Insurers are in the business of assessing, pricing and covering risk—but are they using risk as a lens to help their customers? Eric Joost from Willis Towers Watson talks about what happens when you overlap risk, people and business strategy.

Highlights

  • In this episode of the Accenture Insurance Influencers Podcast, we speak with Eric Joost, an executive with more than 30 years’ experience in the insurance industry.
  • The insurance industry has changed in four key ways: speed, data and analytics, market size and broker consolidation.
  • Technology is helping industry players become more efficient, and shift the focus from transactions to more holistic advisory services.
  • Among those holistic advisory services, particularly for complex risks, there is a need for insurers to help customers use risk as a lever to achieve other business goals—and in some cases, to avoid risks in the first place.
  • Disruption has many insurers focused on digital experiences—however, semi-digital experiences, with human intermediaries, may be advantageous, especially with complicated products.

Reframing risk & disruption, with Eric Joost

We’ve had the honor of interviewing some of the sharpest thinkers in insurance, and collectively they paint a picture of an industry in flux, whether that means self-driving cars, artificial intelligence or the changing face of fraud.

This episode’s guest has more than three decades of insurance experience, and big ideas on where the challenges and opportunities are. Eric Joost is the global head of property and casualty at Willis Towers Watson, the third-largest insurance broker in the world.

In this episode, Eric talks about how the industry has changed over the course of his career. In particular, he addresses the shift from focusing on transactions to offering more holistic advice, and how conversations about risk—and managing risk—can help clients achieve business goals. He also talks about the benefits and limitations of digital experiences.

The following transcript has been edited for length and clarity.

Tell me about your role at Willis Towers Watson and your areas of focus there.

We do three things at Willis Towers Watson, which is simply in the category of people, risk and capital. We’re a merged business and that will speak to some of the things I’ll talk about. [Editor’s note: Willis and Towers Watson merged in 2016.]

I generally focus my time in the risk part of our business, not exclusively. And I’m part of our global leadership team. I do a lot of work around strategy and connectivity. So: how do we follow global trends where clients want service and action globally?

In addition, I do a lot of work around client experience: delivery, and consistency when it’s relevant. What are our skills? How do those skills need to change? Are we providing enough context for clients in a complicated world?

Connected to that I look after all our technology, and that’s everything from rationalizing some of the historical things in the tech stack, to investing and innovating around new areas where we’ve been pretty active.

And then finally, I spend a lot of time looking for opportunities between our bigger business units in the firm, for when we have companies that want to combine a conversation about risk with a conversation about people. It’s not for everybody, but when it’s there we spend a lot of time doing it.

Fascinating, and certainly a lot of opportunities for cross-pollination as this world becomes more blended. I imagine that there would be more opportunities for those types of conversations.

You know, I think we’re all seeing those types of things––and it’s not a struggle, it’s just remembering to meet the clients where they are. Certain clients want that conversation and realize that there’s nothing in the risk world that isn’t either firstly or greatly impacted by how people behave… and that’s an oversimplification.

If you really want to deal with risk, you’ve got to deal with people. I think everyone makes that connection. So it’s about asking: Is their business in the way they want to run the business, in a place where they want to act in that fashion today? Not always, but we’re ready for the ones that are. And the ones that aren’t, we’re prepping the environment so that as we get more use-cases we can make the business case clearer to people.

You’ve been in insurance for more than thirty years, at Aon, Allianz, and previously Willis, prior to the merger. And obviously our world has changed tremendously over that period of time. I’m curious, what are some of the biggest changes you’ve seen in the insurance industry over that time?

That’s a good question. And I’m smiling a bit because it when I was younger, I used to ask that question a lot––particularly when I saw people that mentored me retire, you know, “What were the biggest changes you’ve seen?” And so now I’m feeling a little aged at this point by the fact that you asked the question the way you did, which is completely fine.

I mean, I think of it in four categories:

  • Speed
  • Data and analytics
  • The size of the market
  • Broker consolidation

Technology really influences speed, and data and analytics. When I came into the business, it was letters, it was faxes. Now it’s internet, now it’s e-mail. There’s a lot of good things that that’s brought. But by the same token, what I have noticed that I don’t really enjoy, is that when you were using a letter, the writing and the thoughtfulness that went into that letter was very deep.

To some degree, as far as the speed is turned on in the industry, there’s been a decrease in thoughtfulness to some degree, and a decrease in context. Information’s moving, but no one’s putting it together for people as well as they used to. And so a change that’s very helpful for efficiency, moving information and making decisions is terrific. But I’m not sure that we’re always good, as an industry, at helping our clients see through that complexity.

As the amount of content information increases, the risk we face is that the context goes away. And I think some of that’s happening. We’re working really hard and we won’t be perfect, but to try and get people to slow down, and to really challenge each other with, “What is the message in the narrative you’re delivering?” and not, “How fast can you respond?”

On the positive side, the technology has really helped on the data and analytics. And it’s not that we didn’t have data and analytics before, but the speed, the data of the available datasets, the access to information more quickly, has been terrific. You’re now able to bring almost any situation––to almost any risk situation––better quantitative outputs to measure the risk and measure the choices than we’ve ever been able to do before.

That doesn’t mean that the insurance world’s being run by machines or everything is quantitative. Thirty years ago, the math, the quantitative input really wasn’t there, and there was just too much weight on experience and war stories. All this quantitative output and insight is getting complemented by experience, constraints companies have, what peers do. It’s very complementary.

So I think that’s really helpful. I also think that the data and analytics that we’re building today—and we’re getting better around how we organize that data—that will drive innovation the next 10 years. It’s a critical component to get other participants in the market, so I’m very optimistic.

The last two things are the scale of what is insured these days, and we want to insure more. We can look post-disaster and go, “There should have been more insurance purchased.” But it’s just the scale of how the market’s grown, along with the world economy. It’s amazing to me.

And then the last thing which probably has some good and bad in it, is I work for a very large broker. We’ve been a consolidator. Aon, where I worked before, is a consolidator of brokers. A lot of things have come out of the large amount of broker consolidation that’s gone on over the last 20 years, and the consolidation that continues.

What were the top 20 brokers is really concentrated, almost in the top three or four now. There are many great things about the scale we’re able to bring. It brings many more specialists to bear than we could ever possibly afford in the past. It brings technology and leverage across the whole business.

On the bad side, I don’t necessarily think consolidation is bad, but it creates perceptions around lack of choice or market power, which can be challenging for us to…not defend, but talk about and articulate around. My sense is if I talk to clients—and I do quite often––they’re not short on choice. There’s plenty of choice, there’s plenty of competition. But I can see where this concentration of power can be positioned differently in people’s mind and that’s not always a great thing.

Certainly. And those four changes really have changed the industry, and I imagine, the broker side of things. There’s this old-school picture of insurance, that it’s bought and sold at the kitchen table. And to some extent that’s probably still happening, but in what ways has the role of the broker changed over time?

That’s the stereotype, you just described it. And to some degree I’d agree it’s still out there and I think in some cases that’s a good thing. When I first came in the industry, there was a lot of pressure around what today are more basic things––which is, clients needed insurance to protect them. Even with very large customers, corporate clients, the balance sheets weren’t so fortress-like as they are today.

So it used to be about actually just placing insurance and the process you went through. In some cases, is insurance even available? And other cases, how much insurance can I buy? Because the market wasn’t fully developed and obviously there’s always “How much does it cost?” There was a lot of effort around the placement and getting people to understand the process they’re going through. That meant physically bringing people around the world to different insurers to reinforce, “I’m serious about this. I can tell you a more nuanced story about why I manage risk better,” and so forth and so on.

Now if I transition to today, it’s not that that work doesn’t exist––it does––and all those things still do matter. But to some degree or another, we’ve brought as an industry a lot of efficiency to that. I mean, I can literally have a broker in the middle of the United States today and put them into the global market within a matter of minutes, whether it’s through email or one of our broking platforms. From the time they start to think about, “OK, here’s a way to describe what the client’s doing, here’s what I’m looking for.”

That isn’t relevant for every single one of our customers, but that’s an amazing shift from when I wanted to do that 30 years ago, that was a four- or five-day piece of work. I was assembling giant binders of information that wasn’t necessarily structured technologically. And I was shipping it in FedEx and UPS boxes all over the world and then following up with faxes and phone calls.

So we’ve made that part of it very efficient. It’s still very valuable, price transparency, price arbitrage, things like that.

What we’re doing more of is the advisory side of our business. Too often when we talk about it, we tend to say, “Well, the world’s moving to advisory and therefore the broking or replacement part of the business is going away.” And it’s not. We’re still doing all that transactional work. In addition, we’re doing things now—and this would be a subset of it—around straight-up risk management for our clients, helping them get inside the problem and think about the risk of the problem they’re trying to solve.

I see. Can you share an example of this approach to risk management, either from your insurance practice or from other parts of Willis Towers Watson?

Things like project administration in the construction space––very, very large, massive projects. We take on a lot of the logistics around project administration, all the subcontractors and all the other kind of components of insurance and related issues.

By way of example, 20 or 30 years ago we were just talking about getting project insurance placed. Today we’re talking about, “How do we bend that cost curve and that risk curve from what used to be maybe 7, 8, 9 percent of project costs, and now we’re talking about 2, 3 percent.” And then here are the mechanics you can go through to actually drive that further down.

And then we do tons of contract review—not insurance contract review. It’s like you’re signing a big consulting arrangement with, let’s say, obviously a client––what are the process implications around how you write that contract together? How does that knit together with, for example, your professional liability insurance? For firms of a certain scale, those are enormous decisions they’re making when they’re doing, say, several hundred-million-dollar projects.

And then, what I would say––and I’m seeing this in the construction space and it surprised me as I’ve walked into it in the last couple years––we’re actually talking to the whole ecosystem of large infrastructure projects. And that’s everything from the financing, to the sponsor, to all the different lawyers and consultants. It’s about saying, “listen, the way we’re building infrastructure in the world is a little bit broken right now, and the problem is it’s keeping money from getting to necessary infrastructure. The investment return’s not there, there’s too much risk, and the margins are way too thin.” And through consensus with all these participants, we’re at the table talking about, “How do we orchestrate this process or run the project better, so that we can de-risk these projects? We can make the returns more reliable, and as a result we bring more capital into the construction business.”

And again, I couldn’t have imagined talking about that 30 years ago when I broke into insurance, and was trying to place directors and officers liability for savings and loans in the United States.

That’s quite the story arc and what I’m gathering from our conversation so far, Eric, is that whereas maybe before the insurance world and brokers were much more focused on the products and on the transactions, things have become more holistic.

It’s almost like using risk as a lens to look at a business and providing not just advisory services—what insurance products do you need—but how can I, as an adviser, better help you use that risk in other parts of your business.

That’s a very good way of expressing it. You know, I wouldn’t describe it as a light switch changed and we decided, okay, now we need to be advisers. There’s different nuance of this in all of our businesses, but in order to be competitive, as we were seeking the transaction business, we suddenly became advisers. We started to realize that advice was a very important part of the conversation––for someone to trust you with the transaction work.

And the early stages of quantitative work came in because competitively, in order to take a complex situation to market or a mid-sized situation to market, you needed more tools to explain to a client why they were risky, or why they weren’t risky. And that kind of stuff has always been around the business, but making it approachable for clients is sometimes more difficult and we’re just getting better and better at it.

For example, we have a security business and it deals with kidnap ransom in parts of the world. And as much as we sell insurance and services in the event somebody might be abducted, someone said, in wry way—we realized our clients would much rather never get abducted than have to worry about insurance.

At the end of the day, more than likely you live in apartment or a house. At the end of the day, you just don’t want the problem of a fire in your house––and not because the insurance won’t respond, but because everything else around it is really kind of a pain. You just have to go through this massive project on your own. So it’s critical to help people avoid problems and make them feel like you’re doing that in a way that’s valuable to them.

There are examples now of more sophisticated data and analytics that will allow us to take two types of risk and correlate them against each other, more like the financial markets do today. Maybe that will allow certain clients an ability to offset risk, wash it against one or another and then maybe further out the mindset portfolio. But you know that’s a 10- or 15-year trajectory. I may or may not be on this podcast by that time, but I’d like to see it happen.

We’ll have you back in 10 or 15 years and wax reminiscent about this episode. For now, I’d love to take a look at…we’ve sort of hinted at the disruption that’s taking place in the insurance industry today. I’m wondering what that means for brokers in particular. You’ve mentioned speed and this need to respond quickly, but maybe at the cost of context or narrative arc. You’ve talked about access to data and analytics which can enable an innovation, but could also be really overwhelming if you’re not prepared to deal with it. What are some of these current challenges and opportunities within the broker side of things?

I think you describe it pretty well. It’s a great opportunity for us. In more cases it’s like the example I gave you earlier about the last 30 years: what we were doing in placement and broking never went away, even as we’ve moved to more of an advisory role. I see a lot of similarities in disruption for us, meaning for the most part this actually creates new markets and new places for us to express ourselves, and work for clients to bring value—but it doesn’t necessarily eliminate what’s going on today.

When people discuss disruption, it’s interesting to talk about a simpler message: to talk about insurance and look to banking, and say we’re both in financial services and disruption will affect us both, and it’s probably these things. (And I would say banking has gone through that process before insurance.)

But you know, insurance, even in the corporate and mid-corporate space where we’re in, for the most part operates in hundreds, if not thousands, of segments. And a lot of where the disruption occurs is at those permutations of hundreds and thousands, not at the industry level. And that happens first and foremost.

Nothing’s going to be disrupted unless a client thinks it’s a good idea. And it happens first and then the client sets the industry. What I mean by that is disruption [in different microsegments happens at different paces]: the construction industry of insurance will disrupt at a different pace than the banking industry of insurance will disrupt, or the technology.

And then thirdly, geography matters in our space, and it’s not just because it’s a property insurance and a property is a physical location, that does matter, it does change by geography. But you operate in different regulatory environments and countries and things like that. So the way we look at it is really trying to break these things down to the relevant enough segment that disruption can occur and then make that work at that level.

It sounds like you’re describing disruption not as this nebulous market force, but as something that happens at the intersection of business segments. Can you share an example of what this looks like in practice?

You think about automobile insurance––you can say in North America, you see in the US––it’s a very digital business today. The US statistic is something like almost 80 percent of this stuff is done through the internet now. Now, what you might miss in those statistics, is the time for auto insurance to change in the US, with largely the same mechanics to some degree and ability to be digital, has taken almost 10 to 15 years.

OK. So that’s the deepest-penetrating, fastest-moving piece of this disruption in the US––and there’s lots of interesting tangents to this, with automated vehicles you get kind of the sharing economy, automation, automated driving and stuff like that.

But if you just moved from the automobile space in a consumer environment, you go to the small medium enterprise (SME) space, what you’re going to see there is people, clients––they’re usually entrepreneurs––they’re not doing work just between 9am and 5pm. They want simple, fast access to, “Hey, I need insurance. Here’s my information. Can I get an answer immediately?”

Some people have said, “I’ll make that completely digital and I’ll just destroy the insurance agent.” I’ve seen people walk back from that because in the end clients want a semi-digital experience. That is, as much as I want a simple offer and to know what my options are, I’m fundamentally dealing with kind of a complicated product and I want somebody, at that last moment, to walk me through a little context.

But what is happening in that space is a lot of this stuff is going digital. And then that forces some reset in how you invest in technology—if you’re focused on an SME segment versus, maybe, the large and complex segment where we play. But it does allow you to start observing how your clients work digitally, or how they interact with you. Meaning there’s lots of amazing things that Google can see, and Facebook can see, and Amazon can see about the customer behavior. And if you get out of some of the darker rhetoric that pops up, that data gives you wonderful ways to improve the client experience. And so you’re seeing some of those groups getting pretty good at that.

And if you flip over to where we’re at, we’re in a highly custom space––that doesn’t mean it’s not being disrupted, it’s just some of this new technology is allowing us to increase our ability to serve digitally. And simultaneously, we’re able to get better and deeper on… if you think of a Fortune 50 company and how they want to think about risk, and really think about how they affect that, we’re able to get into that a much different way than we were 10 years ago.

We can see price arbitrage between the identical product in two different markets very quickly now; before that was rumored to exist. We can take advantage of that for our clients. We can bring transparency to our clients. That was difficult 10 years ago.

And then, by the way, a lot of the disruption is helping the administrative side of our business get more efficient, whether it’s by being more technological, using less people or just being more effective, less error prone. Things like that.

But, again, we use that construct to talk about insurtech and technology, and how all this is affecting us, because until you’re at that kind of segment intersection, you’re probably talking about the issue in way too a macro context that doesn’t apply very easily to any part of the industry. 

It does and it seems to me…we’ve mentioned challenges and opportunities and they tend to be two sides of the same coin. Given the speed of changes––and you’ve mentioned regulatory environments and geography––I’m wondering from a broker standpoint, how does that affect their ability to keep up with the changing regulatory environment? Both in terms of what regulates their work, as well as policies coming down from the individual insurers as they try to respond to those shifts in the marketplace. Can you comment on that maybe splitting between sort of the consumer and SME level versus the corporate level?

I mean first, it’s a good thing. And we operate in hundreds of countries and we have to honor that very sincerely.

If I just take the window of the last 20 or 30 years, it’s certainly a more expensive environment to operate in. Just to have that properly controlled and understood, it creates a bit of confusion, because as you can imagine you’ve got a lot of different regulators, different locations, people, human beings with different points of view… What I do see though, which is good, I think on the consumer side, I see a more and more of an opening of the regulators to an environment of protection for the consumer, but simplicity in the transaction.

Not everyone’s getting it right, but the direction of travel’s correct. And I think that if you want to have a highly efficient market, at some point it can’t just be, “Hey, here is a technological comparison machine and it just spits out a few things that lets you make a decision.” You need a better sense of what you’re buying, what it does and how you need to interact with that product if something goes bad, things like that. So we’ll never get it perfect, but it’s going in a nice place. And so I think that’s great.

You know on the complex side of things, on the one hand we get a lot of scrutiny. The Financial Conduct Authority (FCA) in the UK just released a report on the broker and wholesale London market and generally, I think we received it pretty well. But it’s also laid out a lot of things that I would just contrast with when I first joined insurance.

There are conflicts of interest when you’re trading things and just being able to manage those conflicts appropriately––because they do need to be managed, they can’t all be eliminated––is important. And so how we manage those conflicts, how we talk about those conflicts, how we train people on those conflicts, and how we explain the business, which was maybe very un-transparent 20 or 30 years ago, versus how we explain it today, it’s important.

Clients have absolutely every right to understand how it works, how the market comes together, how we’re compensated and things like that. I think all that’s healthy, because to some degree once you make that part very efficient and understood, it lets you have a better and a more trusted conversation about your advice, where else you could stretch some of these principles. But if you can’t get to the trust you’re going to be in a pretty transactional place, consumer or corporate.

So I’ve been a big fan of a lot of these things, and during my career I have been brought into this stuff because not everything works as smoothly and perfectly as you would like it to when you’re around tens of thousands of colleagues.

Eric, thank you very much for taking the time to chat with us. I’m excited to continue our conversation in the next episode.

I’m looking forward to it.

Summary

In this episode of the Accenture Insurance Influencers podcast, we talked about:

  • How technology, data and analytics have enabled speed in today’s insurance market. In turn, that has helped industry players shift from transactional services to more holistic advisory relationships.
  • The diminishing context provided by speed—and the value in shifting from “How can we deliver this faster?” to “What is the message that needs to be communicated?”
  • In addition to covering risk, insurers can provide value in helping customers mitigate risk, or use risk as a lens for addressing broader business objectives.
  • Digital isn’t always the answer—sometimes, a mixture of digitally and human-enabled experiences can deliver more value to customers, especially with complicated products.

For more guidance on risk, disruption and innovation:

In the next episode, Eric will explain why he’s made diversity and inclusion his personal priority—and why it’s both a moral and business imperative. He’ll also take a hard look at the insurance industry and what its failings reveal about opportunity.

What to do next:

Contact us if you’d like to be a guest on the Insurance Influencers podcast.

 

 

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