Insurance Executive

A Leader for Turbulent Times

Lloyd’s CEO Inga Beale is tasked with guiding the venerable insurance market through Brexit and the demands of the fiercely competitive global specialty business.
By: | July 6, 2017 • 12 min read

Underwriters at Lloyd’s are accustomed to taking on complex, even daunting, risks. The company’s leader looks at the world today and sees plenty of opportunity, but also much to be concerned about.

“Political instability is something that troubles me more than anything else because I think there is now more uncertainty across the world than there has ever been,” said Inga Beale, CEO of Lloyd’s of London.

“It feels that all of the norms that I grew up with are being challenged — openness, globalization, acceptance, inclusion — on a global scale.”

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Appropriately, we’re sitting around a table in Beale’s modern glass-fronted office at the top of the Lloyd’s Building — itself a vision from the future — to talk about Brexit and Lloyd’s newly announced Brussels subsidiary.

Add to the mix Donald Trump and the threat of nuclear attack from North Korea, the bombing of Syria and a spate of terrorist attacks across Europe, and it’s clear we are living in the most dangerous period certainly since the Cold War, or possibly ever, believes Beale.

That belief received even more chilling reinforcement when terrorists detonated a bomb at an Ariana Grande performance in Manchester, England on May 22.  Twenty two people, some of them children, were killed and more than 50 wounded in that attack.

Three years ago, it was Beale herself making world headlines with her appointment as the first female CEO in Lloyd’s 329-year history. But now Brexit and other seismic disruptions to world order have taken center stage.

Lloyd’s announced at the end of March that it would establish a new European subsidiary in Brussels in time for January 1, 2019 renewals so it can continue writing risks for all 27 European Union (EU) and three European Economic Area states after the UK exits the EU.

Currently, it uses its passporting rights to serve EU customers from London, but the expected loss of those rights after Brexit necessitated the establishment of a new subsidiary.

For now though, it’s business as usual, said Beale, with the UK remaining a full EU member for at least two more years. She added, with a reassuring smile, that there will be no immediate impact on existing policies, renewals or new policies written during that time.

“We were campaigning very much to remain in the EU before the referendum because we knew what the likely impact [of leaving the EU] would be on Lloyd’s,” said Beale, whose impressive resume includes stints with GE Insurance Solutions, Zurich and Canopius.

“We rely very much on our licensing network, and being part of the EU means that from London we can write insurance and reinsurance for all of the EU countries with our passporting authority.

“But with the UK exiting the EU, it now means that we lose those licensing powers to offer insurance with immediate effect. To counteract this, we have determined to set up a subsidiary within the EU, meaning that about five percent of our global revenues will have to go through this subsidiary because it is insurance business offered to our EU-based clients.”

Beale and her team also negotiated that most of Lloyd’s underwriting business will remain in London, as will the majority of the transactions and decision-making powers. Meanwhile, the manpower needed to run the new Brussels operation will be in the “tens rather than hundreds,” she is quick to point out.

“It’s not a huge raft of people having to move over,” she said.

“Lloyd’s will continue to do 95 percent of its business as it has always done — it’s only the other five percent that will have to go through a separate legal entity, and we’re not anticipating any further changes to our business model as a result.”

Beale, whose dual role is both supervisor and advocate for the market’s 100-something member underwriting syndicates, says that the franchise board chose Brussels over other locations including Luxembourg, Dublin and Malta because of its “robust and quality” regulatory regime.

“At the time, I didn’t even know that reinsurance existed, but once I discovered it I absolutely loved it.” — Inga Beale, CEO, Lloyd’s of London

It also provides access to a multilingual talent pool, is near to London, and, most importantly she stresses, is located in a member state with a “very high certainty of staying in the EU.”

“We want people who reflect our customers,” she said.

“The London insurance market is littered with people from all over the world because London is such a global insurance hub, so we need experts here who speak the language and understand the different cultures.”

North American Footprint

Despite its large European market, it’s the other side of the pond where Lloyd’s really thrives. Approximately 46 percent of its business comes from the U.S., mainly California earthquake and East Coast hurricane risks, she said.

Lloyd’s also remains the No.1 excess and surplus lines insurer in the U.S. and the largest non-U.S. domiciled insurer, she added.

“We have done really well in terms of growing our E&S market share over there,” she said.

“That’s our sweet spot; those non-standard risks that are hard to place.”

By contrast, Beale said that reinsurance has become a much more competitive market with new entrants offering alternative types of reinsurance putting a squeeze on prices. As a consequence, Lloyd’s has focused more on insurance, she said.

“We have also done well in Canada and with our delegated authority through our Managing General Underwriters and Managing General Agents,” she said.

“It’s this very local and specialist distribution channel that has been our success story across North America.”

In January, Beale was made a Dame Commander of the Order of the British Empire — the female equivalent of being knighted — and is also the Association of Professional Insurance Women’s Insurance Woman of the Year for 2017.

“What concerns us most is not individual risks such as earthquakes and hurricanes, but rather assessing the aggregation of our exposures to financial and liability-type risks with no geographical boundaries.” — Inga Beale, CEO, Lloyd’s of London

As the person directing Lloyd’s, she is also acutely aware of the shift in power towards emerging economies, with McKinsey recently reporting that 67 percent of commercial insurance growth will come from those markets by 2020.

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In response, Lloyd’s has focused its efforts on Asia and Latin America, transferring more than half of its managing agents to its Shanghai and Beijing platforms; and it was recently granted final approval to open a reinsurance office in Mumbai, she said.

“That’s where the future’s going to be,” she said.

“We know that a lot of the business is no longer coming to London in the traditional way, hence we have set up a Singapore platform and platforms in China, and opened up an office in Dubai as well as in India to be closer to our clients and brokers there.”

Lloyd’s profits last year were flat at $2.7 billion, while GWP was up $3.9 billion.

The market made a profit despite taking a $2.7 billion hit for major claims — the fifth highest such total since the turn of the century — primarily due to Hurricane Matthew and the Fort McMurray Wildfire in Canada.

Although natural disasters are Lloyd’s bread and butter, its real strength is in insuring complex risks, from cargo ships and satellites to political and terrorism risks.

Lloyd’s Role in Cyber

It’s the aggregation of those harder-to-quantify risks such as cyber security that concerns Beale most. Expected to grow to $7.5 billion in global premiums business by 2020, cyber is a big focus for Lloyd’s. It has a 25 percent market share and aggregate limits of approximately $650 million per risk, she said.

“What concerns us most is not individual risks such as earthquakes and hurricanes, but rather assessing the aggregation of our exposures to financial and liability-type risks with no geographical boundaries,” she said.

“We saw that with the financial crisis and the collapse of Fanny and Freddie, and its impact on Greece, but now it’s cyber.

“We have interviewed numerous risk managers and they are telling us that they are only insured against less than 10 percent of the risks that their businesses face on a daily basis. Our challenge is to make sure that we are continuing to adapt as fast as their businesses do and that we are delivering the relevant products that they need.”

Another area where Lloyd’s has seen an uptick is political and terrorism risk, said Beale.

The U.S. standoff with North Korea, Brexit and a swath of ISIS terrorist attacks across Europe have only exacerbated the problem, heightening fears among those countries’ citizens and tearing whole communities apart.

“We would love to get to a stage where a client can track something being quoted or a claim being paid, just like you do with a package being delivered [to your home].” — Inga Beale, CEO, Lloyd’s of London

Just witness the anguish of the victims and families in the Manchester concert bombing.

“We have seen a dramatic increase in demand for these types of products because of the political instability everywhere at the moment, particularly for companies that are trading cross border with countries where governments can suddenly intervene at a moment’s notice,” she said.

“Similarly, businesses are looking to protect themselves against the ever-growing threat of terrorism, which is where Lloyd’s can step in to give them the confidence to keep on trading.”

Reforming Lloyd’s

Within Lloyd’s itself, Beale has been at the forefront of trying to modernize the aging institution. Despite its modern metallic and glass exterior, inside Lloyd’s there’s still very much what some might term a stuffy “old boys’ club” culture.

Men are required to wear a tie and women weren’t allowed into the underwriting room until 1972. Brokers still walk around with leather slipcases crammed full of paper.

The Lloyd’s headquarters on Lime Street.

Beale’s predecessor, Richard Ward, tried to modernize Lloyd’s but left plenty for Beale to address in that respect.

Beale committed $700 million over the next five years to upgrade Lloyd’s aging computer and IT systems, with the end goal of achieving one-touch data capture to speed up the premiums and claims process.

“It’s about following that data all the way through the process from the client to the intermediary and the underwriter, and the processing of the premiums and claims,” she said.

“We would love to get to a stage where a client can track something being quoted or a claim being paid, just like you do with a package being delivered [to your home].”

Another area Beale is keen to shake up is diversity within Lloyd’s itself. Currently the market is two-thirds male, while only 11 percent of the whole London insurance market are non-UK nationals — a damning statistic that Beale is all too aware of.

“The Lloyd’s market doesn’t reflect the demographics of the whole of London and we are very conscious that we’re not tapping into all of the available talent that’s out there,” she said.

“We need to cut out the old ideas, try to challenge the unconscious bias and create an environment that is welcoming for people who are a bit different.”

Beale has also been pushing the [email protected]’s initiative, currently in its third year, and in September Lloyd’s will host the third annual Dive In festival to promote diversity and inclusion in the insurance industry.

In addition, 95 percent of the Lloyd’s market has already signed up to its Diversity & Inclusion charter to improve diversity, she said.

“To attract the best talent we need to modernize and look at how we can change our working practices and hiring decisions for the better,” she said.

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“There’s a vast amount of work that we are actively doing to encourage people to be more open and seek more diverse talent.”

On a personal level, Beale readily admits that she was late to the leadership game, and it was only her mentor, Annette Sadolin at GE, who convinced her to take her first promotion.

That lack of confidence is something that, as a leader, Beale has witnessed in her own team and she is keen to help overcome.

“Annette became very much a mentor for me throughout my career, so whenever I have had to make key decisions I would always ask her view,” she said.

“The key lesson that I have learnt from her is that things move so quickly and you need to take opportunities when they come along that give you exposure to something new, even if they don’t seem like a natural career path at the time.

“For me, being a leader is all about inclusion and being passionate about the people you work with because you need to inspire and motivate them. But there is also nothing more rewarding than watching people progress their careers.”

A Truly Global Journey

Beale, who initially harbored ambitions of being an architect, admits that she “fell into reinsurance,” starting as a trainee international treaty reinsurance underwriter at Prudential Assurance Company in London in 1982. But once she had a taste there was no turning back.

“At the time, I didn’t even know that reinsurance existed, but once I discovered it I absolutely loved it,” she said.

“I fell in love with the global nature of the risks that came to London; one day you could be looking at a piece of business from Chile, the next from Australia.”

But, back then, working in a male-dominated industry where she was the only woman among 35 men, Beale struggled to fit in. So she quit and went travelling for 10 months.

It was during her time as a receptionist at the BBC in Sydney, Australia that Beale worked under her first female boss, a formidable woman, she said.

Inspired by her boss’s strong work ethic, Beale decided to return to the insurance business.

She soon landed a job with GE Insurance Solutions in Kansas City, where she held various underwriting management roles, before being appointed president of GE Frankona and head of continental Europe, Middle East and Africa for GE Insurance Solutions in Germany.

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After 14 years at GE, Beale moved to Switzerland with Converium as group CEO in 2006.

Two years later, she joined Zurich Insurance Group as a member of the group management board in Zurich before being appointed global chief underwriting officer, prior to her appointment as group CEO at Canopius in 2012.

The breadth and depth of her experience makes Beale a natural fit for the demands of the Lloyd’s top job.

There’s no doubt she’ll be drawing upon every ounce of that expertise and experience to keep Lloyd’s at the cutting edge of this harrowing new world we live in.

Alex Wright is a U.K.-based business journalist, who previously was deputy business editor at The Royal Gazette in Bermuda. You can reach him at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Lead Story

Improving the Claims Experience

Insureds and carriers agree that more communication can address common claims complaints.
By: | January 10, 2018 • 7 min read

Carriers today often argue that buying their insurance product is about much more than financial indemnity and peace of mind.

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Many insurers include a variety of risk management services and resources in their packages to position themselves as true risk partners who help clients build resiliency and prevent losses in the first place.

That’s all well and good. No company wants to experience a loss, after all. But even with the added value of all those services, the core purpose of insurance is to reimburse loss, and policyholders pay premiums because they expect delivery on that promise.

At the end of the day, nothing else matters if your insurer can’t or won’t pay your claim, and the quality of the claims experience is ultimately the barometer by which insureds will judge their insurer.

Why, then, is the process not smoother? Insureds want more transparency and faster claims payment, but claims examiners are often overburdened and disconnected from the original policy. Where does the disconnect come from, and how can it be bridged?

Both sides of the insurer-insured equation may be responsible.

Susan Hiteshew, senior manager of global insurance and risk management, Under Armor Inc.

“One of the difficult things in our industry is that oftentimes insureds don’t call their insurer until they have a claim,” said Susan Hiteshew, senior manager of global insurance and risk management for Under Armour Inc.

“It’s important to leverage all of the other value that insurers offer through mid-term touchpoints and open communication. This can help build the insurer-insured partnership so that when a claim materializes, the relationships are already established and the claim can be resolved quickly and fairly.”

“My experience has been that claims executives are often in the background until there is an issue that needs addressing with the policyholder,” said Dan Holden, manager of corporate risk and insurance for Daimler Trucks North America.

“This is unfortunate because the claims department essentially writes the checks and they should certainly be involved in the day to day operations of the policyholders in designing polices that mitigate claims.

“By being in the shadows they often miss the opportunity to strengthen the relationship with policyholders.”

Communication Breakdown

Communication barriers may stem from internal separation between claims and underwriting teams. Prior to signing a contract and throughout a policy cycle, underwriters are often in contact with insureds to keep tabs on any changes in their risk profile and to help connect clients with risk engineering resources. Claims professionals are often left out of the loop, as if they have no proactive role to play in the insured-insurer relationship.

“Claims operates on their side of the house, ready to jump in, assist and manage when the loss occurs, and underwriting operates in their silo assessing the risk story,” Hiteshew said.
“Claims and underwriting need to be in lock-step to collectively provide maximum value to insureds, whether or not losses occur.”

Both insureds and claims professionals agree that most disputes could be solved faster or avoided completely if claims decision-makers interacted with policyholders early and often — not just when a loss occurs.

“Claims and underwriting need to be in lock-step to collectively provide maximum value to insureds, whether or not losses occur.” – Susan Hiteshew, senior manager of global insurance and risk management for Under Armour Inc.

“Communication is critically important and in my opinion, should take place prior to binding business and well before a claim comes in the door,” said David Crowe, senior vice president, claims, Berkshire Hathaway Specialty Insurance.

“In my experience, the vast majority of disputes boil down to lack of communication and most disputes ultimately are resolved when the claim decision-maker gets involved directly.”

Talent and Resource Shortage

Another contributing factor to fractured communication could be claims adjuster workload and turnover. Claims adjusting is stressful work to begin with.

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Adjusters normally deal with a high volume of cases, and each case can be emotionally draining. The customer on the other side is, after all, dealing with a loss and struggling to return to business as usual. At some TPAs, adjuster turnover can exceed 25 percent.

“This is a difficult time for claims organizations to find talent who want to be in this business long-term, and claims organizations need to invest in their employees if they’re going to have any success in retaining them,” said Patrick Walsh, executive vice president of York Risk Services Group.

The claims field — like the insurance industry as a whole — is also strained by a talent crunch. There may not be enough qualified candidates to take the place of examiners looking to retire in the next ten years.

“One of the biggest challenges facing the claims industry is a growing shortage of talent,” said Scott Rogers, president, National Accounts, Sedgwick. “This shortage is due to a combination of the number of claims professionals expected to retire in the coming years and an underdeveloped pipeline of talent in our marketplace.

“The lack of investment in ensuring a positive work environment, training, and technology for claims professionals is finally catching up to the industry.”

The pool of adjusters gets stretched even thinner in the aftermath of catastrophes — especially when a string of catastrophes occurs, as they did in the U.S in the third quarter of 2017.

“From an industry perspective, Harvey, Irma and Maria reminded us of the limitations on resources available when multiple catastrophes occur in close succession,” said Crowe.

“From independent and/or CAT adjusters to building consultants, restoration companies and contractors, resources became thin once Irma made landfall.”

Is Tech the Solution?

This is where Insurtech may help things. Automation of some processes could free up time for claims professionals, resulting in faster deployment of adjusters where they’re needed most and, ultimately, speedier claims payment.

“There is some really exciting work being done with artificial intelligence and blockchain technologies that could yield a meaningful ROI to both insureds and insurers,” Hiteshew said.

“The claim set-up process and coverage validation on some claims could be automated, which could allow adjusters to focus their work on more complex losses, expedite claim resolution and payment as well.”

Dan Holden, manager, Corporate Risk & Insurance, Daimler Trucks North America

Predictive modeling and analytics can also help claims examiners prioritize tasks and maximize productivity by flagging high-risk claims.

“We use our data to identify claims with the possibility of exceeding a specified high dollar amount in total incurred costs,” Rogers said. “If the model predicts that a claim will become a large loss, the claim is redirected to our complex claims unit. This allows us to focus appropriate resources that impact key areas like return to work.”

“York has implemented a number of models that are focused on helping the claims professional take action when it’s really required and that will have a positive impact on the claim experience,” Walsh said.

“We’ve implemented centers of excellence where our experts provide additional support and direction so claim professionals aren’t getting deluged with a bunch of predictive model alerts that they don’t understand.”

“Technology can certainly expedite the claims process, but that could also lead to even more cases being heaped on examiners.” — Dan Holden, manager, Corporate Risk & Insurance, Daimler Trucks North America

Many technology platforms focused on claims management include client portals meant to improve the customer experience by facilitating claim submission and communication with examiners.

“With convenient, easy-to-use applications, claimants can send important documents and photos to their claims professionals, thereby accelerating the claims process. They can designate their communication preferences, whether it’s email, text message, etc.,” Sedgwick’s Rogers said. “Additionally, rules can be established that direct workflow and send real time notifications when triggered by specific claim events.”

However, many in the industry don’t expect technology to revolutionize claims management any time soon, and are quick to point out its downsides. Those include even less personal interaction and deteriorating customer service.

While they acknowledge that Insurtech has the potential to simplify and speed up the claims workflow, they emphasize that insurance is a “people business” and the key to improving the claims process lies in better, more proactive communication and strengthening of the insurer-insured relationship.

Additionally, automation is often a double-edged sword in terms of making work easier for the claims examiner.

“Technology can certainly expedite the claims process, but that could also lead to even more cases being heaped on examiners,” Holden said.

“So while the intent is to make things more streamlined for claims staff, the byproduct is that management assumes that examiners can now handle more files. If management carries that assumption too far, you risk diminishing returns and examiner burnout.”

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By further taking real people out of the equation and reducing personal interaction, Holden says technology also contributes to deteriorating customer service.

“When I started more than 30 years ago as a claims examiner, I asked a few of the seasoned examiners what they felt had changed since they began their own careers 30 year earlier. Their answer was unanimous: a decline in customer service,” Holden said.

“It fell to the wayside to be replaced by faster, more impersonal methodologies.”

Insurtech may improve customer satisfaction for simpler claims, allowing policyholders to upload images with the click of a button, automating claim valuation and fast-tracking payment. But for complex claims, where the value of an insurance policy really comes into play, tech may do more harm than good.

“Technology is an important tool and allows for more timely payment and processing of claims, but it is not THE answer,” BHSI’s Crowe said. “Behind all of the technology is people.” &

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]