Atypical Property/Casualty CEO

In anticipation of the visit by Peter Hancock of Chartis, I found an article from the Insurance Journal that was a summary of an address he gave as the keynote speaker at a recent meeting of the Professional Liability Underwriting Society (PLUS). His comments reveal that he has very strong opinions about the economy and regulation, as well as innovative ideas on how to drive this industry into the future. The following are a few things that I found interesting and important to keep in mind when he is speaking in front of the class:

Another financial crisis is inevitable:

"No way do I believe that banks, brokerages or insurance companies have learned the lessons of 2008."

"We are cruising for another financial crisis and so we as an industry need to be prepared for that...2008 was a dress rehearsal for the big one."

Regulation is necessary to promote smarter policies and will not hamper economic recovery:

"I don't buy that regulation will delay economic recovery."

Banks and business leaders should "work with regulators to get it right."

Traditional metrics may not be effective in the analysis of fixed costs:

"As we change our business mix and focus on the higher value added and growing parts of our business, that expense ratio can move around a lot and it, to me, is not a particularly useful metric to tell us how well we're doing.

Hancock has recommended using risk adjusted profitability (RAP), a new metric, in order to track and account for variable costs.

Research, especially exploring resources outside of the industry, is essential for development of new products and driving this industry forward:

Hancock has created a new position, a Chief Science Officer, who is responsible for all internal R&D and accessing outside research from other fields of study (e.g. econometrics, physics, medicine, etc).

"There is an enormous opportunity to leverage data and science in insurance."

"So as we look at how do we take data from one industry and apply it to another, or data that is obtained in one country and applying it to another, we have to use a lot of judgment, and not a literal application of the statistics to understand when regimes or their context is different, how do you use that data in a practical sensible way to make good decisions? So it is a blend of art and science. We need poets as well as scientists."