, Richard envisages unprecedented change and challenges for insurers.
“I don’t recall any situation in economic history where every business was facing potentially the ‘blockbuster moment’ where your entire business model is undermined by technological change,” he says.
It is expected that by 2025, 104 million new cars will have some form of telematics connectivity. The impact of driverless cars will come much sooner and be “much more profound than people expect” says Richard.
“My hypothesis is in 20 years’ time, very few people will own cars. The owner-driver fleet will be 15 to 20% of what it is today…[it’s] a blockbuster moment coming for the insurance industry,”
He also anticipates growing fragmentation of the industry and more specialist businesses with robust intellectual property around a single component of the industry.
“Traditionally, the obvious thing to do was to hoover all of that IP into one company and use it as a proprietary. I suspect [now] you’re going to see, for example, digital commercial underwriting platforms that will become industry-wide, almost like credit bureaus, and for the people that design them there will be much more value in servicing the whole industry than being wrapped up in a single corporate,” he says.
While insurers grapple with non-traditional data sources that will allow them to better understand and price risk, complex mathematics and analytical skills are becoming more and more valuable.
“Actuaries are going to have a field day as the quantum of information that we have access to grows exponentially,” says Richard, adding that the broader economy, beyond just the financial services industry, is starting to realise and better understand the benefits of the actuarial skill-set.
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