Presidential Address by Russell Higginbotham FCII

Technology

Introduction
Good afternoon ladies and gentlemen. Thank you for taking time out of your busy schedules to attend the Insurance Institute of London's AGM. It is a great honour for me to be here, and I’d like to thank you for the opportunity to lead the Insurance Institute of London as your President for the next 12 months. When I look at the long and distinguished list of past-Presidents, I have to say that standing here today is a very humbling experience.

I'm looking forward to building on the great momentum and work that has taken place under Dominic's leadership this last year. So first, I want congratulate Dominic, Allison and the rest of the team for all of your hard work, leadership and focus on advancing the Diversity and Inclusion topic for our profession and for the exceptional speakers and programming that you've run over the last 12 months.

Under your watch, membership of the IIL has increased by over 6% – a tremendous achievement. This record growth is connected to the popularity of Chartered status for firms and the Institute’s reputation for providing high quality continuing professional development for our membership. At well over 23,500 the Insurance Institute of London incorporates roughly half the London Market, and is bigger than some entire professional bodies. So thanks for your work (and for the hard act to follow!)

I have been in the insurance profession for over 30 years and have spent time living in the UK, in Japan and in Australia. I have met hundreds of wonderful and talented people around the world and have had the opportunity to travel to meet clients in countless cities and towns. I feel privileged to have done this and never cease to be amazed that some regard it as a 2nd choice career – so I commend the CII’s Discover Risk and Discover Fortunes initiatives which show teenagers what rewarding careers our sector can offer.

When I look back, I really appreciate how much our world and the way we work has changed. In my first summer as an undergraduate at an insurance office, I was working in the administration department of 2-300 people. It was largely paper-based work but there was one computer, sitting quietly in the corner and observed with some suspicion by most in the team. Special permission was required from the Superintendent to fire this thing up and run the home-spun annuity calculation programme that sat on one of the floppy disks. How times have changed – and how much more will it change?

We all carry infinitely more powerful (and more useful) computers around with us in our pockets. Everything is at our fingertips. We can check our investments, order a car and check out reviews and book the best restaurant around our location. For those of us that aren't already spoken for, a simple "swipe right" can lead to a new girlfriend or boyfriend. Indeed, our language is changing too – have any of you been "Ghosted" for example? Perhaps you're not familiar with the term, so please take this as your homework assignment and Google the phrase – ideally after my speech rather than during it!

At various client and business events around the world, I've enjoyed the chance to gauge the audience's general reaction on the subject of technology and innovation with a very basic question. I have asked various groups … "How long before you think the traditional insurance process will look completely different?"

Given five choices that range between "it's happening now" and "it will never change" – there's always agreement we're on the "sooner than later" end of that spectrum. People generally seem to think things will be very different in 5 years – certainly in under 10 years.

So, collectively we know the disruption is coming, but how do we prepare? How do we plug in? How do we get ourselves up to speed with this fast moving train so that we can jump aboard and drive it ourselves? How do we make sure that, as a sector, we use the technological change and the vast amount of data it can provide, to not only make sure we stay relevant, but to make sure that our business is ready to compete and help shape the future? Ready to meet the needs of a new customer who expects to have simple, accessible solutions and coverage that is flexible and customized.

That is exactly why I've chosen "technology" as my theme for the year.

All of us in this room represent one of the most influential insurance markets in the world.

While the first methods of transferring risk date back to the Chinese and Babylonian traders of the 3rd and 2nd millennia BC respectively, it is London that devised the modern business of insurance - and over the last 328 years, we've managed to stay relevant and fresh in how we help to manage risk and design solutions to mitigate the effects of risk.

We now need to continue to evolve and adapt in the face of changes that we've never seen before. Changes in the world, in the environment in which we operate and in a competitive landscape that is spreading across new entrants we never before considered as competition.

We often talk about Google or Amazon as brands that are synonymous with this new and emerging technology, mainly as a threat to our sector. We wonder who is going to do to us what Uber is currently doing to the world of taxis. Rather than seeing these developments as a threat and try to respond to them, I'd prefer to see this topic as an opportunity and for us to be on the front foot – and to be masters of our own destiny.

There's so much we can say about that topic – we could be here all day – but thankfully we have 12 months to cover it.

The Protection Gap

My firm has talked about The Protection Gap, the difference between economic loss and insured loss, for many years. It is very, very large and, unfortunately, it is getting bigger. Shame on us all.

Like I said before, let's not consider new technology as a threat – but as an opportunity – to try to close some of these protection gaps.

Already, there is a hive of activity in our sector. Many of us are investing in new accelerators, incubators and start up partnerships. "InsurTech" is our latest buzzword – a word which in fact was actually coined by our London insurance community just last year.

In the first half of 2016, the number of so called "InsurTech" investments is up more than 50% than at this time last year. Our research shows there were just 2 deals in this area in 2010 and already this year we've tracked 90 different insurance investments in tech-related start-ups.

Examples - Take Telematics. At its core, the little black box can provide data on an individual's driving habits and allow us to charge a premium commensurate with the risk. But if we take a more holistic view – and more transformational approach - we can use this information to engage with customers, to help people become better drivers who travel with fewer risks and create fewer accidents.

Look at the SmartHome – an increasingly wired household where we have sensors for everything from the lights and heating through to domestic appliances. We can, for example, remotely track when an elderly person takes medicine or puts the tea kettle on. These sensors and signals can lead us to early warning signs, alert us to trends or create new ways to provide helpful advice. Think about how, if we innovatively pair this data with our risk products we can really make strides in not just managing risk but truly helping people live longer, healthier and safer lives.

Insurance is becoming more tailored to each customer with better, more accurate pricing and more accessible products. The flip side of means potentially fewer risks to cover. This will challenge many of us in this room. It means that increasingly we need to shift from a purely "product" to "service" mind-set. How can we add real value in this new world and for this new kind of customer?

Risk mitigation and avoidance is good for society. We shouldn't worry about lower average premiums. We should delight in the ability to meet the needs of many, many more customers. The Protection Gap tells us that the opportunity is definitely there.

Technology and the London market

If there are answers to be found, I know we can create them here! London was judged to be the most innovative city in the world by the Global Innovation Cities Index in 2015. We have an excellent ecosystem of insurers, tech start-ups, creative industries, law firms, capital and regulators.

This hub of activity is great news for insurers looking to innovate and we stand at the edge of great potential for the London Insurance Market to lead this revolution.

A call to action

First, let's not forget that our personal relationships with clients and business partners are primary. New technology and data connections should support – but not replace – this core foundation of our business.

It's very important that we all raise our personal, corporate and sector knowledge around FinTech and InsurTech developments. The digital revolution is bringing about new solutions and new ways of doing business. We all need to learn about it, embrace it and work creatively and collaboratively.

We need to be experimental, agile and bring a revised mentality to our profession – something that the London Market is well known for.

To link back to Dominic's theme of D&I, there needs to be strong new technical, new analytical, and new entrepreneurial skills in our workforce.

The CII and the IIL will continue to play important roles in talent and skills development. For those of us here, staying abreast of the issues by attending relevant IIL lectures is certainly an easy way to increase your awareness! We have an excellent and extensive programme of lectures planned for the rest of this year and into 2017, so please do continue to support them.

Ladies and gentlemen, thank you for your time and your attention. Thank you for your support in the year ahead. You now have permission to Google the phrase "Ghosting"!