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Tier two Tier three Risk. Reinsurance. Human Resources. Stephen Cross Chief Innovation Officer Aon Risk Solutions Chairman Aon Global Risk Consulting Insurance.

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Presentation on theme: "Tier two Tier three Risk. Reinsurance. Human Resources. Stephen Cross Chief Innovation Officer Aon Risk Solutions Chairman Aon Global Risk Consulting Insurance."— Presentation transcript:

1 Tier two Tier three Risk. Reinsurance. Human Resources. Stephen Cross Chief Innovation Officer Aon Risk Solutions Chairman Aon Global Risk Consulting Insurance in the 21st century Risks, reward and opportunity

2 Risk. Reinsurance. Human Resources. Insurance in the 21 st century. Risk, reward and opportunity “Committee: A group of men who individually can do nothing, but as a group can decide to do nothing.” Fred Allen 1894 to 1956

3 Tier two Tier three Risk. Reinsurance. Human Resources. Insurance & Broking follow each others fortunes

4 Risk. Reinsurance. Human Resources. Brokers - segmentation Market cap Bloomberg – today in US $ Billions 1Marsh30.3 2Aon25.6 3A. J. Gallagher7.7 4Willis7.3 5Wells FargoN/A 6BB+T InsuranceN/A 7Brown and Brown4.6 8JLT3.0 9Hub InternationalN/A 10LocktonN/A

5 Risk. Reinsurance. Human Resources. Top Insurance Carriers Non Life Insurance 1Allianz 2State Farm 3AIG 4AXA 5Zurich 6Generali 7Liberty 8Allstate 9Travelers 10Berkshire

6 Tier two Tier three Risk. Reinsurance. Human Resources. Insurance in the 21st century Risks, reward and opportunity

7 Risk. Reinsurance. Human Resources. Top 50 risks – Aon Global Risk Management Survey

8 Tier two Tier three Risk. Reinsurance. Human Resources. Incremental vs game changers … but what about the recession?

9 Risk. Reinsurance. Human Resources. Progressive Insurance Company Founded in 1937 Revenue $17 Billion USD 27,000 employees Progressive opens its doors for business and introduces the industry’s first drive-in claims office 1937 First auto insurance group to launch a website 1995 First publicly held company to report underwriting results monthly 2001 First insurance group to offer instant online quotes for motorcycle, boat and watercraft insurance 1999 Android™ app just for car insurance 2010 Pay As You Drive (Usage based insurance) 2011 Uses customer credit history information to develop more accurate policy premiums 1991 Concierge claims service, reducing time spent on claims; 4 days to 15 minutes 2003 Safe driver Plan, which reduces rates for low-risk drivers 1956 First insurance company to offer Pet Injury coverage 2007

10 Risk. Reinsurance. Human Resources. Commercial insurance  Commodity?  Facilities Pre-Underwritten  Using SMART technology / satellite imagery  Current structure not a sustainable model

11 Risk. Reinsurance. Human Resources. Ballpoint pen in Space! When NASA first started sending up astronauts, they quickly discovered that ballpoint pens would not work in zero gravity. To combat the problem, NASA scientists spent a decade and billion’s to develop a pen that writes in zero gravity, upside down, underwater, on almost every surface, and at temperatures ranging from below freezing to 200 Celsius. The Russians used a pencil.

12 Risk. Reinsurance. Human Resources. Large Corporates and Multinationals  Opposite to other risks  Complexity and magnitude of risk increasing  Obstacles to achieving business objectives  ‘Change’ is everywhere  Volatility is an issue  More, way more than transactional relationship

13 Risk. Reinsurance. Human Resources. Uncertainty - Global  Uncertainty impacts investor confidence  Capital is portable 42% of population 50% of GDP Election’s in 2014

14 Risk. Reinsurance. Human Resources. What will shape insurance in the future? 1. Big Enormous data … Supported by analytics 2. Buying behaviours and access to information 3. Acceptance that data privacy is a thing of the past 4. New risks … Cyber, Social Media & Sustainability 5. Globalisation and interconnectivity – evolving systemic risks 6. Infrastructure & urban development over next 30 to 50 years

15 Risk. Reinsurance. Human Resources. “Information is not knowledge” Albert Einstein Enormous data… supported by analytics

16 Risk. Reinsurance. Human Resources. Flight QF32 - Nov 4, 2010 Airbus A380

17 Tier two Tier three Risk. Reinsurance. Human Resources. Buying behaviours and access to information Are we too old to change?

18 Risk. Reinsurance. Human Resources. “I skate to where the puck is going to be, not where it’s been” Wayne Gretzky Canadian Ice Hockey Player

19 Risk. Reinsurance. Human Resources. Acceptance that Data Privacy is a thing of the past …the genie is out of the bottle!  What is private?  What should be private?  Where is this going?

20 Risk. Reinsurance. Human Resources. Tracking Stephen … But I like some of this & it’s valuable to me!

21 Risk. Reinsurance. Human Resources. New Risks… Cyber  Do you have a Web Site?  Do you use Smart Phones?  Do you store data on a Cloud?  Cyber market at $2B in Premiums! Social Media  Traditional operation risk now reputational risk  Media cycle is no longer 24 hours Brokers role is to advise and hedge the risks

22 Risk. Reinsurance. Human Resources. Globalisation and Interconnectivity Proliferation of mobile devices Combination = Massive step forward …but also in terms of risk Accelerating connectivity Accelerating data accumulation Accelerating computer power Accelerating accessibility

23 Risk. Reinsurance. Human Resources. Who owns the ‘stuff’? “Power tends to corrupt and absolute power corrupts absolutely ” Lord Acton 1834 to 1902

24 Risk. Reinsurance. Human Resources. Infrastructure & urban development Population  100 years ago = 10% of people lived in cities  2014 = 50% of 7.2 billion people = 3.6 billion  2050 = 70% of 9 billion people = 6.3 billion Impacts  Risk Concentration  Extreme weather events  Requirement for massive increase in urban resilience  Shifting consumer preferences  New risks Question: can the market adequately insure the new risk landscape?

25 Risk. Reinsurance. Human Resources. A tale of two cities Detroit vs Silicon Valley …if the Insurance industry was a city, which one would it be?

26 Risk. Reinsurance. Human Resources. Opportunities and rewards  US and European companies have $7 Trillion in cash on their balance sheets  Private Equity have $1.2 Trillion  M&A activity has restarted  New risks and building risk resilience  Allows brokers to focus on value creation  Data and Analytics - improved decision making  Elimination of inefficiencies  Continued growth of the Middle Class  Many countries slowly climbing out of recession

27 Risk. Reinsurance. Human Resources. Risks  Failure to adapt, ignoring reality, resulting in gradual Irrelevance or Extinction  Redundancy in current infrastructure leads to Unemployment  Limited if any value placed on personal Relationships  Race for premium results in poor or Foolish Choices  Flawed inputs to machine learning, leads to Catastrophic Systemic Failure  Marketplace Manipulation  Massive Risk Accumulation

28 Risk. Reinsurance. Human Resources. Failure to adapt Example: Borders Books NYSD Founded in ,000 employees 2011: Chapter eleven

29 Risk. Reinsurance. Human Resources. Redundancy of infrastructure Leads to unemployment Redundancy of infrastructure …but if you don’t take action, companies without legacy systems issues will eat you alive

30 Risk. Reinsurance. Human Resources. Personal relationships  Do we care?  Do our future buyers care? Our definition of relationship changes… …to a ‘personal’ relationship with masses of people we never meet …So what?

31 Risk. Reinsurance. Human Resources. Foolish choices ExampleIrish banks system 2007 share price Current Anglo Irish Bank of Ireland Allied Irish Bank

32 Risk. Reinsurance. Human Resources. Marketplace manipulation Examples:  Banking on Libor  Insurance price fixing  Energy: ENRON  FX price (alleged) collusion  Payment protection Insurance miss-selling  …..

33 Risk. Reinsurance. Human Resources. Massive risk accumulation Do we actually know what is connected to what? Domino effect

34 Risk. Reinsurance. Human Resources. Predictions Self - learningMobile everythingTelematics Virtual currency Micro insurance New competitors in traditional space Crowd funding Automated advice Virtual markets Virtual exchanges Prescriptive fraud prevention Walking wallets Self - driving cars Earnings estimates based off a multitude of non-owned data points Google broking Facebook insurance Amazon Insurance

35 Risk. Reinsurance. Human Resources. “You see, but you do not observe ” Arthur Conan Doyle Predictions

36 Risk. Reinsurance. Human Resources. Predictions for brokering in the 21 st century Are we building this?


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