Posted on 16 Jun 2009
In a time of financial turmoil, the insurance industry faces an unprecedented opportunity to begin selling on value and not on price, Joe Plumeri, Chairman and CEO of Willis Group Holdings, the global insurance broker, told delegates at the Insurance Day's Summit Bermuda. Delivering the keynote address at the event, Plumeri said that the insurance industry should make the most of being a capital provider and risk adviser in a time of scarce capital and huge risk.
"In a time of fear, we offer security. In a time of scarce credit, we provide capital. In a time of newfound risk awareness, we are the risk professionals. All of this puts us in an exceptional position to lead, Plumeri said.
Plumeri said that the need for greater transparency in business transactions that has resulted from the financial crisis has given the insurance industry "a perfect opportunity to showcase all that we do and the value we provide, because we will need to explain why we charge what we charge and what it is that clients get for their money. We are not just buying policies at the best price - we offer analysis and fight for the best possible terms. We are selling an experience, not a commodity. Now is our time to prove that insurance is more than a retail transaction, insurance is a partnership."
Listing the opportunities presented by the economic turmoil, Plumeri told the 150 delegates that, in a time of renewed calls for greater transparency, contingent commissions should be abolished once and for all as they represent "manufactured revenue and not added value." A long-time, outspoken advocate for greater transparency and the elimination of contingents, Plumeri also rallied his peers to join the debate over how the industry will be regulated, advocating principles-based over rules-based regulation and warning against a government "over-reaction."
Another area of growth that the insurance industry should be ready to capitalize on, according to Plumeri, is the new risk assessment that will be needed to accommodate new business models. "We may finally have reached the moment when true Enterprise Risk Management is something that our clients will demand. We will need to apply the analytics and modelling sophistication that we've developed in the reinsurance sector for the retail side,"he said.
Plumeri applauded the industry as a whole for "sticking to its knitting," investing conservatively and learning and evolving from past adversity.
Plumeri's speech was centered on a concept from Joseph Schumpeter, a Czechoslovakian economist in the early twentieth century, who said that capitalism moves forward following a process of "creative destruction." "Inevitable cycles of expansion and retraction are not only survivable, but are in fact the secret of capitalism's extraordinary power to inspire innovation and progress. Insurance is going to be one of the essential building blocks of recovery. We will help the world find the "˜creative' in creative destruction," he concluded.
A full copy of his speech is available on www.willis.com/What_We_Think/Publications
Willis Group Holdings Limited is a leading global insurance broker, developing and delivering professional insurance, reinsurance, risk management, financial and human resource consulting and actuarial services to corporations, public entities and institutions around the world. Willis has more than 400 offices in nearly 120 countries, with a global team of approximately 20,000Â Associates serving clients in some 190 countries.