This a shortened version of Making Risk Flow podcast, episode: “Global Strategy and Operational Excellence in Insurance | Sufen Lim, TMK." In the latest episode of the Making Risk Flow podcast, host Juan de Castro interviews Sufen Lim, Senior Vice President at Tokio Marine Group. With over a decade of experience spanning investment banking to her current role, Sufen offers a unique perspective on the industry's evolution and Tokio Marine Group's strategic vision.Sufen joins Juan to share the cultural nuances crucial for thriving in the insurance sector and the group's commitment to driving product innovation and operational excellence. With wisdom rooted in Winston Churchill's advice, from harnessing AI to collaborating with insurtech startups, Sufen also reveals Tokio Marine Group's forward-looking approach to meeting customer needs and addressing future mega trends.
Listen to the full episode here
Juan de Castro: Hello, my name is Juan De Castro and you're listening to Making Risk Flow. Every episode, I sit down with my industry, leading guests to demystify digital risk flows, share practical knowledge and help you use them to unlock scalability in commercial insurance. Today's guest is Sufen Lim, SVP office of the CEO at Tokio Marine Kiln. In this episode, we'll talk about her transition from investment banking to insurance about Tokyo Marine’s innovation strategy and how they coordinate these efforts across such a large and distributed organisation. Hope you enjoy the podcast. Sufen, thank you so much for joining me today. I'm really excited about chatting to you about all things Tokio Marine and I'm sure we've got a number of topics you plan to discuss, which I'm sure will be really interesting. Let's start with an overview of who you are, your role, your background to set the scene for the rest of the chat.
Sufen Lim: Sure. Thank you, Juan, for inviting me to this podcast. I'm happy to be here today. So my name is Sufen Lim. I'm Senior Vice President at Tokio Marine Group. I qualified as a chartered accountant. I was an investment banker for over a decade, advising global financial institutions. I moved in-house into one of my favourite clients, Tokio Marine, about 10 years ago. And my key area of expertise includes global strategy, mergers and acquisitions, investments, operations, as well as innovation.
Juan de Castro: I'm always really interested in these transitions from other industries into insurance. So we'll touch on that in just a second. But Tokio Marine is one of the largest global insurers. Can you also give us an overview of the shape of the group?
Sufen Lim: So Tokio Marine is a global insurer and we are headquartered in Japan with operations across 46 countries. We're listed on the Tokyo Stock Exchange with a market cap of $54 billion with over 40,000 employees globally. For full year 2023, the group grew $40 billion in net premiums and we generated a net income of over $4.5 billion. Our international business, so what I call outside of Japan, contributed to over 56% of the business unit profits for the full year 2023.
Juan de Castro: And I think Tokio Marine is one of these companies with almost like a case study of what was originally, in this case, a Japanese insurer that has successfully expanded globally. As you said, over half of the premium come outside of Japan now. So I think it's a fantastic case study in that sense. Another topic that I would like to discuss with you a bit later is how you manage such a large and complex organisation? But let me go back to the introduction you mentioned in the beginning. You moved from being an investment banker, I assume working across industries, to join Tokio Marine, 10 years ago. And I'm always really intrigued about how people find that transition. So let's start with what are your two or three aha moments or things that surprised you in that transition?
Sufen Lim: I think just thinking through a story that I had. The first day I showed up at work on the insurance side, by 6 pm, we had the cleaners in front of my office. And so I thought, okay, it's time for me to actually get out of the room. And 6 pm for me in the banking world is probably half day. Let's put it that way. So I think it is also a positive takeaway in that sense, whereby what I realised is there's a lot of rebalancing that's required with regards to mindset, with regards to just how you manage stakeholders within the insurance companies versus banking. And also the culture is just very different. And just talking about culture, I'll particularly point out the pace of change, which I think is like the banking sector. I've seen that definitely improving over the last few years, in particular where insurance companies are starting to embrace more digitalization, modernization, and also innovation. And for me, personally, with regards to this transition from the advisory side to being a principal in-house, especially around having to deliver on strategy and strategy execution, that is just fascinating. And then that's just probably been me being a curious, intellectual person who likes to problem-solve. I think it's fascinating to have that helicopter view on strategy, but also be able to be hands-on and immerse deeper into the day-to-day operation aspects of running an insurance company.
Juan de Castro: It's funny when you say that at 6 pm, the second half of your day started. I remember also when I was back doing management consulting and when I had some stuff before that. When I joined this management consulting firm at 5 pm, we would have a team meeting to plan the second half of the day. And that was a cultural shock getting into management consulting. And then, as you say, when you leave management consulting or investment banking, that is also another shock because you cannot expect the rest of the team to be working at the same pace. And it's totally a different culture. So you joined Tokio Marine 10 years ago. I believe your early years in Tokio Marine were still very much kind of inorganic growth, M&A focus. Is that right?
Sufen Lim: Yes, that was correct. So the first five years when I joined the group, I was mainly focused on mergers and acquisitions and strategy. So as many would have known, you mentioned the case study. So Tokio Marine actually embarked on this international expansion strategy in the 2000s. When I first joined the group, I think what really attracted me as well is the fact that at that point in time, the international business contributed to about 40% of our business unit profits. And the business mix was clearly more geared towards property. So I was excited by the fact that I was able to join a group, which I knew at that time was going to go through such a transformative journey in terms of growth, in terms of business profile, and in terms of building up capabilities where we have the balance sheet to also deliver to serve our customers and our commitment to the society. So at that time, after six months of joining, we actually led a transformative acquisition for the group. And that was Houston Casualty. And that has helped us diversify further into casualty lines, which we were clearly underweight on. And with that, we were able to provide a more complete suite of solutions to our customers at that time. And furthermore, I think since then, we continuously look for high quality franchises, such as Pure Insurance, for example, is one where it is very specialised in services in the high network segment, and then in emerging markets as well, we've done various distribution transactions, we've also done various bought-on, whereby it further solidifies our position within the domestic market itself. So I think the expansion through M&A over the last decade has clearly resulted in where we are today from the growth in our international business and also to become a global insurer where we were like compared to 10 years ago.
Juan de Castro: So you mentioned Pure, which is probably one of the most respected high net worth brands and insurer globally. We also looked at them when we were back at Hiscox. What can we learn from that? Because they were actually getting things right. After such an acquisition and integration with a global company like Tokio Marine, what is your strategy in terms of integrating them into the broader group? Do you keep them running quite standalone? Do you integrate them deeply?
Sufen Lim: So the reason why I mentioned why we tend to look at high quality franchises is the fact that it comes along with a very strong management team, the sort of talent bench as well. But also we look at the segments that some of these businesses are operating in. They're very distinct. So for us, it's not like a lot of US carriers where you do an acquisition and day two, you have this hundred day integration plan where you merge them, you take out costs, you try to consolidate some of these businesses as part of the group. Well, Tokio Marine Strategy has always been enabling and empowering the local management teams to actually run their business very autonomously. Of course, everyone reports into the Japanese governing structure. We will have directors, experts coming over from Japan who be integrated into the business, who know more about the running of the business and the strategy. But I think Tokyo Marine itself is actually a very respectful culture. And we do rely a lot on the local CEOs and the management teams in terms of delivering and continuing to do what they're really good at.
Juan de Castro: So we've talked about the inorganic growth. So some of these M&A deals we've done in the last few years. When you think about the other side of potentially more organic growth, how do you drive innovation from within? How do you think about the innovation at Tokio Marine?
Sufen Lim: Yeah, I would say that I think about innovation broadly as opposed to main areas across the insurance value chain. And that is sort of top line and cost, literally. So from a top-line perspective, it's what enables that is really that driving of the product innovation. And by product, I don't just mean new products. I meant services distribution as well. And on the second element around cost is clearly to look at the operational transformation side of things. And that could range from your underwriting processes to data analytics to sort of business process transformation side of things. So if I possibly start on the top line aspect, which is like driving product innovation, as a group, we're actually pretty innovative. We always put our customer value at the core of what we do. We cannot forget that there is that changing risk landscape. We are ultimately an insurer and we work with risk. So the changing risk landscape, we have to take into consideration what we call the future megatrends. We have to think ahead in terms of ensuring some of these changing risks in order for us to continue to stay relevant to our customers. And for example, I'll just give maybe two examples. So the one is sustainability. And everyone knows that it's top of our minds with regards to investors and also it affects our day-to-day society. So to support climate transition risks, we're actually working with EV Insurtech on providing battery warranty and electric vehicles insurance. And then we also have a group company, which we acquired, that focuses on renewables. So we are exploring the insurance cover around the storage side of things with them. Another example that I can give you is on social responsibility. So we are working with another Insurtech, which has a science-based solution on developing, and identifying raw materials and goods that come from certain regions where historically there have been forced labour and could be child labour, could be immigrants as well. So this interesting technology has also enabled us to come up with some sort of parametric trigger where when we structure our cargo insurance. And given us the strength of our balance sheet as well, where at the Tokio Marine Group, we also invested in quite a few of these Insurtech’s, whether it's through direct from a balance sheet perspective or through our venture funds. And what we found successful is the combination of actually deploying capacity on the balance sheet side, but also investment on the capital side as well to actually help this Insurtech grow, work with us in the long term. And then therefore create that path where we can actually be relevant to our society and to meet some of these changing needs.
Juan de Castro: Okay, and before we move on to your second category of operational transformation, so you've mentioned, for example, here working with a couple of Insurtechs in battery warranty, raw materials, and building on the previous point you made about being respectful of the companies you work with and letting them somehow run standalone. But at the same time, how do you think about if there's an opportunity across the rest of the Tokio Marine businesses to leverage some of these new products, let's use the battery warranty one, for example, so how do you let them run independently while capturing those synergies?
Sufen Lim: Yeah, so the good thing is that there's not a lot of overlap across the group companies that we acquire internationally. So therefore, each and every one will have a sweet spot with regards to underwriting with appetite. And also, they will be specialising in certain areas within that. So if I just take that EV company, for example, I mean, the EV insurer tech will be relevant to our clients, particularly on the Japanese side. And why is that? It's because we are the largest motor insurance provider in Japan domestically. But on the EV side as well, I think that's where we at Kiln are able to provide that battery warranty insurance and the electric vehicle insurance. But we know another sister company that specializes in the renewable space, the construction side. And therefore, we will be approaching them to say, what about working with us with regards to providing capacity for some of these areas, where we as Kiln may not have the appetite to actually do so. So various initiatives within the group on group collaboration around innovation. And with that, I mean, we look at it not just from a lens of what we can bring to the table as a group across the different companies with regards to the sort of underwriting risk appetite side. But also, I think in terms of the investment front as well, that's where we will have the capability to actually assess some of these investments in order for us to roll with the insurance tech.
Juan de Castro: Again, just building on those examples, do those investment opportunities come from a central innovation team? Do they typically come more from individual business units that identify those needs and take the lead? So is it more centrally-driven or is it more distributed? How do you identify this type of innovation?
Sufen Lim: We do both, let's put it that way. So we do have a sort of digital innovation team centrally. Even that said, I mean, they are dotted across the world as well. So we have representation in New York, in Tokyo, in Singapore, Silicon Valley, and so on. So clearly with that, we also have invested in VC funds, and that brings that pipeline with regard to some of these opportunities. Within Kiln itself, we are actually central to Lloyd’s of London Innovation Lab. So we see quite a lot of pipeline in there. But also, you know, through our own network with regards to the London market, we are also able to source quite a significant pipeline with regards to some of these opportunities.
Juan de Castro: Okay, that makes total sense. You mentioned the second area of innovation being in internal operations, so the way you work internally. Can you talk a bit more about that?
Sufen Lim: Yeah, sure. So as I mentioned before, I mean, we have grown significantly through acquisitions across the group. So each company itself is different and they are sort of managed autonomously. So therefore, it wouldn't be surprising to hear that every subsidiary may be on a sort of different path with regard to their transformation journey. And they all will have different sorts of operational challenges that they will prioritise. So therefore, in our world, I think there's no sort of one size fits all solution with regards to how we drive operations in transformation. I think in itself, it is a complex group, but we will need to sort of balance the level of governance that really drives the further complexity that we already have versus the sort of innovation, which generally, I believe, personally, requires significant agility. So I think as a result of that, we try to balance what is called bottoms-up innovation experiments and also the sort of cross-group initiatives that we have. So just to give you an example on the bottoms-up innovation, so two years ago, I led a project here at TMK where we started using AI to ingest data from the market, from contracts directly into our policy admin system. So we started with two lines of business as an experiment and a proof of concept. And then when that worked, that is clearly being rolled out to other lines of businesses. And the purpose of that is to clearly enable automation to help us scale as we continue to grow our top line. But also I think many people forget as well is that data consistency piece that you get when you have fewer humans to tap into various languages that they could possibly have, even though it comes from the same source. So that has clearly helped us from a sort of downstream reporting as well with regards to data quality. Another example I can give you is on a sister company in the US that actually specialises in, I'll say, sort of short-term medical aspects of insurance. And they have started using AI quite significantly in the claims automation as well as the triaging process. And that really helps them significantly with improvements in efficiencies, especially since they have to manage large volumes of claims. And another example we have in the Latin America side of things is that this company in Brazil has actually successfully integrated machine learning into their pricing model. And also they're fully automated from a straight through processing with regards to underwriting to claims in the motor insurance side. So this has clearly translated into good loss ratios and also good overall combined ratios on the expense side for them as the business scale.
Juan de Castro: And these are all examples you mentioned. These are all bottom-ups. So these different Brazil, the US, those different entities would identify a partner that they could work with and then start working with them, right?
Sufen Lim: Correct. So it's really down to, as I said, because it's so hard to have a one-size-fits-all and everyone has a different prioritisation, urgency, or areas that they want to target with regards to use cases where they can actually bring it up. So I think by having this experiments approach creates value for these group companies themselves, that will help them create those success cases. And once you have the success cases, that's when I think we actually share them across the group. And that leads to my second point with regard to this cross-group initiatives. So for example, I mean, we are learning from the US company with regards to looking to potentially using AI on the claims front as well. On the emerging market side of things, our Asian business is transmitting teams to a Brazilian office to actually try to learn from them with regards to what they've done in the motor business too. So I mean, these are just very positive stories that we will be able to see that use case. Not within specific lines of business, or specific group companies, but once people learn about it, more and more people want to learn more about it. And therefore that breeds that cross collaboration across geographies, across group companies with regards to some of these success cases. And I mean, Juan, you will know as well, a lot of these experiments, projects require dedication and resourcing internally. And that's where I said to balance that governance aspect because of complexity versus agility. So once you have that agility, once we have that and the success cases, when we try to crossbreed it across, say, from geography A to geography B, that's where more and more resources can be put on by the group to help with the deployment on the support side. And then that hopefully helps us as well with regards to that sort of intra-group collaboration story.
Juan de Castro: Gen AI and large language models. I'm sure every insurer board is talking about it. They're all thinking about how to make progress around it. So what is your approach to testing, deploying, and leveraging across the group in Gen AI?
Sufen Lim: So I think you're right. I mean, you can't forget about Gen AI, right? So we're really testing AI. So I think Gen AI is definitely there and there to disrupt the industry. So again, we've done it in similar approaches, both themselves and also cross-collaboration approach. So I believe within each group company, even at Kiln, we have our own internal Gen AI working group. That group itself is comprised of people across different functions and then also exploring what's out there, some use cases for Gen AI and how is it relevant to our own business today. We ourselves at Kiln are test-casing quite a few of these use cases ourselves. So we are experimenting with that. And at a group level, we have a coordinator, gen AI Working Group 2, which I'm part of. And that group itself, the role of it really is also to look at where all the activities are across the group companies and whether we can actually learn from some of these use-cases that each and every one is actually experimenting. I think governance, we can't forget about governance around Gen AI data privacy and so on and so forth. So that group also helps to create that overall consistency with regards to how each and every good company is approaching governance, and data privacy on gen AI usage. And on top of that, don't forget as a group, we have huge purchasing powers with regards to some of what we can do with large vendors. And to that point where if we find a lot of use cases coming from, say, a particular vendor X, and we don't want to name that vendor X, then therefore, I think from a group perspective, it is reasonable to say, well, can we actually get a group deal with regards to the contract? So I think that sort of is how we're thinking about gen AI today. But of course, I think once there are tangible successes or some of the experiments that we're doing, then it could be more interesting.
Juan de Castro: And you mentioned you're part of that Gen AI group initiative. Have you identified a short list of use cases that you think are most relevant for kind of capturing business benefits from Gen AI?
Sufen Lim: Yes, so we have, I'll say, a short list of use cases, but also every group company, again, will prioritise those use cases differently. We are looking into something in the underwriting space. So there are various use cases that we are looking at, whilst other group companies might be testing it in the sort of coding side, sandbox side. So I think that is where there are clearly lots of use cases. Today, if you go to any consultant, they will pitch you everything under the sun from how useful that will be. But to make something relevant to us, we do need to bring it in-house, have a think as to what's best for each of these group companies ourselves.
Juan de Castro: In that sense with things like new technologies like gen AI is Tokio Marine strategy more to be at the forefront of the innovation leading the pack or is it more the conservative strategy of saying, okay let's be a fast follower once we understand all the use-cases? And I don't think there's a right or wrong. And it is not a leading question, right? Sometimes with some of these technologies, it's totally fair to say, well, we want to move fast, but we want to be cautious too.
Sufen Lim: I think we have a lot of room to probably improve on this matter. I wouldn't bucket us into whether are we made of the pack. Do we sort of want us to be a fossil level per se? I think we definitely do not want to miss out on those potential opportunities. I mean, Gen AI is definitely one of these future mega trends that I mentioned before that will change the landscape in the world that we operate in. So there's no way we could be not doing anything around it, especially for such a large group like us. But I do think in the end, there is that importance around that growth mindset and how that affects the culture within the group and also each group companies, especially around change, around being able to fail and to learn from failure. And actually as a group, experiment and then try to see how we can move forward tangibly with some of these use cases that we think will be relevant.
Juan de Castro: So perhaps a wrap-up question. We've talked a lot about innovation, how you look at innovation, different types of innovation from bottoms-up to group initiatives, product innovation, and process innovation. What advice would you give a startup in any of those spaces that is thinking about partnering with Tokio Marine?
Sufen Lim: Yeah, so clearly I talk a lot about our customers, our commitment to our customers, and in terms of our use cases, some of these operational challenges. So I would think about it, my advice would be, we will be your customers. So therefore, think about the value proposition that you can bring to us with regard to problem-solving, whether it's on the front end, the back end, or throughout our value chain. And very importantly, as a group, cultural respect, culture of long-term is extremely important to us. I think for us, there's always this mindset of creating a win-win long-term relationship. It shouldn't be a one-off job. It shouldn't be a one-off project. It should be something to see how we can actually work together for a long time. So that is probably some of the thoughts I have at this stage. I'll probably also end with a quote from Winston Churchill, which I hope to provide some encouragement as well, where it says, “Success is not final. Failure is not fatal. And it is the courage to continue that counts.” So I do see this as a commitment and our commitment as well as an insurer to build that timeless endeavour to our customers.
Juan de Castro: What a brilliant way, Sufen, of wrapping up the episode. All I can say is thank you so much for joining me. And it's been a fascinating kind of window to look at how you're thinking about innovation strategy at Tokio Marine. So thank you so much for joining.
Sufen Lim: My pleasure, Juan. Thank you very much for the invite.
