This a shortened version of Making Risk Flow podcast, episode: “20 Years as CEO of Hiscox: Personal Reflections and the Evolution of PPL” Juan is joined by Bronek Masojada, the former CEO of Hiscox and the current Chairman at Placing Platform Limited (PPL). Their conversation ranges from discussing Bronek’s time at Hiscox and his reflections on the challenges he faced, to talking about how PPL works, how it is being received by the market, and its successes.
Listen to the full episode here
Juan de Castro: Thank you Bronek, for joining me in this new episode of Making Risk Flow. This is a very special episode for me. I think you were my first boss when I joined insurance some years ago, and so it’s really close to my heart to have a conversation with you today. Perhaps for the few who don’t know you, would you like to do a brief introduction of yourself?
Bronek Masojada: Thanks Juan. Yes, it’s good to see you, I guess I couldn’t have been too bad a boss if you’re prepared to carry on talking to me, even though neither of us is still at Hiscox, where we first met. I’m Bronek Masojada, I pursue now a life doing interesting things with interesting people. Having stood down in December of last year as Chief Executive of Hiscox, a role that I had for just over 20 years. What I’m trying to do is leverage some of the skill sets that I developed at Hiscox to advise businesses, mentor young leaders, and on occasion, invest in businesses as well.
Juan: You were at Hiscox for 20 years as a chief executive, so perhaps we should start there with some personal reflections. What would you say you are most proud of?
Bronek: When I was at Hiscox, in total for 28 years, I joined in ‘93 as a pretty young, like you, ex-consultant, as a managing director. At that time, we were a pretty small business. We, well not so small, we employed 200 people and had a premium income of about 500 million US Dollars. We were Lloyd’s managing agent, and we didn’t have any of our own capital at that time. Lloyds was under a huge amount of stress, and it was clear to Robert Hiscox, the chairman who had hired me, and to me that we needed to evolve and provide as much of our own capital to support the business as possible. So that was the beginning of the journey. 28 years later, when I stepped down, Hiscox had gone from 200 people to three and a half thousand people, from a single office in London and then Wall Street to over 30 offices across the world. And premium income had gone from about $500 million to just under $5 billion. And we achieve all of that virtually entirely through organic growth, having good ideas, hiring good people, giving them capital, and challenging them to execute. So, I think as I reflect on that time period, what I’m most proud about is not any individual event, but the journey. Our strategy was to grow and shrink depending on the market cycle and the retail business to grow steadily through moving into adjacent products, into adjacent territories, and as time went by, into multiple ways of distributing that. So, what I reflect is that if you are in business and Robert Hiscox always used to say to me that building a business is the most fun you can have with your clothes on. You have to really enjoy the journey and get satisfaction from the achievements. Every day, every week, every month. There are a few lucky people who have one great idea that they execute but that wasn’t me. What I really enjoyed, was the journey and I loved it. For people who are in a role that they don’t love, I think the real thing is to try and find a journey in a role that you do because you spend so much time at work that even if you think I’m working to make money to do other things, you have to enjoy what you do for 8 hours a day. Otherwise, you’ll look back on your life and say, gosh, why did I do that for so long?
Juan: And I think that journey has been absolutely phenomenal. As with everything, I’m sure there were plenty of ups and downs.
Bronek: Many, many, many of them.
Juan: Many of them, right, but the business that you’ve built over those 20 or 27 years is absolutely outstanding. What are some of the biggest challenges you’ve faced or things that you didn’t predict?
Bronek: First thing, I have to correct you, it’s not a business that I built, it’s a business which we built. Because initially when I arrived at Hiscox, there was an existing management team which I became part of, led by Robert Hiscox. And so we together set on the journey. Later on, Robert stepped down and I worked with Rob Charles, who had previously been the chief underwriter. And again you continue and there’s an executive group of about a dozen people. In the end, you can’t build a business in America and the number of European countries, the UK, Asia and Bermuda as one person. When I think of the challenge in terms of how do you lead a business, if you read business books, there are all sorts of strategy, finance, soft skills, and so on, but that hasn’t been the challenge to me. I was very clear that if I wanted to be effective as a leader, there were three things I needed to have. Number one is ideas. Hiscox had a big ambition, which I just explained, to grow the business both in the London market but also in retail. But you need ideas all the time about how you’re going to achieve that ambition. Number two, you have to have energy, because it takes a huge amount of energy to build any business or run any business. And that doesn’t really matter whether you’re a one or two-person startup, a small business, a big business, or a huge business, it takes a huge amount of energy. What you spend on your energy is different, but it still takes that energy, and you need to have that physical energy to continue. And then finally you need desire, you need the will which comes from the desire to do all, to have ideas, to have energy, and to build a business. And why does that matter? I used to travel between our different offices and what I always used to remind myself is you need to communicate your energy to the people you’re meeting, you need to communicate your ideas. They only saw you for two or three hours a year if they were lucky. And so that one encounter with you would set the tone of their belief in the leadership of the organisation for quite a long time. And that’s equally, I’m talking now internally, but the same is true when you’re talking to potential clients, when you’re speaking to existing customers, where you’re speaking to existing brokers? That combination of ideas, energy and desire are the three biggest challenges to being effective in business.
Juan: I remember probably this was back in 2015 when we were working together, I think for one of the executive committees you asked us to read a paragraph or a book, which was called Grit. There’s a fantastic Ted Talk from Angela Duckworth talking about the power of grit and research about grit being the characteristic that best correlates with success.
Bronek: I think there’s a great sort of persistent is omnipotent, and that’s one way of putting what you’ve just said on the other thing, occasionally in life, and this comes back to flexibility, everyone has heard the saying if at first you don’t succeed, try and try again. But there’s another line, that I’ve sort of added myself, that after trying three times, it’s still not working, do something different. If you’re trying to get to an objective and you try a particular path there and you keep on failing, well, don’t give up on the objective or just try and get there in a different way. And sometimes persistence doesn’t always mean doing the same thing day after day. It means persistence in wanting to get the objective, but having to keep on rethinking how you might get there.
Juan: Yeah, do something different, but also then know when to give up. It’s a quite fine balance. Is there anything that you learned that challenged your historical beliefs?
Bronek: Every day something came along which you would say, “Gosh, I hadn’t thought of that.” And that’s inevitable, that’s good. When I started at Hiscox, advanced technology was the fax machine. And so if you think about the technological change we’ve seen over the last 25 years, I remember I didn’t have a mobile phone when I joined Hiscox. You either went to the gym or you had a mobile phone because they were so big and so heavy at the time. But what that really communicates is you got to keep thinking about what technology, what law, what consumer behaviour is going to change the way how you go about doing things. For example, the product that we sell in the insurance industry will always be required if you own a home and in 30 years time you will still be insuring it for things like fire, theft, water damage, explosion. Those are sort of core things which cause losses. But the way you need to change things about how you deliver that? What are the customer expectations? I can’t look back and say, oh gosh, that was a one-eureka moment which changed everything. Because to me, every three or five years something came along that completely needed a reinvention or rethinking of the way Hiscox was going about its business. And that’s really hard to anticipate, but it’s that flexibility. To me, another sign of changing your thinking is curiosity. As a CEO, as a business leader, it’s very easy to stop being curious because everyone keeps on telling you, “Yes, of course, that’s a brilliant idea.” Because when you got in a hire, fire, paying, promotion leverage over someone, they always think you are brilliant, they always laugh at your jokes. So you need to be curious and outside of your, sort-of bubble; looking at new things, interacting with new people. And that curiosity is what helps inform and challenge your thinking. In fact, one of the things I’m enjoying most of not being a full-time CEO is actually having time to meet interesting people, doing interesting things, and that’s challenging my thinking all over again. And I really enjoy that and it’s great.
Juan: Let’s shift gears now, from these personal reflections into some of the most relevant activities you’ve been involved in outside Hiscox in the last few years. One big initiative has been PPL and you’ve been one of the leaders of that initiative. Perhaps can you start by sharing what PPL is and what it tries to address for those who are not familiar with it.
Bronek: PPL stands for Placing Platform Limited and it’s effectively a utility which is owned by the three market associations, the International Union of the IUA Lever, the International Brokers, and then the LMA, and then the fourth participant is Lloyds. And what it is, it’s a platform on which you can place big ticket risks. So connects over 400 firms and 20,000 users in the London market, brokers and underwriters, and it’s used to place risks and then also to confirm cover. So it’s effectively the trading platform for the London market. I became chairman of that in Q1 in March 2018. At that point, PPL was really up and running and it’s been driven by a bunch of believers who believed that the market needed a platform like that if it was going to survive and evolve into the next century. And it had been based on technology provided by a firm called FX and it was up and running, there had been a number of upgrades, there were enthusiastic people in the marketplace and they had persuaded people like me who had tried to modernise the market.
In 2018, David Ledger, who had been, I think, the founding chairman, had done an awesome job corralling through persuasion. David was a broker and he was very persuasive. I remember him coming to my office and persuading me that Hiscox had to be on the platform. And even though it was against my better judgment, we still said, yes, we’d go on the platform. Not better judgment, because again, I always had a desire that it should go digital, but it was against all the experience I had ever had on these cooperative, market-wide benches. But he persuaded and thanks to him and others, it was up and running when I joined, and effectively my job, as I thought when I became chairman, was not to try and improve the platform. The platform already existed, it was to drive adoption, to drive scale across the marketplace. And that was what I saw as what was required in the next phase. And that’s what we set about doing and we’ve been highly, highly successful.
Juan: This is very topical to the theme of a podcast. PPL to some extent is the version of making risks and data flow within the London market environment. Historically it has been, a very traditional market with traditional players. Often we talk about these types of structures as network effects, you need a critical mass of brokers and carriers using them before you can get mass adoption. And those initial stages are probably the hardest ones. So how did you manage to start getting more adoption?
Bronek: The hardest stage was actually the work that David Ledger and the team had done because they got people up and running. If you look at the innovation curve, you can sort of divide it into four stages. It’s about when any new technology, any new fashion, any new way of doing things arises. There’s normally between 10% and 15% of the population who are early adopters, and they always want to try the new best thing. Then there’s about another 35% who are, I would say fast followers, but they are change focused, but they want to be demonstrated that it works. Then you have the other 35% who are “well, if I have to, yeah, I guess I will”. And then you’ve got a final 15% who are the bitter enders who will always resist everything. The people who we know today who say “of course, I don’t have a mobile phone”. So that was my analysis of the marketplace.
And if you want to change a network, you need a lever, you need a force to get them to happen. At the time, I went to Inga Beale, who is the chief executive of Lloyd’s, and I said, look, I’ve been asked to take this to on, and I’m very happy to do that, but I’ve got some requirements before I do that. She said, well, what’s that? So there are two things I said, I’d like you to mandate the use of an electronic placing system by managing agents. That’s number one. And number two, I want you to measure the use of the platforms and make the results public, she said, okay, I’ll do that. And I’ve always admired Inga for having the nerve and the courage to make that decision. Lloyd’s created, some financial incentives, which is if you were above the target, then you got a sort of a gift from Lloyds because you’re making the market more efficient. And Lloyds paid for that out of their budget. We had a combination of carrots and sticks, we then started doing it. We said that we’re going to increase the adoption target by 10% every quarter. So, when we started Q2 2018, we said the target would be 10%. The reason we went to 10, 20, 30, 40 is underwriters are very good at finding the one risk in 1000 that will never go through an IT system. And they’ll say because I can’t do this one risk, I definitely could never do the other 999 risks. And by saying you only have 10% of them on it, when they came around this difficult risk, you said, well, that’s part of your 900, you don’t have to do this quarter on the platform, but find the 100 simple ones and do the 100 simple ones. And then you did 200 and then 300, and at the end of the first quarter, we published the scores, and some people were at 20% adoption and others people were at 2% adoption. And that again, the publication of how people were doing was a huge shock.
Bronek: And guess what? When the Insurance Insider went and spoke to some of the firms who are at the bottom of the queue, they interviewed the CEO and they were confident that ABC managing agent hadn’t made any progress, whatever. It was amazing. However, in the following two quarters, they caught up to everyone else. And so that meant in fact, that by the time the pandemic arrived, by Q1 of 2020, the market was an 80% adoption. And I would say that the reason why the market survived COVID as well as it did at an operational level. This against the financials is because of PPL and the other electronic placing systems because we are already running at an 80% annualised rate this year, PPL processed almost 200,000 risks and almost 700,000 lines of transaction. It’s a huge success and for better or worse, people have realised that they don’t have to go in the room in order to underwrite insurance. And I think that in time you will see a diminution of the importance of the risk as more and more people do. DoI think it will go away entirely? No, because it’s a good place to negotiate more complicated face-to-face risks. But I think the number of galleries, the floor space devoted to underwriting will go down because more and more people will underwrite from their offices. So it’s a great story of transformation, but it’s the great thing about, having a great idea isn’t enough. You need to be able to work out how to implement it. And usually, I give all credit to the standard bearers at the beginning, David Ledger and the others who committed the pioneers for the market. But then you needed fresh thinking about how do you scale it. And I think that combination of the mandate from Lloyd’s driven buying a bill plus technology that worked is what drove the adoption.
Juan: I think it’s a great story of leadership, it’s a great story of change management. How do you drive change in an environment that probably initially was not very supportive of the initiative? And how did you create incentives that made sense for them? Getting to 80% adoption is fantastic. I mean, you are pretty much there and as you said, most likely you always have a 10, 20% of risk that won’t be placed, right?
Bronek: And I think that’s fine, and that’s good because I want there to be ten to 20% of the risks which are too complicated to do through a predetermined placing platform because actually the world is changing and I always think there’s an evolution. It’s complicated, it’s different. People do something bespoke, and then over a period of time, it gets better understood, the coverages get simplified, it makes it easier to make it more efficient and that’s the sort of risk life cycle. And I think that’s a really interesting process. So I don’t think that people think, oh well, you can only do it one way. No, what we’ve shown is you need to segment the risk population you’re dealing with, and you don’t have to deal with every segment in exactly the same way. And I think that variation is what people forget.
Juan: And it’s a particularly interesting story, especially when everybody thinks of the London market as an old-fashioned environment. But to some extent, in this regard, there are aspects of it which are probably more advanced than in the company markets.
Bronek: Right. Well, the great thing, in fairness, the company markets using PPL too. It works across the company market and the Lloyds market. So I’m afraid I don’t see this as an innovation for Lloyds. We use Lloyd’s power to drive progress across the entire London market, and that’s what Lloyds is there for. Lloyds should be the leader of the London market, so everyone’s using it. I think the bigger point is when people meet people, I say your conception of a Lloyd’s broker is somebody walking around carrying a pile of paper. That’s wrong, that’s just dead. That ended. PPL changed that view of the world. And I think there’s a lot more to do on market modernisation. The challenge is to go to your title of making risk flow. We’ve created an island of digital work. Now we need to connect it particularly downstream to the actual accounting and settlement and the processing of that. And again, the challenge of that is not, is this a good idea. Everyone would say it’s a good idea. The challenge of that is, how do you make it happen in an effective way? And then there’s a tension between the challenge I sometimes have people say, well, there’s 140 data points that we need in order to entirely automate the downstream process. How are you going to get the 140? And until we’ve got the 140, we’re not going to really make any step forward. And I’m sitting there thinking, how much digital data do you have today? None. PPL will be able to deliver you about 30 contract-verified fields that drive a contract. Why don’t we work out how to use those 30 and augment them with hands and data entry in order to make progress? And it’s that whole tension between not the destination. The real challenge in life is not the destination, it’s how you get there. And I think whether it’s Cytora trying to implement in a large organisation, whether it’s a small organisation trying to grow, the destination or ambition is really important. But it’s the what do you do on Monday morning? Which differentiates the ability to answer that question, which differentiates, in my view, the winners and the losers.
Juan: I think that is a brilliant takeaway. Extremely insightful conversation, Bronek. As I said at the very beginning, thank you so much again for joining me. I’ll see you soon. Keep on having an impact in the industry, even if it’s as an advisor, investor, etc.
Bronek: Thanks a lot, Juan. Good to chat, and I hope people that have listened thus far have found it interesting.