I liked the idea of moving to a smaller company, where I could make a difference,” says Nicola Stacey, Chief Underwriting Officer at Chaucer. “I liked the idea of specialist know-how and underwriters who are real experts in their fields, rather than a more commodity type business.”
Stacey is explaining why she moved to Chaucer from Swiss Re in 2019, “I manage all the underwriters and we provide cover for many, many classes of business – more than I ever anticipated when I joined.” These classes are often very niche – and what is more, they are constantly evolving in response to world events.
A good example of this is political violence cover. “Until recently, strikes, riots and civil commotion (SRCC) insurance was cover you could only buy combined with property insurance. This means that if your factory burned down in a riot, you would be covered.” However, with an increase in civil disturbances, this is often now excluded from general property insurance.
As a result a new market has appeared. “Traditional property insurers say, ‘We don’t want to cover that any more’ – and this is where specialists like Chaucer can step in. We have a political violence team and we can offer a solution.” This, she adds, is very much a global phenomenon. “Towards the end of 2019, there were riots in Chile and now we’re seeing a lot of stand-alone cover being purchased for SRCC in Latin America. The market is booming.”
In order to underwrite these specialist, non-commodity lines, she explains, you need the aforementioned expertise. This means a different way of working. The big insurers have huge capacity and work on mass-market offerings like car insurance and home insurance. The specialists really dig down into their niches and have incredible depth of (often very esoteric) knowledge.
If this sounds quite academic in nature, it is – and for this reason: Chaucer is run on very collegiate lines. “There’s no autocratic management here - we give our people the underwriting authority to make decisions and the freedom to be entrepreneurs and come up with their own solutions.” In insurance, she explains, there are very few hard controls (unlike banking) and there’s a lot of trust involved. The company provides a framework within which people can operate autonomously and deliver “creative collective excellence.” The overall philosophy is “a light hand on the tiller.”
But what about the great news story of the decade – COVID? Surely that is upending everything in the insurance industry, even for specialists who look after terrorism and flooding.
Stacey says that, of course, it will affect the sector and there may be big losses (as well as legal wrangles over what is covered) but the long-term effect is unlikely to be as seismic as many might imagine. “You don’t normally write [new business] when you’re in the middle of a loss-making event and there is also concern about writing pandemic cover until we understand where we are.” Looking ahead, she adds, “There may be opportunities to underwrite specific pandemic risks. Our business is not about avoiding risk, it is about pricing adequately for risk and avoiding surprises.”
In fact, the big growth risks over the next decade are likely to be what they were pre-COVID – climate change (flooding, wildfires and so on) and tech (cybersecurity breaches, hacking, etc).
Technology is not just about new risks though. It is also changing how the insurance industry operates. “We used to be a business where people physically wrote things on paper – but now everything is effectively electronic trading. It’s far more data-orientated than it was – you have models and algorithms that help you price risk.” Technology is changing how customers deal with insurers too. “It’s the ability to buy insurance via an app on your phone. I think there will be a lot more of this pay-as-you-go type insurance – for instance, with automated cars. If you pick up a car on the street, you’ll only want insurance for the time you’re using it, rather than an annual policy.”
In a related vein, the wealth of data in the modern world is allowing companies like Chaucer to offer innovative new types of insurance. “We’re doing quite a bit of work on parametric covers – this means insurance that works on a trigger. So you might take out a policy which says that if an earthquake is stronger than a certain magnitude or the wind blows faster than a certain speed, then the cover pays out. The joy of these things is the cover is either triggered or it’s not.” This allows insurance to function better for everyone concerned.
For both insurer and insured this makes life much simpler.
“It saves the time and cost of a loss adjuster having to go out and examine the premises and all the other work that goes with a normal insurance claim,” says Stacey. It also allows insurance to be part of a seamless tech ecosystem. “you can see a future where you can buy all the insurance you need on your phone, as you need it – and these claims are paid out instantly when they’re triggered. Even with a car accident, there will be cameras on the cars and they’ll be geocoded and time coded. You’ll take a photo, you upload the claims form and the money will appear in your account a few seconds later.”