1- Please introduce yourself and your experience.
My name is Andrew Johnston, I run the Global InsurTech business for the reinsurance broker Gallagher Re. As it relates to experience specifically pertaining to InsurTech, I have been involved in InsurTech since July 2016. At that time, I was hired to run some research initiatives for Willis Re (which merged with Gallagher in December 2021) to support our traditional client base. InsurTech came into my purview almost immediately, primarily as a source of angst and anxiety for our clients who feared they might be disrupted by this eruption of technologically enabled disruptors.
In January 2017, I launched Willis Re InsurTech to put some intellectual rigor around the global InsurTech universe — clients were given access to our research findings, and more importantly, received access support to InsurTechs who we had vetted who we thought could be advantageous to our clients (through technology partnerships, distribution and capacity opportunities etc.).
Quickly the industry came to the realization that the advantages of leveraging ‘InsurTech’ far outweighed the threat of disruption. It really laid the foundation for the operating model of Willis Re InsurTech — finding best-in-class InsurTechs for our clients. Fast forward to now, I manage a team of approximately 30 people, who are located across the globe, in search of the best businesses who adopt the label of InsurTech. This can be to bring their technology to bear with clients, or where we are a client (in instances where technology supports a broker’s core functions), or where InsurTechs themselves are clients — typically businesses who originate risk.
My team and I have seen some 1,600 InsurTech businesses, have supported reinsurance placements of hundreds of millions of dollars (globally), and supported countless traditional clients with their technology strategy. I am probably best known as the editor of what was the Willis Towers Watson Quarterly InsurTech briefing, which I am told is read by millions of people worldwide. While producing this briefing has never been my day job, I have enjoyed the intellectual and commercial pursuit of providing the industry with our view on this ever-evolving space, backed by up-to-date data.
My ‘day job’ role really is as reinsurer broker/intermediary, and client advocate, but I certainly enjoy the rich variety that my job has. Every part of our industry looks at technology and I am fortunate enough to work for an international firm that is involved in every step of the way of pretty much any part of (re)insurance.
Prior to joining Willis Re (now Gallagher Re) in 2016, I worked as an expert historical consultant to the UN at their International Tribunal in Cambodia. This was largely a result of my former academic pursuits, where I worked as a genocide researcher/academic for almost a decade. My PhD is in genocide, specifically the Cambodian genocide of the 1970s under the Pol Pot regime. Additionally, I have also managed a couple of specialty agriculture start-ups, and been a lecturer in Economics, Politics, and Anthropology. While this non-industry work experience may not seem to have relevance to my current role, it did give me a foundational understanding (and empathy) of running businesses, breaking into new industries, creative and factual writing, research, and the pursuit of unchartered territory. As a final note, I am British, but based in Nashville (and often New York and London).
2. You’ve written extensively on innovation and InsurTech projects over the past few years. Now in the light of the recent developments in global markets volatility and the current crisis the EU is going through, what is your take on the state of InsurTech in 2022? (in terms of product verticals and investments)
There is no shortage of investment capital globally for InsurTechs. There is many multiples more investment capital looking for InsurTech grey matter (than the other way round), and we do not see this slowing down. As painful and regrettable as the current situation is from a humanitarian perspective, I am not sure that we will see any major slowing down or vastly changed outcomes as it relates to InsurTech. In terms of global market volatility, given that most of the investment funding is coming from private VCs and PEs, the bull/bear pendulum will unlikely swing too much to the extent it would accelerate the drying up of any otherwise willing capital.
Those InsurTechs who might be affected are those who have already gone public but quite honestly, they are not only in a fractional minority (when we consider InsurTech as a whole), they were probably going to struggle regardless. Some InsurTechs who have gone public have rushed and have arguably struggled to solidify the foundations that would ensure their long-term survival. The extent to which we can use technology or rely on technology firms to reduce certain types of volatility is probably the best outcome we can hope for in this space.
3- Speaking about disruptive products, how do you characterize the adoption and acceleration of parametric insurance solutions and how these stack up with the other innovative insurance products out there? (embedded, open insurance, digitized broking, claims automation, etc.)
Disruption is a very relative term. I don’t know that any product can ever be considered disruptive without more context. I do think initiatives such as parametric insurance provide incumbents and new entrants the opportunity to deliver different types of solutions to clients and capacity providers.
Parametric insurance itself is not new — what is new, however, is the speed of delivery. Parametric has become synonymous with instantaneous results, and that is because technology allows it to be so. One could argue that technology breathed new life into this business model, and allowed its scope to be expanded. We are certainly at an exciting crossroads with it.
Parametric has the potential to be very impacting on our industry but we still have to get the basics right; we have to price the business correctly, understand the trigger and confirmation mechanics properly and provide a make good to the policyholder in a manner that suits all parties. Historically parametric was reserved for weather and agricultural events but the advent of access to data event triggers has facilitated an expansion of its appropriateness to other classes and cases of business. It is certainly at the vanguard of digital innovation.
Embedded insurance is also gathering a lot of momentum, especially around point-of-sale life-changing events. It is however only one part of the story — (albeit an important part), distribution. Parametric insurance has the potential to be an end-to-end solution (you could buy a parametric flight product through an embedded experience while buying a flight online). The other initiatives that you mention are very exciting, when done properly. Digitized broking does not exist (outside of highly commoditized products) without proper human integration, claims automation (again, outside highly commoditized claims) does not function as it should without people. These tools can be great for decision support, but rarely decision execution.
4- Should InsurTechs lead the pack in setting the path to parametric adoptions or incumbents? Likely somewhere in between, what’s the right balance?
As you note in the question, it’s probably somewhere in between. Parametric is not always an optimal solution given that the payout in the event of a claim is often lower than if adjusted over time — there needs to be a compromise with speed, and the pioneers need to really understand this. Incumbents often adopt the label of ‘InsurTech’ for individual product and solution workstreams, so it is quite hard to separate the two these days. If by ‘InsurTech’ you mean outside in technology-first companies, I definitely think they possess the power to challenge the market and remind the industry of the power of technology. Think of them as tool providers and tool sharpeners. They cannot go it alone though — if the InsurTech is offering a product, someone needs to sell it. If they are originating a risk, someone needs to back it. If they are looking to transform a market, someone has to believe it. Our industry requires a community that represents the best of all worlds.
5- Now going to more business-related thinking: how is the reinsurance brokerage business evolving? And what is the future of capacity placement? (for MGA, InsurTech treaty, or otherwise)
Great question. Our core focus, supporting cedant clients, remains our highest priority — that involves many things but it is ultimately matching risk with capital. We are, however, evolving our model away from a transaction/execution-only model to that of a risk consultant that is paid by a brokerage transaction. We have access to extremely innovative pools of capital, and our insurance company clients (and MGAs) continue to bring to the market great new products and solutions that require us to respond (and in some cases be the leader). The future of capacity placement, I think, will continue to be led by people but powered by technology. I do not see the reverse dutch-auction style platforms, or other tech-only placement environments winning this race (or even surviving long term) without heavy human adoption and support. As with all automation, you can only really automate things that are highly commoditized and predictable. To that end, you need people to support a placement, especially a complex one. The pursuit of price discovery and coverage is an ever-evolving one, as is the pursuit of new sources of liquidity and underwriter support. This is an area where technology really can support the human.
You can find Andrew on LinkedIn.
Thanks, stay safe.