A whole new paradigm is emerging in terms of how policyholders interact with their insurers—but some insurers are struggling to adjust. That was one of the main takeaways from a Fireside Chat with Mike Morrissey. The discussion took place on Intelligent Insurer’s Re/insurance Lounge, an online platform where interviews and panel discussions are available on demand.
Morrissey stepped down last summer from his role as president and chief executive officer of the International Insurance Society (IIS) and is now exploring new avenues. The conversation covered his plans for the future, his observations from 50 years in the industry, and his predictions for the industry’s ongoing evolution.
Discussing the changing dynamics of relationships between insurers and policyholders, Morrissey highlighted the fact that customer expectations, in terms of the experience they want from their insurers, have been influenced by their relationships with companies such as Starbucks, Apple, Alibaba, Tencent and Amazon.
“They don’t expect just to get a policy notice in the mail every six months, they want to have a 24/7, multi-channel relationship with a provider of an important financial service,” he said.
“A lot of companies are having trouble adjusting to this. There’s a sense that the industry has traditionally developed products and told consumers, whether they be individuals or governments or corporations, that they should buy these to protect themselves.
“The buyers of insurance now want risk management advice, in a much broader in a much more subtle manner, and the industry has to respond.”
This is just one of many ways the industry is changing. Morrissey also highlighted ongoing digital advancements, predicting that these will largely be absorbed by the more adaptable incumbent players.
“There was a time a couple of years ago when many people thought the insurtechs were going to render the traditional insurance companies irrelevant and take over the business themselves,” he said.
“Now we see that the insurtechs are more enablers to help the smart and forward-looking big companies adopt new techniques. There will be an occasional breakthrough independent insurtech—Lemonade looks as though it’s not simply going to be an enabler for somebody else but a company to be reckoned with in its own right—and there are others, but for the most part I think the surge of technological innovation for the industry will be adopted by legacy companies to improve their operations and help them better understand changing consumer behaviour and the needs of the marketplace.”
“Public policymakers can’t solve the problem on their own.”
Mike Morrissey, former president, IIS
Morrissey joined the IIS in 2009 and he played a key role in many important changes and developments in the industry. One of his proudest achievements has been working to make the voice of the insurance industry relevant to global policymakers and to win the insurance industry a seat at the top table when discussions of economic development, resilience and sustainability are taking place.
He also worked to broaden the organisation’s membership to parts of the world and a tier of the industry that had not been involved before.
“I am proud of adding diversity and inclusion to the leadership of the IIS,” he said. This links in with the efforts of the IIS to close the various protection gaps that exist in the world—around catastrophe losses, health insurance, and retirement savings, for instance.
“Some have said we’re talking about somewhere between one and two trillion dollars of protection gaps that the insurance industry can at least help fill,” he said. “A big catastrophe year, like last year, underscores the fact that the gap, if narrowing at all, is narrowing too slowly.
“The industry has a big mountain to climb, but it is climbing that mountain.” Morrissey added that this is not a task the industry can accomplish alone.
“The insurance industry makes the world better.”
“But public policymakers can’t solve the problem on their own either,” he said. “It’s through partnerships, with the industry, governments and other international institutions such as the United Nations, the World Bank, the World Economic Forum, and so forth, all putting their heads together, that progress is made. And that’s what I tried to get the IIS to promote.”
Morrissey has stepped down from leading the IIS but he remains involved as a special advisor and he’s taken on multiple other roles in the industry now that he has more time. “Running the IIS was a very demanding job; I did around 500,000 air miles a year,” he said. “I was busy all the time—happily so—but it crowded out a lot of other interests of mine.
“Now I continue on the board of Selective Insurance Group where I’ve been a director for many years. I’m on the board of Protected Life, and the board of an insurtech, which I think is an exciting part of the insurance industry.
“I’ve taken on the chairmanship of Legeis Capital, getting me back to my investment and asset management group roots. I’ve got a portfolio of activities now, and I couldn’t have done that, either in good conscience or in practical terms, if I had continued to run the IIS, so it was a good time for a change.”
An outdated paradigm
In particular Morrissey is excited to be getting back into the investment business, having felt for a long time that insurance companies face daunting challenges in their investment management.
“The insurance industry, over a very long term, in life and non-life, has very roughly broken even on underwriting and made the vast bulk of its bottom line on investment income and capital gains,” he explained.
To view the full Re/insurance Lounge session click here.
“Now, with interest rates where they are now, it’s a very challenging situation. If you add to that some regulatory constraints that I personally think are a bit punitive, it makes the challenge very, very daunting.
“The regulatory paradigm has been, I would say, outdated: bonds are safe, stocks are risky. liquidity is good, less liquidity is bad—these old norms have shifted. If bonds are safe, government bonds must be the safest bonds. Well, tell that to the Italian and Greek insurance companies that were forced to invest in their sovereign bonds because they were supposedly the safest.
“Some of the regulatory attitudes on appropriate capital charges were a little outdated. I’ve been arguing, through the IIS and personally, for a new approach to looking at what is truly risk in investments in the 21st century. This is one of the things that attracted me back to the investment business.”
Explaining his long-term fascination with the industry, Morrissey added that while there is still a way to go in terms of making insurance as attractive to top talent as companies such as Google or Facebook, one of its great appeals is the real human value of the work it does.
“I urge people to lift their eyes above the day-to-day horizon of their management tasks and recognise the fact that there is a true nobility to the mission and the activities of this industry,” Morrissey said.
“It’s not just about selling that next policy. The insurance industry makes the world better. It makes more people’s lives better. It makes the world function better, and I think we can all be proud to be involved in it.”
To view the full Re/insurance Lounge session click here.
Image: Shutterstock / Akespyker