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Interview: Finance, Fitness & the Future of Insurance

Interview: Finance, Fitness & the Future of Insurance

June 2020 by Damian Rhodes

Finance, Fitness & the Future of Insurance: An interview by Damian Rhodes with Bob Carter.

This is the first in a series of discussions with finance and accounting leaders within the insurance industry - we covered wide ranging topics from IFRS17 to Iron Maiden! 

What does it take to be a finance leader in the insurance industry?  
I don't believe there is one attribute which sticks out above all others but rather it is having a recipe of attributes that you change the quantities of depending on the circumstances: communication, vision, empathy, kindness, integrity, ability to inspire, decisiveness, willingness to listen to others and clarity of speech. To be successful in finance and insurance I would also add technical / industry knowledge, analytical skills, not be afraid to challenge, willingness to embrace new technology, and business partnering skills with actuarial and risk management teams.

What has been the challenge you have enjoyed most? 
I love all challenges but the one that sticks out the most occurred early on in my career. I was leading a local and US reporting team and in my first review with the new CFO he said that he wanted to move me from being the team leader to being the technical expert for the business. This was not in my plans and in the next couple of years I not only convinced him to keep me as the team's leader, but transformed the troubled business to the best in class for the region.  

What project have you been most proud of?  
I have often despaired at inherited system set-ups so was delighted to be invited to lead the consolidation work stream for a finance transformation project all the way from producing the Functional Design document, through identifying, creating and testing the consolidation rules to successfully implementing them in a new Tagetik system, all under a strict governance process. I was blessed with working with great teams and the fact that the new system went live over a Year End (not my decision but it did add a certain excitement to the whole process) added to the sense of pride at our achievement. 

What challenges does IFRS17 bring in the next six to 12 months?
This is the most significant change to insurance accounting requirements in over 20 years and has been that long in the making. It will require a complete overhaul of insurers’ financial statements and its impact and work required will extend beyond the finance and actuarial functions of insurers with a large impact across Data, Systems and Processes. Its business impacts need to be understood and communicated to a wide range of internal and external stakeholders. Although its effective date has recently been deferred a further two years until Jan 2023, most businesses are already hard at work on its implementation. 

What impact will Covid19have on the industry?  
The obvious one is economic. The decrease in investment portfolios and associated drop in investment income will both give rise to a drop in available capital and a reduction in investment income. The regulators, especially in the UK and France, have put pressure on insurance companies to follow the bankers and cancel dividends, although not all European regulators have followed suit and not all insurers have complied. I suspect there will be further conversations between European regulators on different applications of the capital standards in the separate jurisdictions. The reduction in investment income will put more pressure on the underwriting result leading to probable increased prices. However, during the financial crisis in 2008, reduced yields resulted in a limited impact in the short term. There will also be an impact on claims and premiums, which will vary hugely by product. Of these travel and contingency will be the heaviest hit, with claims increasing and premiums dropping or being deferred. Business Interruption is being impacted by Social Inflation and the results of the various court cases will be waited upon with interest.

I have also recently read about the talent gap - the number of people becoming eligible for retirement being exponentially higher than the number of younger people interested in joining the insurance workforce. The pandemic may cause some people to delay retirement plans, reducing demand for newcomers and enhancing this gap. Hopefully both the emergence of Insurtech and the idea that insurance is a stable industry, will encourage those at the beginning of their careers to choose insurance.

Outside of Covid19 and IFRS17, are there any other challenges for the insurance industry in the coming six to 12 months? 
I'm not sure that there is much scope for big challenges outside the two you have mentioned, although following the impact of Fintech on the financial services industry, I see Insurtech having a similar disruptive influence on an Insurance industry that has remained relatively unchanged for a long time. We are already seeing Insurtech start-ups coming into the market, with many established insurance companies investing in them. 

What do you look for most when recruiting for your own teams?
Having ascertained that they have the technical skills I look at team fit:  do they have a good inquisitive mind, positively challenging the status quo, and do I see myself being able to work with them. I also like individuality although I wouldn't go as far as Dominic Cummings’ "weirdos and misfits with odd skills".

How do you like to spend your time when you are not working? 
I read up on insurance articles and enjoy listening to various webinars (totally recommend Colin Hiles’ “Stay sane in a crisis toolkit” series, Stuart Baldwin, Harriet Beveridge and Gavin Ingham.  For leisure, keeping (getting) fit has become an obsession and I recently took up cycling, and resistance exercise. Being at home has also enabled me to become our dog's best friend by taking him for long walks around the local fields. I also enjoy reading 'escapism' fiction and listening to a wide range of mainly pre 21st century music with Tchaikovsky, Genesis, Iron Maiden, Queen and Meatloaf all competing on my play list!