Industry legend Joe Plumeri delivers rousing messaging on the crucial societal role of insurance

Insurance legend Joe Plumeri has spoken passionately about the crucial role insurance plays in business and society, giving a typically uplifting and clear-eyed view on where the industry must excel. 

Speaking to Voice of Insurance podcast host Mark Geoghegan, the former Willis chief executive, also gave a straight-talking insight into the lessons of 9/11, which still hold relevance today.

He was joined by Tony Ursano, co-founder of Insurance Advisory Partners. 

Plumeri has taken up the role of chairman at the boutique insurance investment advisory specialist business.

9/11 and insurance excellence 

Reflecting on his time in insurance, Plumeri said he was a great cheerleader for insurance, but he ‘didn’t think that it had invested enough in technology and in processing’.

The insurance around 9/11 was typical of what was not quite right in the industry.

“I think manualisation of placing business, it was too manual. I think the whole wording process and getting wordings done took too long,” he said, reflecting on his time at the centre of the global insurance world. 

“I experienced that with the World Trade Center. As you know, we bound that insurance in July, but with wordings never took place. And I always use the expression it was the only industry that shook hands and never knew what the hell it shook hands about.”

He questioned why, at the time, the insurance claims were not processed and paid quickly, concluding: “So I still think that the responsibility that the insurance industry has, both from a broker side and from an insurance company side, is great because it’s so vital to the epicentre of capital and the epicentre of commerce. 

“But with that, you need to raise your game and be able to place business quickly and to be able to pay claims quickly.”

Winners and losers 

In a wide-ranging interview, the duo discussed insurtechs, global insurance conditions and M&A.

Ursano gave an insightful view of MGA and hybrid-carriers.

He said a whole industry of ‘specialised and excellent underwriting’ operations were being created with MGAs.

But he emphasised: “It’s only going to take one or two to burn a carrier, to take a little bit of the balloon off the roads and cause people to be a little more cautious.”

He also had a word of caution on hybrid-carriers. Hybrid carriers are players which reinsure a large part of the book, keeping a slice of the risk. 

He observed: “Hybrid carriers, where the leverage that they employ premiums to surplus, the reliance that they have on reinsurance, recoverables to write the business, it doesn’t take a lot to create pressure on those business models. And so I think we’re going to see a bifurcation of winners and losers in both the MGA and the hybrid-carrier space over time, and there’ll be plenty that are highly successful, and they’re likely to be a few that aren’t.”

Insurtechs will fail 

Ursano estimated that only 15 to 20% of insurtech businesses that start actually succeed. 

He said: “And for us, it’s been a lot about trying to see businesses where you have a very clear path to profitability. 

“It’s been trying to see businesses that actually can be broadly utilised by the industry to make it better, whether that’s from an expense perspective or an underwriting perspective.

“And businesses where they truly have something distinctive from a technology perspective, we see a lot of businesses that are data centric and analytic.”

He cited businesses such as CyberCube, which is ‘now the standard for modelling cyber exposure in the context of the ILS market’, as ‘businesses we like’.

He threw in a note of caution though, stressing that overall insurtechs can be tricky to evaluate: “So those are businesses that we like, but discerning which ones are going to be successful from which aren’t is a tricky exercise, and one that we’re trying to be very careful about.”

Investment in insurance firms 

The discussion expanded further onto what makes a good insurance investment opportunity. 

Plumeri put a high value on an insurance business that understood its role in benefiting society.

“Is your real purpose, and understanding, that you play a very vital part in society? Whether you’re a broker or an insurance company, and if they understood that – so that was their ethos every day – I would invest in that company.”

Ursano summarised his view on a good opportunity: ” I would say there are two things I’d be looking for. One, is truly best in class, management team and culture – right, like, who has it right in terms of the right culture to grow the business? And also who has sufficient scale for and commitment to investing in technology?”

He said you have to ‘use your wildest imagination’ to work out what the industry will look like in five or ten years based on the pace of technology.