UK insurance ‘dissected’


I felt compelled to respond to some comments that were prompted by a previous article:

IBM Insurance:: does the industry really care what customers want? I wonder…

The following comments come from a, highly experienced and senior, former insurance executive, who now works for one of the major Global Consulting firms. Obviously I wouldn’t name names without first gaining the approval of the individual in question but I really wanted to share my thoughts. After all that’s why I blog.

For many years I have eagerly anticipated some meaningful debate with thought leaders, passionate or concerned people from within the insurance industry. But I have been, consistently disappointed. I wish I was more confident that these views might spark some meaningful discussion…but I won’t hold my breath!

The comments:

I think David Wilson is making the point that despite the results of the IBM survey, he’s seeing little action from the UK insurance industry. I think at the moment UK and Western European insurers have their hands full with Regulation – Solvency II, RDR – and this is diverting their attention.

Even so, in terms of innovation, UK insurers (or at least Northern European insurers) are seen as leading the global pack in terms of capital effectiveness and optimisation, with the North American market looking to UK as an example of best practice especially in the area of risk management.

My response:

What are the key issues identified:

  1. Compliance with additional Regulation – brought about by cultural, operational and regulatory failures
  2. UK & Europe seen as innovation leaders – based upon the above, should this be the case? And,
  3. capital effectiveness and optimisation – are these correct metrics for innovation and compliance?
  4. risk management – where is the evidence of “best practice”? – I see plenty of evidence of “bad practice” that has become ‘accepted practice’ across the industry. What are current practices in relation to complexity, business resilience and systemic risk?
    Insurance and banking have convinced themselves that they have been/are innovative but, if this is true, why are they the least trusted and most complained about industries according to their customers? Does that not explain the perceived need for more regulation?

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UPDATED: facing facts – “creative destruction” or life in the post-critical landscape?


I make no apologies for re-blogging this item in the HOPE that someone (anyone!) heeds the warning signs. Unless I am very much mistaken it is the legal responsibility of company directors to plot and steer a safe course for their “charges”…and I wouldn’t count upon the same leniency as has been enjoyed within the, elite, Political and Financial classes.

So, it is time for “Business Leaders” to make their mark and to set themselves apart from mere guardians of the status quo. 

Recognise the characteristics of modernity and rectify the mistakes now, if you have any intention of being part of the solution. Alternatively, do nothing, apologise and pay an unknown price for your contribution to economic turbulence and uncertainty that are symptomatic of a pre-critical environment fashioned by/for the most self-serving: PLEASE!    

Getting the complexity message across to people who don’t want to know or understand is really tough.

But it may comes as a surprise to some (outwith the industry) that it is incredibly difficult to introduce new, better, more reliable and comprehensive means of managing risk to Financial Services companies…even though it would, significantly, improve their bottom-line – enabling them to improve their customer proposition!

 

SO, in the circumstances, you may understand why I rarely trouble anyone for their thoughts on “peak oil”, how we can best prepare for a post critical society, how we survive and re-build society. Read more of this post

Presentation: what stage in the cycle do YOU think we are at?


I know what I think and I reckon and, had it not been for the unimaginable amounts of money created out of thin air by Governments, we would already be travelling the road to recovery in the new landscape!

I am no financial or banking expert but I really don’t believe one need be if embracing some ‘Systems Thinking‘. Of course, I would love to hear some reasoned arguments for and against my viewpoint. I hope you enjoy the presentation.

Here is some further “food for thought”

“In finance it’s often been survival of the fattest rather than the fittest”

Andy Haldane, Bank of England

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Living with Black Swans: balancing the books in uncertainty


OK I’m a self-confessed fan of NNT but early on in this interview with his former Professor he again hits the nail on the head. He reminds us of the lessons that every business (and political!) leader needs to learn..

“…You have to avoid debt because debt makes the system more fragile. You have to increase redundancies in some spaces. You have to avoid optimization. That is quite critical for someone who is doing finance to understand because it goes counter to everything you learn in portfolio theory…. I have always been very sceptical of any form of optimization. In the black swan world, optimization isn’t possible. The best you can achieve is a reduction in fragility and greater robustness. You may have heuristics, but not an optimization rule. I hope the message will finally get across because I haven’t succeeded yet.

People talk about black swans but they don’t talk about robustness, which is the real lesson of the black swans.”

Business Leaders of the current culture are not, generally, “agents of change”. As I have said before we need to cultivate Risk Leaders. Those who, not only,  recognise the flaws of the current culture but are motivated to create, champion, execute and capitalise upon new models and strategies.

Apart from the clamour, from better informed and more demanding consumers, for greater transparency, accessibility and demonstrable sustainability, the pressing NEED is for this new breed to embrace the concept that robustness (or NNT’s anti-fragility) can ONLY come from by creating (and maintaining) a sound business infrastructure…from the bottom up or, as I feel is even more appropriate, from the “inside out”: i2o”.

The relevance of scaling and causality

Such problems as Taleb highlights can only be addressed if the owner can view the business (or system) at the appropriate “scale”. Otherwise how would one know where and by how much to “increase redundancy” to build RESILIENCE in order to survive unforeseen and unforeseeable future events?

After all redundancy and robustness cost NOW and need to be maintained, so, have an ongoing impact upon profitability.

Complexity: The Secret Life of Chaos


An absolutely stunning, fascinating, beautiful BBC documentary that is required viewing for every thinking person on the planet. From the earliest thoughts of Alan Turing (father of computers) in Part 1, through Mandelbrot’s fractals, to computerised brains in Part 7 this is riveting. An absolute joy!!!

From chaos to complexity, simplicity and back again!

When people ask me about what I do, or what Ontonix does, the explanation can be as complex or simple as the subject itself. So much of it depends upon the enquirers’ understanding of the planet, their environment or  themselves. But it can also be about how “open” someone is to thinking (often) “beyond” what they have grown familiar with.

An understanding of complex systems and an appreciation of our inability to predict outcomes should serve us well. With non-linear systems, IF we must make assumptions: assume and cater for the worst foreseeable outcome. Do NOT be fooled by past results for, it is not the “known knowns” of risk but the “unknowns” of uncertainty that we have to deal with. The “price” of, apparently minor miscalculations deviations or events  can have major impacts as “feedback” loops across the system and connected systems.