This week´s guests on The Voice of Insurance are the dynamic duo, David Walsh, Founder & Group CEO, and Graeme Newman CEO, CFC Underwriting, who talk about their ambitious growth plans in the dislocated cyber insurance space, why the market is bifurcating between those carriers who are running for the hills when it comes to ransomware and those that are facing the challenge head-on and their views on automated underwriting.
As CFC Underwriting had a calendar year in which they posted 50% GWP growth and in which they had set up a Lloyd’s Syndicate to support their underwriting, Mark asks about the company´s geographic focus, Graeme comments, “There´s a machine that we´re building which is this business here in London, where we have the kind product development, the origination, actuarial and pricing function and risk management functions and critically we haven´t talked about this yet, a lot of the technology, and we´re building that here in central London. There is a ton of investment going in there, and that’s people; a lot of that is driven by the talent, the software that we can get our hands on. But then we have this growing infrastructure outside of London.” Graeme discusses how their geographic footprint is growing outside of London, with offices in the US and Australia.
As for the main focus of the business itself, Graeme remarks, “It’s always a little bit of everything, we´ve never had a shortage of projects. Our challenge is to constantly prioritise and invest in the right ones.” Graeme talks about investment in the underlying technology and the large complex insurance platform they have, which can write any line of business in pretty much any geography. Speaking further about CFC Underwriting´s technology investment, Graeme adds, “Over 25% of our staff are now in technology and data, and you’re going to see that growing and growing as a percentage of the people at CFC.”
Mark brings up the company´s recent technology acquisitions and how the last time they were on the podcast, they commented that they had to get closer to the risk itself (cyber) - is that still the thinking, asks Mark? Graeme comments, “There´s a ton of investment gone in from us and many of our competitors, and in that sense we are all looking to preempt risk to proactively identify exposure our clients have, to try and fix those problems before they turn into major claims, to get better at true technical underwriting as in gathering large numbers of data points that we can analyse to see what truly drives risk.” Graeme discusses how part of the market is investing in cyber, while the other is chronically underinvesting in this class of business as they see it as just another insurance line. Graeme adds, “They´re left effectively with two standard tools – change the price or reduce Terms and Conditions, and that´s the bifurcation we´re seeing; some people run for the hills, sub-limits, co-insurance, major exclusions around common vulnerabilities, that´s not the direction where we´re heading.”
However, Graeme comments that some carriers are moving the needle in a positive direction when it comes to cyber. “I´m pleased to see that there are a number of major insurers that are committed to this as a line of business and are trying to maintain that product integrity and find ways to price the risk, to manage the risk, and that has to be the way forward… we as an industry have to work this out to remain relevant.”
What you are looking forward to the most in 2022, asks Mark. Graeme discusses how there are several exciting projects they are working on, and why autonomous underwriting will help win the game, “2022 is the year we´re really delivering on as many material projects, and a lot of that is within technology. There is some extraordinary stuff that we´re doing with not simple process automation, but intelligent automation. 2022, 3, 4, 5 is going to the year of API distribution, we´re seeing a massive surge in digital distribution of product (in complex commercial insurance). This opportunity to be a market leader in autonomous underwriting and automated digital underwriting of complex, specialty insurance products that´s the future, I think. The business that can get that right, with the broadest, most intelligent footprint, will win the game in 5-10 years.”
David also agrees with the focus on automation, commenting, “The move towards automation is really interesting. I mean, we liken it a little bit, our underwriters right now is a little bit like when you´re driving a Tesla along the road, it tells you if you´re drifting into the next lane, it tells you if you´re getting too close to the car in front, but you still got your hands on the wheel, and for a lot of underwriting that´s exactly where we want it to be right now, but slowly, slowly over the next few years some of it is actually going completely autonomous.” David also mentions how they are looking forward to what they can do in the admitted space in the US.
Finally, in answering an earlier question about whether CFC Underwriting sees itself as an insurtech, David says that they are not opposed to being identified an insurtech, but as he sees it, “We feel we´re maybe more like a challenger brand.”
Enjoy the podcast.
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