Risk Insider: Jack Hampton

The Relevance of Lloyd’s

By: | November 20, 2017 • 3 min read
John (Jack) Hampton is a Professor of Business at St. Peter’s University, a core faculty member at the International School of Management (Paris), and a Risk Insider at Risk and Insurance magazine where he was named a 2018 All Star. He was Executive Director of the Risk and Insurance Management Society (RIMS), dean of the schools of business at Seton Hall and Connecticut State universities, and provost of the College of Insurance and SUNY Maritime College in New York City.

Would baseball be the same without Babe Ruth? Or New York City without Manhattan or Thanksgiving without turkey? Of course not. The same can be said for the world of insurance without Lloyd’s.

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Imagine if you will, someone comes up to you and says,”I am sending a wooden sailing vessel from Canary Wharf in London to Kolkata in India. It is a journey of 11,500 miles making a 192-day, round-trip voyage at a speed of five miles per hour. The satellite global positioning system is not operating and hostile pirates line the route. If the vessel disappears, we may never know what happened. How much would you charge to insure it?

This kind of decision 300 years ago was the start of modern insurance. Ten shipowners agreed around a coffee table that each would accept 10 percent of the risk of loss of each other’s vessels. Ten ships depart. Nine come back with riches that are shared. Except for the loss of life, it doesn’t matter whose ship never returned or what happened to it.

Cyber risk management is like watching the departure of a sailing vessel with limited navigation or communication capabilities. A loss can occur with a breach of the walls of computer or communications systems. It can happen through doorways penetrated by hackers, mischief by rogue employees or careless actions by authorized system users.

What can go wrong? Everything. When can it go wrong? Immediately or never. How much of a loss will occur? No one knows.

An argument can made that we need a modern Lloyd’s to act as the focal point for cyber risk avoidance, reduction and transfer.

In such an environment, we can reflect about Lloyd’s morphing from a coffee house to a powerful global marketplace for insurance. Information about a loss would make its way back to London where details were shared to help reduce future loss. This worked so well that Lloyd’s established agencies in foreign ports, building an expansive information-sharing network further reducing losses even as its syndicates reimbursed them.

Another feature of Lloyd’s was the presence of speculators — parties who sought profits from accepting unpredictable possibility of loss. Insurance agreements were backed by the entire personal wealth of thousands of individuals who could lose everything following a catastrophe. As recently as the ’90s, dozens of Lloyd’s “Names,” as they were known, were forced into bankruptcy as they failed to meet their commitments to the insurance syndicates where they were members.

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An argument can made that we need a modern Lloyd’s to act as the focal point for cyber risk avoidance, reduction and transfer. It can act as a clearinghouse where risk managers, brokers, and carriers can quietly exchange confidential information and encourage all parties to enhance electronic systems to reduce loss. It can bring in the capital markets where speculators are willing to accept the possibility of extreme loss of unpredictable nature.

Risk managers should be encouraged to visit Lloyd’s and have this discussion, as I did in October. Just remember one thing — if you are a male, you must wear a tie. Don’t worry about a jacket. Lloyd’s has a room full of them for visitors who do not need a guarantee that one will match their tie and pants.

Tradition dies hard at the totally electronic, paperless, computerized Lloyd’s of today, even as the genius of its past and present may help meet tomorrow’s cyber risk needs.

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

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That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

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Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]