Lloyd’s underwriter Novae published an interesting thought piece last week. They commissioned some independent researchers to pose a series of questions to a panel of industry leaders and manfully collated the responses into an essay ‘Looking Forward’. Their main conclusion, that innovation and specialisation are the keys to the industry’s future development, may not be ground breaking but is certainly something to reflect on.
These days we hear a lot about London outgunning the opposition via its creativity but invention is not coming easy to a market currently enjoying a rare run of profitable years. Underwriters may have just got too used to peddling the same products in the same style because it makes money and it is easier than doing something different. New lines of business like cyber and reputational harm are growing but remain as tiny corners of the industry.
Not only have the good times fostered inertia but the process of industry consolidation has also contributed to a sluggish approach to innovation. ‘The future is big’ say the contributors to Novae’s research and in an insurance world whittled down to just a few insurers, reinsurers and brokers, undersized players will struggle. Unfortunately it is resourceful and entrepreneurially spirited smaller companies that normally outperform larger and intrinsically risk-adverse corporations when it comes to monetizing new ideas.
Of course scale brings with it advantages, not least financial security, access to capital and commercial leverage; all of which are pretty important too for those aspiring to develop new products and markets. The modern-day challenge, therefore, seems to be for larger organisations to harness the power that their size affords whilst nurturing an internal ethic which encourages and incentivizes small teams to think and act with freedom. The regulators might not be so keen but firms whose structure allows some liberty to those in the business are likely to be the ones who answer Novae’s clarion call for innovation.