Tag Archives: Duperreault

Why Are We Still Just Talking Diversity?

These remarks were delivered in London on Sept. 27, at the start of the three-day Dive In Festival, an initiative designed to enable diversity and inclusion in the insurance industry. 

Thank you, Inga.

I appreciate that you feel I might be able to add something meaningful to today’s conversation. But I have to admit that as I put together my remarks, I felt a growing frustration.

I’ve been talking about aspects of diversity and inclusion for awhile now.

When I was at Marsh, the subject was one of the main focuses of a retreat I had with my senior management. At the time, Marsh had a lot of issues, and how to build a more diverse leadership was one of them.

A couple of years ago, I gave a speech at a captive conference in Bermuda called Where Are the Women?

I quoted chapter and verse from all the studies that have been done that prove having women in senior positions and at the board table contributes to an improved bottom line.

In the last year or so, I’ve talked about how diverse the millennial generation is, and how they expect their workplaces to respect and reflect that diversity.

See also: Is the Data Talking, or Your Biases?

Those talks also quoted chapter and verse showing that diverse teams produce innovative solutions that translate to better business results.

And last year, I spoke at the annual meeting of the Insurance Industry Charitable Foundation. That speech was called Where Are the Women – One Year Later. The answer wasn’t a satisfactory one.

Over the years, not much has changed. Just more talk and more research.

I’m at the point where I want to say – enough!

We’ve talked enough. We’ve researched enough.

We have proof that diverse teams are more creative.

We have proof that when employees feel included, you get superior results.

We have proof that we need to do a much better job of attracting millennials to the industry.

I won’t bore you by citing the studies that make the business case for diversity.

And quite frankly, I don’t care about the business case.

Because this is the right thing to do. Exclusion has no place in any industry, not just insurance.

We all know this is true. And yet changes we’ve made over the years have been incremental, not fundamental.

We’ve made some progress with race and gender parity, but truly diverse bench strength just hasn’t materialized.

Why?

One reason is that it’s difficult to break up the status quo, and old habits die hard.

Look at Lloyd’s. Here’s a venerable institution, with a culture and tradition all its own, and a way of doing business that’s been forged over the centuries.

Lloyd’s is to be celebrated for its resilience and endurance, and for the iconic global brand that it’s established.

But for the most part, the market has been built by males – mainly white – who are used to working together.

This shouldn’t be taken as criticism. Lloyd’s is not the only place that’s diversity-challenged.

And the fact is – a homogenous group develops its own shorthand and leans on its shared experiences. It’s a comfortable and familiar way to do business.

Nothing particularly wrong with that – except that in today’s world, a group like that is an anachronism.

Look at the world in the 21st century. Fifty percent of the population is under the age of 30. That’s billions of people with a profoundly different perspective than the generation now running the insurance industry.

In the U.S., racial minorities will be the majority in less than 20 years.

In the U.K., there’s a similar trend although not as pronounced. If our industry is going to remain relevant, our workforces must mirror the world we live in.

If we’re going to undertake partnerships like Blue Marble, the microinsurance venture that relies on technology to address the massive protection gap in the developing world, we need digital natives in our offices, not digital immigrants like me.

Everyone here today knows this. I’m preaching to the choir.

So what’s the reason we haven’t made more progress?

Legislation that prohibits discrimination in recruitment and employment practices has been in place in our major markets for years.

Every leader I know in the industry is committed to this issue.

And yet – even though more than three quarters of insurance CEOs surveyed recently have a strategy for diversity and inclusion, the same survey warns that underrepresented groups feel this is mere lip service.

Eighty percent of the women surveyed feel that, while their leaders may SAY they’re committed to diversity, career opportunities aren’t equal and promotion is biased toward men. The same goes for people of color.

See also: How Diversity Can Stoke Innovation  

What’s really at play here?

In Bermuda, the first event in our Dive In Festival is a workshop on unconscious bias. Kathleen and her team chose the subject because they feel it’s a significant factor in how we create a diverse and inclusive industry.

Inga touched on it last year when she launched Dive In.

She warned that unconscious bias “makes managers hire in their own image, missing out on the perspectives and insights that come from people with different backgrounds, gender, cultures, sexuality and physical impairments.”

And there’s the rub.

For all the intellectual support we give diversity and inclusion, we still haven’t found a way to confront the biases each one of us has.

Unconscious bias is another area where there’s been a lot of research. Some statistics here might be helpful in understanding how this works.

Our brain processes about 11 million pieces of information a second. To manage this constant influx of data, we develop mental shortcuts to handle what we’ve learned so we’re not overloaded by what we’re learning.

These shortcuts are influenced by our environment, our upbringing and our experiences. And depending on what those influences are, we end up holding stereotypes we’re often not aware of.

That’s the gist of unconscious bias.

Implicit or unconscious bias prompts our brains to make snap judgments without even thinking about them. It’s easy to see how this can affect hiring and promotion decisions.

I’d like to pause here, because I know that some people balk at this explanation for why we’ve made so little progress with diversity and inclusion.

To anyone who’s been on the receiving end of what feels like a discriminatory decision, this sounds much too convenient.

In other words: Don’t hide behind the excuse that your preconditioned brain made an unfair hiring decision.

This is a fair comment. I’m not saying that our industry’s management is so evolved and self-aware that conscious decisions to discriminate have been eliminated from the workplace.

We know that’s not the case.

However, if we accept that unconscious bias does affect our ability to make meaningful progress, what do we do about it?

How do we recognize our biases and learn how to compensate, so that the diversity and inclusion balance tips in the right direction?

Events like Dive In help. For the next three days, thousands of people working in our industry will be thinking and talking about diversity and inclusion. That’s a great start.

I’m involved in another initiative called the Insurance Careers Movement. This is a campaign to compel millennials to choose insurance as a career. One of its key messages is there’s a place for everyone in our industry. I’m grateful to Inga for joining me in this effort.

Both Dive In and the Insurance Careers Movement keep issues of diversity and inclusion at the forefront. They raise our collective awareness.

Ultimately, it’s people like me who have to commit to making a difference, because the buck stops with us.

The most obvious way for industry leaders to tackle unconscious bias – and perhaps the easiest – is to challenge our management to build diversity metrics into recruitment, hiring and promotion policies.

This doesn’t imply that qualifications, education and experience don’t matter or should be discounted. But it formalizes and embeds a focus on diversity, and that’s important.

We can make sure our work spaces are inclusive. Can a person with a physical impairment work there comfortably? For example, are our offices wheelchair accessible?

Do our corporate policies accommodate neurodiversity? There are companies who recognize that the pool from which they draw talent can include employees on the autism spectrum. They’ve created a working environment that makes these employees feel welcome and valued.

Do we offer our management opportunities to take workshops and seminars on what a diverse and inclusive company looks like?

There are lots of concrete examples of how unconscious bias can be offset by a corporate culture that enables diversity and inclusion.

But:

With all that, I keep coming back to one essential truth:

Creating a diverse and inclusive industry is the right thing to do. It’s always been the right thing to do.

It’s never been the easy thing to do. As I said earlier, it’s much easier to stay with the same than choose the different.

To greater and lesser degrees, we all know what that feels like. Think of a time when something about you was held against you – often something completely beyond your control.

It could be your social status.

Or the color of your skin.

Or your religion.

Or who you love.

See also: Language and Mental Health (Part 3)  

At one time or another, each of us has felt that we were being judged unfairly and that opportunities for which we were qualified were withheld for all the wrong reasons.

I include myself in those comments. I was raised by a single mom who, as a separated but devout Catholic, was judged by her church and her community as “less than.”

Those are difficult memories for me.

But as difficult as they are, they gave me a compassion and an empathy for what it feels like to be excluded.

As we work to improve our corporate practices, and offer training, and host events like Dive In, I’d like to challenge all of us to remember what it feels like to be on the outside looking in. If we can hold onto the compassion and empathy those memories generate, I believe we can begin to overcome the unconscious bias that’s inhibiting our progress toward a diverse and inclusive industry.

We know it’s the right thing to do, so let’s do it.

Thank you.

Insurance in the Age of the 12th Man

Brian Duperreault, chairman and CEO of Hamilton Insurance Group, told attendees at A.M. Best’s 23rd annual conference in Scottsdale, AZ, that the insurance industry has been an analog laggard rather than a digital leader, and that the clock is ticking on responding to the needs of a digital world. The address follows:

Thank you, Matt, and thanks for that wise review of the forces that have shaped the industry over the years.

Hearing that history line makes me feel pretty old. I lived through a lot of those highlights.

You’ve heard where we’ve been as an industry, and I’ve been asked to give you some thoughts on where we’re going.

The title I’m using is Insurance in the Age of the 12th Man. I’m sure most of you know what I’m referring to by the 12th man – any Seahawks fans with us today? – but in case you don’t:

The reference to a 12th man was first used more than 100 years ago to describe a really dedicated football fan.

It gained some significant traction at Texas A&M, and the Aggies still claim it’s theirs – in spite of what the Seahawks say.

The point is this: Fans can be so fanatically loyal to their team, it’s like having a 12th man on the field. Fans can shape the game and often affect a win or loss.

I’ve heard they can even make the earth move.

Last month, fans at a soccer game in the U.K. celebrated a last-minute goal so “enthusiastically” that it was recorded as a minor earthquake.

Why am I referring to the 12th man in a talk about the future of insurance?

Because we’re doing business in an age that’s profoundly different from anything we’ve ever experienced, and I believe it’s driven by what I’m going to call the 12th man phenomenon.

Virtually every industry has been redefined by an increasingly demanding customer, and it’s doing the same to ours. It’s the fan base – the collective 12th man – that’s driving how we develop, market and distribute our product.

And for many companies, there’s not much time left to figure out how to stay in the game.

PwC just released its annual CEO report and noted that access to digital technologies means that we’re more connected, better-informed and, in PwC’s words, “increasingly empowered and emboldened.”

This isn’t just a shift in market forces. The market has always been changing, and we’re used to that. This is something entirely different.

Given the digital world we’re living in and the impact of real-time communication through social media, the market’s voice is much more crystallized. There’s an immediacy, an intimacy that we’ve never had to deal with before. This is a voice that’s loud, clear and specific.

One of the best examples of the effect of the 12th man is Uber.

You probably know Uber’s story.

Its founders were so fed up with how hard it was to get a cab when they wanted one that they developed an app that puts a taxi at your fingertips. They didn’t just enhance the taxi industry; they blew the existing model apart.

They didn’t care what the regulations were. They just made it work – and it continues to work, because Uber gave customers what they wanted. AirBnB did the same thing to the hotel industry.

  • If you’re used to downloading apps to watch a movie, do your banking or order your groceries;
  • If you customize how, when and where you listen to the radio or watch TV;
  • And if this uncluttered, efficient, highly personalized way of living is what you’ve been used to since you could walk, then

There’s no reason that you’re going to expect anything less when you’re buying insurance.

Maybe this sounds like background noise to those of us who’ve been in the business for a while. After all, our industry has been resilient over the centuries. It’s been a safe bet for decent returns on investment.

But people my age see the world through an analog prism. This is our Achilles heel – because there’s a generation of 80 million Americans who see the world through a digital lens.

This is the workforce that Matt referred to earlier.

They’re going to be the buyers and sellers of our products. They’re going to run our companies. As the largest voting bloc in the U.S., they’re going to elect our governments.

They’re going to be a noisy and demanding 12th man. They already are.

This expectation for a streamlined and efficient buying experience is one of the main drivers behind my company, Hamilton Insurance Group. We believe that insurance has been an analog laggard, not a digital leader. We think we can do something about that.

As I give you thoughts on what will shape our industry over the next decade, I’m going to keep coming back to the 12th man.

I’ve seen lots of lists of future industry trends – some of them are mine – but I think it comes down to:

  • How to build a sustainable company
  • How to be smart about data and
  • How to strip waste out of our industry.

Let’s look at sustainability.

Traditionally, creating shareholder value in an insurance company has had two main components: investments and underwriting.

Right now, we’re between a rock and a hard place on both counts.

We’re in a prolonged zero-lower-bound period where interest rates dip in and out of negative territory.

In a traditional insurance company, there is no money to be made on the fixed instruments that most companies are required to invest in.

Having low-yield assets on a balance sheet for regulatory purposes virtually ensures little investment income.

What’s a CEO or CFO to do?

Well, you can shift your investment philosophy and invest in equities or alternative instruments with a higher yield. But you have to prove you can handle the additional risks that come with a different mix of asset allocations.

You also need an expert asset manager who’s well-versed in current regulations, as well as the commitment of your executives and board, to move to a riskier investment strategy.

You can bank on profitable underwriting – but in a market like this, that’s a grueling experience. Terms and conditions are tough, and margins on most lines of business are razor thin. You have to stay disciplined and resist the siren call to write discounted business. And it seems the days of large reserve takedowns are over.

You can look for M&A opportunities, which in many cases may delay the inevitable and add the stress and cost of effectively integrating what are likely to be legacy systems and cultures.

And while you’re grappling with investments, underwriting and M&A, you have to keep an eye on the rapidly changing digital world, which could render your company obsolete.

So what’s a sustainable business model look like in the age of the 12th man?

I think part of the answer lies in a flexible regulatory environment.

If you’re a company in Bermuda, where your regulator is the Bermuda Monetary Authority, you can establish an alternative investment strategy, as my company has done, in return for putting up additional capital, and work with a data-driven investment manager like Two Sigma, which manages Hamilton’s investments.

Almost a decade ago, the BMA embraced the Solvency II framework and then fought to get Solvency II Equivalency for Bermuda. Their persistence will be rewarded when official recognition of Bermuda’s equivalency takes legal effect on March 24.

I don’t think it’s a coincidence that virtually the day after Bermuda’s Solvency II Equivalency was announced, XL Catlin announced it was moving its company registration to Bermuda. I think others will follow.

Bermuda has reacted well — better than most — in recognizing that flexibility is key to staying solvent.

In the States, things are more complicated. Deloitte released a report last month that said one of the biggest challenges for today’s insurance companies is trying to comply with new capital regulations that were originally designed for banks and don’t provide much flexibility in modifying an investment strategy.

It’s an accepted tenet that regulation works best when it addresses market failures and protects insurance buyers. But regulation can over-correct: In some cases, states have been too slow to rewrite laws, some of which have been in place for almost 100 years.

Today’s regulator has to confront the effect that the digital dynamic is having on both the insurer and the insured. This creates the need for a delicate balancing act: defining the right regulatory regime in a market that’s morphing in front of our eyes.

A word about rating agencies – sometimes referred to as de facto regulators:

Some agencies, like A.M. Best, have been forward-thinking in broadening the factors they consider when assigning ratings. I applaud Best’s for undertaking the survey on predictive analytics that Matt discussed. This is a meaningful contribution to the dialogue. We need more of that from our regulators and rating agencies.

Best’s has also done the work to understand alternative assets. For example, at Hamilton, Best’s spent time onsite with our investment manager, recognizing that these complex strategies require some effort to understand.

Having said that, I’d like to urge rating agencies to put more weight on the 12th man’s voice. How you’re accepted by the market matters. The quality of the relationships you establish, the panels you’re on, the submissions you receive – that all matters.

I said investments and underwriting were traditional aspects of building sustainability. M&A can play a role, and technology definitely does.

However, in this second decade of the 21st century, there’s so much more to running an insurance company.

In addition to a vocal, demanding 12th man, we’re living in a world of extreme political polarization, exchange-rate volatility and social instability.

And against that fragmented, disrupted backdrop, there’s the expectation that a company’s commitment to purpose should be as important as its commitment to profit.

Almost half of the 1,400 CEOs surveyed by PwC feel that, in five years, customers will put a premium on the way companies conduct themselves in global society.

Building a sustainable company is one of most complex issues we’re going to face over the next decade.

Now let’s look at data.

A few years ago, we were all talking about Big Data. It was THE buzz word.

Looking back, I think it’s safe to say that most of us didn’t know what we were talking about.

But living with the effect of disruptive technology, we’ve been on a steep learning curve. We’ve begun to wrap our heads around what we can do with the massive streams of data available to us.

EY just released a study on sensor data. It’s worth a read if you haven’t seen it.

As lead director at Tyco, I have to declare my interest in the subject. We’re spending a lot of time looking at how streaming data can help us develop better products.

We’re taking a holistic, data-driven look at behavior across multiple channels to give our clients the insight that helps them optimize their performance.

EY says top-performing insurance companies are already innovating with telematics, wearable technology and sensor data. EY lists the competitive advantages of being smart about data this way:

  • You can assess risk more precisely
  • You can design products faster
  • You can connect with customers more directly
  • You can revolutionize claims handling
  • And – you can maximize profitability because of better targeting

The implications for what sensor data can do for our industry are remarkable.

We’re talking about sensors on people, on cars, on ships and planes, in offices and homes, on GIS systems that provide data about climate – pretty much anything on the earth, or in the sea and sky.

Understanding this voluminous amount of data, finding correlations and eliminating bias can help us develop policies that are better-written, more comprehensive and more relevant.

Being smart about data also helps us come to grips with emerging risks, particularly a risk like cyber.

At Hamilton, we’re taking a cautious position on cyber. We’re not writing it as a class until we’ve identified an approach that gives us comfort. We haven’t found one yet, mainly because there’s been a tendency to underestimate the interconnectedness of cyber risk.

Too often, discussion about cyber revolves around hacking. But if you put any credence in what I just said about the impact of sensor data, you have to believe that there’s data-based risk in everything we do nowadays. If that’s true, what are the implications for cyber?

Getting back to sensor data –

Access to this type of intelligence has some significant implications for our distribution partners. The role of the broker and agent has been evolving for years, but data analytics is one of the greatest threats – or opportunities – for the partners who help us develop and distribute our products.

Who owns the data? Who interprets it? Does the insurer or the insured need anyone to do that any more?

Then there’s the duality of the role that brokers and agents play. They represent the insurer’s interest as well as the insured or reinsurer. Serving two masters is never easy. How well can you do that in an age of colliding data sets?

I think the answer to whether there’s still value in an intermediary is a qualified yes – IF the broker or agent brings a level of expertise and counsel that far surpasses what the carrier offers or the client can determine by himself. This means setting the gold standard for manipulating and interpreting data.

A last comment on data –

One of my own learnings over the last year or so is that if a company is going to embrace data and technology, it has to be a company-wide initiative. It can’t be done in silos.

I don’t think it works to have an incubation or innovation lab where a dedicated team is exploring a new risk management frontier and the rest of the organization is conducting business as usual. You’ll have constant dissonance between the analog and the digital.

At Hamilton, one of the advantages of being a start-up is that we’ve been able to make technology a focus of our strategic plan from the beginning.

Last year, we bought a Lloyd’s syndicate that we’ve completely rebuilt. The benefit of not having any legacy has allowed us to create an end-to-end, integrated system with all reports coming from one centralized data warehouse.

We’ve already demonstrated the value of this model. When Lloyd’s moved to require its syndicates to report pricing data for gross rather than net performance, a lot of managing agencies struggled. We didn’t.

Finally, I’ll look at the last issue I listed in my opening comments – getting rid of the waste in our industry.

By waste, I mean the massive cost of doing business. I’ve been beating this drum since Hamilton was established a couple of years ago, and I’ll keep at it because, if anything puts our industry at risk, it’s the inefficient way we acquire business.

Thirty to 40% of every premium dollar goes to acquisition and managing the business. At Lloyd’s, it’s even higher, largely because analog data-gathering weighs on the market like an albatross.

The quest to make buying insurance easier and more efficient through data analytics is the DNA of our U.S. operations, where our focus is small commercial business.

We want to remove the pain of the rate/quote/bind experience and sharpen the underwriting. We’re blessed with employees who believe in our mission and who have moved mountains to make it real.

They’ve spent the last year stripping unnecessary questions from the forms used in the acquisition process. We know a lot of that data suffers from human bias or error, and much of it is available from public sources that are more reliable.  We use data that comes from dozens of different sources as part of our risk scoring and underwriting process.

Our long-term goal at Hamilton USA is to get the questions that an agent or broker asks an insured down to two: name and address. Smart data analytics, as well as more informed underwriting, will do the rest.

We’ve also created streamlined portals for quotes and are just weeks away from launching mobile-based technology that rates, quotes and binds business owners policies.

The small commercial segment that we’re working in has an average policy size of under $25,000. This is business with small margins and high transactions. Efficiency is critical if you want to make any money.

And there’s ample room for doing just that. In the U.S., this is a $60 billion market. It’s almost $90 billion when specialty risks are included.

You can see why speed to market can make a huge difference in profitability.

Speed to market doesn’t mean we’re cutting out the middleman.

There’s plenty of room at the table for brokers, agents and MGAs – as long as they want to align their systems and practices with our cutting-edge analytics.

We’re working with partners who are as excited as we are about the potential that data analytics represents. We’re being approached by many others who are interested in taking this journey together with Hamilton.

And there’s a generational component to all of this. Some older clients want to do business with a broker or an agent. It’s a relationship they recognize and feel comfortable with.

But remember that 12th man. There are 80 million of them for whom a middleman just gets in the way.

In closing –

I know that Matt was a keynote speaker at a conference earlier this month organized by Valen Analytics. I understand there was lots of good discussion and some fascinating stats underscoring the imperative to embrace data analytics.

Apparently, 82% of companies surveyed last year by Valen say that underwriters are resisting analytics. 30% worry about a loss of jobs. 30% don’t trust the data.

77% of underwriters and actuaries argue about pricing. The No. 1 reason? Underwriters dismiss data in favor of their own judgment.

While we continue to resist change, venture capital companies are looking at our industry and seeing dollar signs.

In 2015, VCs invested $2.65 billion in start-up insurance companies like Oscar, Gusto and PolicyGenius. Ten years ago, that figure was $85 million.

So the clock is ticking. There’s not a lot of time left to figure out how to build sustainable companies, be smart about data and be more efficient.

Above all else, we need to get over our inherent resistance to change. If insurance as we’ve known it was an ecosystem, large sections of it would be on the endangered species list.

But I’m an eternal optimist. I know we have bold people working in insurance and reinsurance. I know a lot of us get what needs to be done.

So let’s just do it – before that 12th man comes down from the bleachers and does it for us.

How to Seize the Opportunities in 2016

This keynote address was delivered to the EY/Insurance Insider’s Global Re/Insurance Outlook conference at the Hamilton Princess Hotel in Bermuda.

It’s a pleasure to be here this morning. I appreciate being invited to offer some thoughts on the state of our industry and where we seem to be headed.

If you’ll indulge me for a few minutes, I’m going to look back at 2015 before I look forward to 2016. It feels like the right thing to do, given the year we’ve had.

I don’t know about all of you, but for me 2015 has come and gone in the blink of an eye.

And what a year it’s been.

You could invoke Dickens and say: It was the best of times. It was the worst of times.

This was the year that a youthful head of state swept into office in Canada on a promise of “sunny ways” – and it was the year that terror ripped through a nightclub in Paris, and a Christmas party in San Bernardino, CA, shattering our personal sense of security.

It was the year that the pope declared a Holy Year of Mercy, and it was the year that more than a million refugees streamed out of the Middle East and into Europe, in a desperate attempt to escape a jihadist war.

It was the year that almost 200 nations signed a landmark agreement to address climate change, and it was the year that another once-in-100-year flood lashed northern England for the second time in less than 10 years.

It was the year that the concept of “the singularity” – when human computing is overtaken by machines – became a distinct possibility.

It was also a year when driverless cars, packages delivered by drone and 3D printing became tangible realities.

Here in Bermuda, 2015 was the year that signaled the demise of a brand name close to my heart – that would be ACE – as M&A fever reshaped the island’s market landscape. It was also the year that the Bermuda Monetary Authority pulled off a coup – seven years in the making – by getting the European Commission to grant us Solvency II equivalence.

2015 was the year when Millennials – the generation born between the late ’80s and the turn of this century – became the largest demographic ever. Think about it. More than half the world is now under the age of 30.

And it was the year when we truly began to exit a world driven by an analog mindset and woke up to the fact that we’re living in a digital age. Labels like digital immigrants and digital natives were used to describe two of the four generations now making up our labor force.

I was invited to speak at a number of different venues this year, and, at each, I tried to describe this sense of being between two worlds.

I’d like to share some of the highlights with you, as I think these issues are going to be key to transforming our industry.

The first speech I gave this year was called “Risk in 140 Characters.”

I was speaking to a group of Millennials in London, and I used Twitter as an example of stripping out inefficiencies to get to the core of a business model. I challenged them to figure out how we can leverage technology to make our industry more efficient.

I also challenged them to spread the word about the industry to their peers. Millennials don’t think much of insurance as a career. With 400,000 positions opening up in five years in the U.S., this lack of interest is creating a talent crisis.

The next speech was “Can We Disrupt Ourselves?”

I spoke to the International Insurance Society in New York a few weeks after I spoke to the Millennials in London, and described some of the game-changing forces our industry is facing – driven by disruptive technology.

I challenged this group – who represent executive management – to figure out how to attract a new generation to our industry, AND to figure out how to work with them. The solution to our disruption will come from the digital natives among us.

Then there was “Where Are the Women? One Year Later.”

In 2014, I gave a speech called “Where Are the Women?” I asked why there aren’t more women in the C-suites and boardrooms of the insurance industry.

This year, I looked at whether much has changed in a year – the answer is no – and what might be done.

The short answer is that people like me – the white males who dominate our industry – need to make gender parity and diversity a priority, and mean it.

A speech I gave to St. John’s University’s School of Risk Management was called “The Canary in the Coal Mine.”

St. John’s organized a day-long conference on issues facing the industry. I talked about M&A, alternative capital and the changing roles of brokers, cedants and reinsurers.

I also addressed the talent crisis, making the point that Millennials are the canaries in the coal mine.

If we don’t pay attention to what they’re telling us about our workplaces and work policies – and this includes our attitude toward diversity and inclusion – they’re going to continue to snub our industry. And we can’t afford to let that happen. Not only are they our future workforce, they’re our current and future customers.

An address to 400 top producers of a brokerage firm was called “Do You Know How to Think Like a Unicorn?”

In Silicon Valley, companies backed by a $1 billion or more in capital are called unicorns, and those backed by more than $10 billion are called “decacorns.” There are more companies with this level of capitalization now than at any other time.

And remember, most of these are tech start-ups, many of which are behind the disruption that’s transforming our world.

I told the brokers that, in the digital world, they need to know their clients’ business, and their clients’ risks, better than the CEO does.

There’s currency in knowing how to interpret data, and brokers have a great opportunity to develop specialized skills that they can monetize.

That’s where the real value-add is.

According to a recent study by IBM, C-suite executives around the world are kept awake at night worrying about being ambushed by so-called digital invaders.

More than 5,000 executives participated in the IBM study. More than half of them told researchers that, above all else, they fear being “Uberized” – blindsided by a competitor outside their industry wielding disruptive technology.

While loss activity, interest rates and pressure on terms and conditions will always affect underwriting and financial performance, it’s now a given that technology and talent will determine who will succeed and who will fail.

So, I asked the brokers: do you know how to think like a unicorn?

I was told later that this firm is now describing itself as a technology company whose product is insurance – so I guess they took my suggestions to heart.

So this year, I focused on five main themes:

  • We still have rampant inefficiency in the way much of our business is conducted.
  • We’re threatened by technological disruption.
  • We have unprecedented risks for which there are no actuarial data.
  • The roles we play are being reinvented in real time.
  • And we have a looming talent crisis.

Not a pretty picture, and not for the faint of heart.

But what scope for innovation!

I really do believe this is one of the most exciting times to be working in this industry in the 40 years since I joined it.

We enter 2016 with the hope that terms and conditions will improve, and the expectation that industry consolidation will continue.

[The recent increase] in interest rates could mean that our capital may take a hit, but we’re likely to earn greater investment income over time, leading to increased revenue.

But these are the traditional hallmarks of a market cycle. This is the easy stuff.

There’s nothing easy or traditional about what’s facing our industry right now. Those of us who cling to the old way of doing business aren’t going to make it.

It’s the manner in which we navigate from the analog to the digital – how we move between two worlds – that will set our future course. This is going to take bold, courageous moves, some leaps of faith and a willingness to fail as often as we succeed.

I think it’s telling that [in November] about 200 industry representatives and entrepreneurs gathered in Silicon Valley to figure out how to change the traditional insurance model.

They felt we need to flip the value proposition from protection to prevention, using data analytics to define the characteristics of a risk and identify how to avoid it.

A report on this conference described it this way:

“One of the biggest challenges for successful executive teams is to reframe a company’s purpose away from its past greatness, and toward a different future.”

We’ve been an industry where past is prologue. But for many of the risks we’re facing, there is no past.

It really shouldn’t matter. We’re awash in data, but data pure and simple isn’t the point.

We need to harness data to predict the future – in other words, adopt the prevention mindset.

The issue isn’t simply gathering massive quantities of data. We need to take the data we have and know how to ask the right questions, and refine the right algorithms, to get the analysis we need to provide our products quickly and efficiently to a world doing business on smart phones.

To create the best risk solutions, we need to redefine the relationships we have with each other and build new organizational ecosystems. This is no time for staying in our traditional comfort zone.

And as an industry whose purpose is to secure the future, we have a collective obligation to address the massive protection gap between the developed and emerging economies.

In 2014, there were an estimated $1.7 trillion in losses. $1.3 trillion of that number was uninsured.

With collaborative undertakings like Blue Marble, the microinsurance consortium that was launched this year, we can begin to close this gap. This not only helps prevent disaster for the underserved, it helps build a sustainable planet.

I know we can figure out how to re-create our workplaces, finding ways to meld the experience and traditional perspective of Baby Boomers like me with the open, diverse, purpose-driven focus of Millennials.

This might be one of our greatest challenges, because it aims straight at the heart of our industry’s old-school DNA.

By the way, I like that Millennials are purpose-driven – because what industry can more rightfully lay claim to purpose than insurance?

As I said in one of my earlier speeches, insurance should be catnip to a Millennial.

Several of us are banking on that being true by supporting an awareness program to let the younger generation know that this is a great career choice.

I’ve been joined by Marsh’s Dan Glaser and Lloyd’s Inga Beale in signing a letter urging our fellow CEOs to put their companies’ weight behind this initiative.

The first phase of this plan is an Insurance Careers Month that will be launched in February 2016. This is primarily a U.S.-based project because that’s where the urgent need is, but other markets will be participating, too. We were aiming to enlist the support of at least 200 carriers, brokers, agents and industry partners – and at last count we had almost 260 signed up. The response has been great.

So, in closing:

It HAS been quite a year.

The way we live and work is changing faster than I think any of us thought possible. We have some amazing challenges and opportunities ahead of us – here in Bermuda, and in the countries where many of us do business.

I’m excited about where we’re going and how we’ll get there, and I hope you are, too.

I believe it’s the best of times.

In the meantime, I hope you all have a great morning of provocative thought and discussion, and I wish you a safe, happy and healthy holiday season.

Can We Disrupt Ourselves?

Brian Duperreault, CEO of Hamilton Insurance Group, delivered these remarks to the recent Global Insurance Forum, held by the International Insurance Society (IIS) in New York City.

It’s a real pleasure to be with you at what is arguably one of the most important annual events in our industry.

I was just 18 years old when the International Insurance Society had its first global meeting in Austin, Texas. I entered the industry in my 20s and joined the IIS in my 30s.

Since then, I’ve benefitted professionally and personally from the knowledge I’ve gained and the friends I’ve made at these annual meetings.

Today, I’m going to talk about an issue that represents a distinct threat to our industry. I might even go so far as to call it an existential threat.

But, like all threats, it also represents a great opportunity.

In it could lie the seeds of a legacy of meaningful change for each of us charged with leading our industry.

So I’m going to address the question: Can we disrupt ourselves?

I’m going to start by saying a few words about Twitter.

Bear with me. I do have a point to make that’s relevant to insurance. Twitter has one billion registered users so far… about one human out of every seven on Earth.

Only 6% of Twitter users are over the age of 45. More than 300 million active users—most of them under 45—join Twitter each month.

Twitter started as a platform for sharing personal moments. It’s morphed into an information delivery system that plays a major role in distributing news, marketing products and affecting the outcome of political and social developments.

And this instant, real-time communication comes with the restriction that you can only use 140 characters to get your message across.

Twitter’s simple idea completely disrupted the way we communicate. I used Twitter as an example of disruption last week when I spoke at the Young Professionals Global Forum in London. I called that speech “Risk in 140 Characters.”

Since then, the CEO of Twitter has stepped down amid charges that the platform isn’t evolving as quickly as it should, and there’s been a lot of soul searching about how this disruptive form of social media can keep current in this ever-changing, ever-evolving age of disruption.

In spite of Twitter’s challenges, I believe the metaphor is a good one. It’s time to select, analyze and price risk, faster and more efficiently – the equivalent of risk in 140 characters.

The young professionals I spoke to last week are all digital natives. As Don Tapscott, who studies the digital economy, says: They’ve been bathed in bits since they were born.

They embrace technology and use it to navigate their world, their relationships and their work swiftly and creatively.

These digital natives are mobile, wireless and connected with their peers all over the globe.

Meanwhile, in the other corner, I—and most of my friends here in this room—are digital immigrants. We’ve had to make a deliberate and conscious choice to adapt to digital ways of doing what we used to do on paper, over the telephone, or through other physical or, at best, analog, means.

Even though it was our generation who invented the Internet, many of us have the feeling of being strangers in a strange land. Using search engines and apps to navigate life and work doesn’t come naturally to us.

We digital immigrants tend to shun social media or dabble around the edges, still thinking Facebook, Twitter, SnapChat and Instagram are trendy chat rooms where younger people tell everybody what they’re up to a thousand times a day.

But the truth is that social media, which erupted onto the scene as a means of personal contact, has quickly morphed into a powerful engine of collaboration with profound ramifications for business development.

Digital natives know that. And because they know it, and use that knowledge to great effect, they are leaping ahead of the digital immigrants in our generation.

There’s a term for this: digital lapping. And this lapping of one generation by another is the basis for the disruption that’s blowing apart traditional business models. For digital natives, disruption is the new normal.

You know what I’m talking about. How many music stores saw iTunes coming? How many taxi dispatchers saw Uber coming? How many hotel chains saw Airbnb coming?

How many Blackberry execs even saw the iPhone coming? Well, maybe they saw the iPhone coming, but it’s an understatement to say their reaction was too little, too late.

Pick any industry, and you can see the pattern emerging.

The automotive industry is a telling example. Sergio Marchionne, CEO of Fiat Chrysler, recently said he’s “more determined than ever to pursue industry consolidation lest technology disrupters beat the auto industry at its own game.” Marchionne’s warning came after a meeting at Google and Tesla, and after spending almost an hour in a driverless car.

“The agenda needs to be moved,” he said, “or all these technology disrupters will come in and make our life incredibly uncomfortable.”

Clearly, all industries are facing massive disruptions because of technology. With new models of service delivery, new categories of products and restructured value chains, society and the customer expect far more than traditional businesses can offer.

These expectations represent a potentially bleak scenario for the insurance industry, because in many respects we are way behind the curve as far as technology is concerned.

And we are groping in the dark for an effective solution to attract digital natives to the industry.

Digital natives are the much-discussed, much-researched Millennials.

Born in the eighties and nineties, they’re the offspring of the Baby Boomers. They’re sometimes known as Echo Boomers or the App Generation.

Millennials are the most diverse generation we’ve ever had. In the US, 35% are non-white, and researchers who study generational differences say they are the most tolerant generation yet, believing everyone should be part of the community.

We’ve been studying Millennials for quite a while, so we know a lot about them:

  • They want to be team players.
  • They want their careers to have purpose.
  • They want to build new things that matter.
  • They use social media to collaborate. They crowd-source everything from fundraising to business capital.
  • They fight for worthy causes by alerting each other to things that distress them.
  • They don’t see much difference between work and leisure, and don’t see the point of rigid work schedules and being tied to an office.
  • They see hierarchy as an obsolete impediment to team progress. They need to get things done, and waiting for permission doesn’t strike them as sensible.

Now, does that list describe how the typical insurance company operates? I don’t think so.That’s a red flag that we need to pay attention to. Consider this:

  • Almost half of insurance professionals in the U.S. are over the age of 45.
  • 25% of all the people working in our industry will be eligible to retire in just three years.
  • That means that, in just five years, there will be 400,000 open positions in the U.S. alone.

Five years ago, Accenture warned that it’s hard to attract Millennials to a career in insurance. Accenture noted that “the industry’s apprentice structure—with its long learning curve and slow promotions—in no way suits a Millennial’s expectation of getting rapid feedback, or working in a flat organization that offers dynamic career development.” Since then, more alarm bells have been rung.

Recently, a report found that only 5% of high school and college graduates thought a career in insurance was worth looking at. When asked why, they said they thought the industry was dull and conservative and doesn’t offer much of a chance to make a difference.

For someone whose whole career has been dedicated to an industry that promises to protect, that really hurts. At the very least, we’ve done a terrible job in helping people to understand the value in what we do.

With hundreds of thousands approaching retirement in an industry that’s dismissed as boring and static, and with disruption looming on the horizon, I believe we’re staring into the jaws of a crisis.

Millennials are not only our future workforce, they’re our future customer base. And our industry, quite simply, is not prepared to attract the numbers we need, with the skills we need, to take charge of the disruption we know is coming.

The men and women in this room have presided over some of the great developments in our industry: Catastrophe modeling, deregulation and globalization all happened on our watch.

We’re not strangers to bold moves. Innovation isn’t a foreign concept.

But collectively we don’t seem to know how to crack this nut: How do we attract hyper-connected, entrepreneurial digital natives into the generally old-school world that so desperately needs them?

I know there are pockets of energy devoted to finding a solution to this problem.

MyPath has been established by the Institutes and affiliates as an industry-led effort to raise awareness of insurance as a career, and to provide information about the industry as well as job opportunities. Hamilton USA, the US operations of Hamilton Insurance Group, is one of the industry partners participating in MyPath.

And there’s Tomorrow’s Talent Challenge, an awareness campaign established by Valen, which provides predictive analytic and modeling capabilities to the industry.

Valen is so concerned about the lack of interest the digital generation is showing in insurance that it created Tomorrow’s Talent Challenge “as a rallying cry for the insurance industry to band together to sell exciting, innovative careers in insurance to Millennials.”

These are laudable efforts – driven by the same sense of urgency that I’m outlining here.

But they’re not enough.

We need a focused, coordinated strategy embraced by some of the major players in our industry.

We need a collaborative commitment like the one announced a few months ago.

In January, as many of you know, a consortium of eight companies from our sector announced a far-reaching initiative to provide insurance to the underserved. My company is proud to be one of the partner companies.

We referred to the new entity as the Microinsurance Venture Incubator – or MVI. Quite a mouthful.

This morning, we announced that the venture has a much better name.

After inviting more than 100,000 employees in our partner companies to help us name the MVI, we chose Blue Marble Microinsurance. This is a great name. It really captures the spirit of our venture. It reminds us of how connected we all are – ever more so in this digital age.

Blue Marble Microinsurance takes a holistic view of our world, planning to extend protection to a broader portion of the population by providing insurance in a socially responsible and sustainable way.

It offers people on the wrong side of the digital divide the stability and potential for growth that insurance makes possible.

Blue Marble Microinsurance’s company partners know that the ability to manage and finance risk is critical to the development of society – any society, but most urgently to those struggling to gain a stable toehold in their pursuit of education, jobs and a prosperous future.

Research and development enabled by Blue Marble Microinsurance will bring affordable insurance products to the developing world.

Technology is at the base of this global project, using innovative apps to connect consumers and products on a micro level – but what drives it is our industry’s collaboration, our sense of purpose and our focus on the future.

What we learn from Blue Marble Microinsurance could truly shift the insurance paradigm.

Yes, it has the potential to reduce the cost of risk analysis and product distribution and delivery. And, through reverse innovation, the application of that knowledge in the developed world could be one of the most enduring legacies of this project.

I have to admit to a huge sense of satisfaction at watching this concept unfold. It was three years ago – almost to the day – that I addressed the annual IIS meeting in Rio and outlined a plan for a coordinated industry effort focused on microinsurance.

At the time, I said that this wasn’t the sort of project that could be tackled by one company. Many had tried, but none had succeeded.

I’m delighted that Joan Lamm-Tennant is now leading the development of Blue Marble Microinsurance.

Joan poured her heart and soul into taking an idea outlined in Rio in 2012 and making it a reality three years later.

This initiative is a shining, innovative example of what happens when we work together to find creative risk solutions.

So if we can find a way to offer coverage to literally billions in developing markets around the world, I know we can figure out how to redefine our work environments, our human resources policies and our recruiting programs in such a way that digital natives will be beating down the doors to join us.

Last week, I challenged the leaders of tomorrow to take charge of their destiny and find ways to attract Millennials into the insurance industry.

Today, I’m inviting you, as today’s leaders, to work together to develop a strategy for our disruption, leveraging the talent and skills of the digital generation.

As I said last week, insurance should be catnip to a Millennial looking for a purpose-driven career.

Let’s invite these digital natives in, make them feel welcome and give them the benefit of our considerable experience and expertise.

Then, let’s step aside and let them lead the way.

We have one of those rare opportunities to leave a lasting, collective legacy – one that ensures the insurance industry stays relevant and innovative and becomes the No. 1 career choice for any young person who wants to make a difference, be part of a team, keep the world working – for generations and generations to come.

Blue Marble Microinsurance is proof that, when we collaborate, exciting things happen. Let’s take a disruptive step to the future – together.