A culture of innovation – Apollo’s CUO, James Slaughter

Chief underwriting officer (CUO) of Apollo Group, James Slaughter, was the latest guest to grace the Voice of Insurance podcast, produced in association with AdvantageGo.

Innovation is a term almost synonymous with Apollo Group. Slaughter suggests it isn’t quite right to label Apollo “an incubator”, but it can seem that way, linked as it is to so many innovative London market launches. Perhaps enabler is a better word.

“Lloyd’s has never been as open as it is today for credible opportunities,” Slaughter said.

The Lloyd’s business has co-launched a steady stream of new startup partnerships in recent months, from cyber and drones, to parametric products and captive insurance business, as well as welcoming African business to the London market.

Apollo has increased its focus on its innovation (ICX) category at Lloyd’s, from 2% to 5% of its stamp capacity, something Slaughter said had been “driven by demand”. The firm has expanded its reach by using its ICX consortia, partnering with other businesses within the Lloyd’s ecosystem, to maximise the effect of joint capacity through a single channel, enabling innovation at scale.

“If you innovate in isolation, putting out a $2m line or a $5m line, it doesn’t help a client. But if you can put $20-25m out, on a novel product, you can start to solve some real problems. Lots of people are innovating, but if you don’t come together and innovate at scale, it’s difficult to get it across,” he said.

One recent application of the ICX scheme has been to co-launch a product called “Just Parent”, focused on delivering “equity and paternity and maternity leave” for small businesses.

Product innovation in insurance tends to run up against challenges such as a lack of historical data for underwriting something brand new. This means careful supervision, but shouldn’t be a barrier to new thinking in the market, Slaughter emphasised.

“If we stick to more traditional methods of evaluating risk, we limit our ability to innovate. The proliferation of data and third party data sources, and our ability to ingest and look at things in different ways, is exploding, and one of the super exciting elements of what’s going on in our industry today,” he said.

Constructing “synthetic loss records” by making use of data that are available – such as the example of paternity and maternity leave – can help substitute real underwriting and claims histories, he explained.

“You’ve got to use your underwriting experience and merge that with high end computer analytics,” he said. “What we’re talking about here is big data analysis that says something along the lines of: ‘what could it have been; and have we tested the environment in which those conditions are applied?’ And from that, can we create a synthetic environment.”

The podcast explores a number of different product innovation areas, many of which make use of technologies, including artificial intelligence, or parametric triggers that substitute traditional claims process for an automated data-driven contract and payout mechanism.

Energy transition and carbon markets represent a major future aspect for product innovation, Slaughter suggested, with products taking time to come together, some failing and others succeeding in an evolutionary process.

Host Mark Geoghegan noted that “carbon could be the next cyber” as a product opportunity, as the market grapples with risk transfer associated with global efforts towards net zero emissions targets.

“There’s a heck of a lot of stuff going on in carbon, around the asset carbon, thinking about projects that are there to restore forests, and things that may have financing or credit risk related elements,” Slaughter said.

“I’d certainly say it’s about the most exciting novel area to explore today…Is it bigger than cyber? I think it’s credible to say it is akin to cyber in terms of the opportunity in front of us,” he added.