This a shortened version of Making Risk Flow podcast, episode: “4 key areas of Data Automation to Fuel Broker Growth” In the first episode of Season 3, Juan invites Philippe Lutgen, the Chief Operating Officer for Howden Broking in Europe, onto Making Risk Flow. The pair discuss the four key areas to success in broking, how data automation could be integrated into broking processes, and how the industry could make strides in underinsurance.
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. Good afternoon, Philip. It’s a real pleasure to have you join me in this new episode of Making Risk Flow. Perhaps we start with an introduction of yourself. I think your background and experience are really fascinating, so if you can start with an overview of your background, that would be really helpful.
Philippe Lutgen: Thanks for having me. I spent 20 years with AXA XL and I was lucky in that time to have different roles. More recently around our shared service operation in India for five years, a big back office operation grew from 300 people to 1000 people. During my tenure, I was based in New Delhi. Fabulous experience. And then after that, as we were merging with Catlin, I became the COO for XL Catlin at the time in Asia Pacific. So covering the entire Pacific region and the role over there was a lot more front end, driving expansion strategy in the region and also integrating with Catlin first and then when AXA bought XL Catlin in 2018, driving integration with AXA and the collaboration with the local AXA entities. So these were the last twelve years of AXA XL and spent in Asia. And then I was starting to think the Covid years were complicated, lockdowns and so forth. It was time for me to kind of reflect a bit on what I wanted to do and I thought I realised it was time for me to change. I wanted to revert, to get a maybe smaller leaner company with a different culture, focusing on slightly more entrepreneurial with a good growth strategy and investments to support it. So I decided to leave AXA XL and I joined Howden a few months ago. It’s just two and a half months. I’m the COO for Howden Europe. So Howden Europe, so that you understand is everything except the UK. So all European countries, from the Nordics all the way down to Israel, we have 19 countries in scope and it’s a great story in that it’s got very ambitious growth plans. We’ve doubled the revenue in the last two years, we plan to double again in the next three years and I’m part of the European leadership team. So it’s a very small team, five people who want to be very lean at the centre and our role is to help set the strategy and accompany the countries in their plans. So I’ve been doing this for two and a half months and my first observation is that great company culture is terrific, good people and there’s an opportunity, which I’m really pleased about.
Juan de Castro: Then there’s definitely a buzz in the market about what Howden is doing. So I’m sure it will deliver everything you were looking for. You’ve got 20 years of experience as an insurer, but now you’ve moved to the broking side. So to some extent, you bring all the knowledge of how it feels to transact or to do business with brokers. Let’s start there. What is your vision for broking? What are your strategic objectives and priorities at Howden?
Philippe Lutgen: My vision for broking, it’s still emerging, it’s only two and a half months since I joined, so I can’t really pretend to have it covered at all. And there are also a lot of similarities between what we do on the broking side and the carrier side for the areas I’m covering, the Ops, Data, and so forth. But I think the vision if I were to look at what I’ve done in the last few weeks, I’ve spent a lot of time travelling across our country. So I really want to go and see the operation, and spend time with the teams. And I think what’s super clear right from the outset is the vision. It’s not one vision. It’s not going to be a one size fits all. It’s very far from being homogeneous. So what I mean by this is we’re largely a retail broker, but we also have a focus on wholesale, the entire value chain really. There’s a language, but sometimes people forget that Europe is a collection of countries and languages so you can’t deploy one vision, one set of solutions to everyone because there are some really strong country specifics. We have different regulatory environments. Take the Nordics, for example. In the Nordics, a broker is not allowed by law to receive brokerage from insurance companies. All the money comes from the client. So it’s like a consulting agreement with the client, data protection, different data privacy rules, whether you handle client money or direct to insurers, whether you do claim sending or not. So in other words, it’s a multitude of facets. And therefore, when I think about vision, it’s not actually a set people think about it is there one system which can be used for everything? The answer is of course not. For me, the thing that brings it all together is data. How you look at the data that you need throughout the value chain to be successful. There are four areas where you need the data:
A Broker promises a service largely around risk cover and claims. So all the data points that we have captured throughout that value chain are to ensure that there is actually a superior service at the end. And you do all this to get the best adequacy between cover and risks, and minimise the gaps in under insurance, minimise the pockets of risk which you’re unable to insure. It’s a data-driven approach all along to meet those various objectives.
Juan de Castro: Actually, that’s really beautiful. To some extent, we could say that data is bridging the gaps across all those cultures and different countries, which is what you mentioned at the very beginning. You mentioned four areas in terms of the role of the broker and then we’d love to talk about that under insurance at the end. But if we start with managing the sales pipeline, that was the first area you mentioned, what is the role of data there?
Philippe Lutgen: Yeah, so here I think it’s really understanding the universe of prospects you have. And this is where I think the expertise of the country CEOs, the account executives we have in a country is essential for them to understand what’s out there, what is the opportunity, all the potential future clients understand who has relationships already with those future prospects. And that could be through personal relationships. And often you deal with small territories where everyone knows each other. For example in England when you walk in a rural area, everyone knows each other. But it’s the same when you go to Greece when you go to Israel or you go to Norway. So an existing relationship, but it could also be through groups in CFO forums, connections with venture capitalists, lawyers, non-execs, and different ways of understanding how you could get access to those clients.
Then it’s about gathering the basic info. So at this stage, you want to have the basic information on the prospects. Who are the current brokers, who are the carriers, what are the risks that are being insured, and what are the inception dates? And it’s important to know that because then you can start to make your pitch when those risks actually renew. And we’ve seen some of our countries having even telemarketing teams, calling those companies and trying to get this information and feed all this into a repository of CRM type of capability where you capture all this. And for me, this is step number one. So you start to build that bulk of information which then you use so it doesn’t sit on its own, it’s not standalone. It feeds into your broking tools once you have the clients on board. So that’s step number one, is that data capture of the universe, managing how you go about winning those accounts, the penetration and so forth. So that’s pretty much the upfront part.
Juan de Castro: That makes sense. And one of the traditional challenges with that type of data is that it gets outdated. Perhaps not in a small country, right, but in a large geography, probably you’re holding that data in a CRM or a similar system. That data tends to get outdated over time. Is there anything you’re thinking about using external data or other data for the two of those purposes? One could be to refresh that information, but I guess more importantly, as a broker, identify what are the triggers where a potential customer might need additional coverage, which might be the right point of the customer journey, right?
Philippe Lutgen: Yes. I think this data is only useful if it’s fresh if it’s current. And you’re right, it could very quickly become stale if you don’t manage it. So putting a big bunch of data in a CRM type of system and then leaving it on its own, it’s going to become obsolete in the very short term. So you want to keep it current. And I think the way you do this as you capture the data, you want to try to link those names to sort of databases like Dun&Bradstreet, so you can start to have group architecture, and then DNB would actually do in Bradstreet will actually tell you when there’s a change in the group structure. So you keep your client structure current, and then you can hook into different databases. You need to read the press, obviously, and stay up to date on what’s going on. But it’s an effort in itself to maintain it. That’s why most of our countries have teams of the marketing team that do only this to keep the pipeline current to the best extent possible. You can hear rating information if those clients are rated. If you’re able to actually attach a rating, and there’s a rating event upgrade or downgrade, you can capture this as well. So there are different ways of keeping it current but it’s often manual to try to stay up to date on what’s going on in the industry.
Juan de Castro: I guess that’s part of the challenge is enabling that to be a much more automated process where you are capturing those figures. Just to give you an example we are seeing with some of our clients for example, can you identify when flying is raising their first funding round? Because that might mean they are setting up a board of directors. They might then need DNB. Those might be the right triggers to then reach out to a potential new customer.
Philippe Lutgen: Yeah, absolutely. This is one of the examples of a third-party feed that you would take into your type of database of information to keep it current. But I want people to remember that it’s important not to underestimate the amount of time and importance that this has because this is ground zero. You can feed a lot of knowledge from this upfront effort on the marketing side.
Juan de Castro: Definitely. Okay, so you’ve done the pipeline, you identified a potential customer, and then you’re about to get into the onboarding phase. What happens there?
Philippe Lutgen: I think what happens there once a prospect becomes a client, once the relationship is established and there’s an agreement to join forces, it’s important to leverage whatever information you’ve captured upstream in your CRM type of capability and then start to enrich it. Then you would want to have a conversation with your client to have data which the account executives will capture. So it’s just obviously getting a view of the risks that the client has, the location, the number of employees, the revenues. It’s just the entire universe of data points which has to be captured during that phase. And this is generally what you do through face-to-face interactions. Unless you’re talking about the sort of SME type of clients where you can have your portal where the client would feed this information into your data capture, then this information is effectively structured in the portal so that there’s less human intervention needed.
Juan de Castro: In that stage, I guess there are a couple of challenges I’ve heard before. Things like how do you drive a consistent data capture? How do you make sure that all your brokers interacting with those clients are consistently capturing the right information and it doesn’t become just a filling out a form, but you are really tailoring the conversation to this specific client?
Philippe Lutgen: I’m glad you said that because when I was thinking about this phase, there’s a huge education piece with the account execs precisely to make them really aware of the importance of doing this right. You have to define what the various data elements are. You have to do this across countries because in the end, when you deal with multinational clients, you want to capture the same information in the same way. The client should be the same whether it’s in Germany or in Estonia. Location or employees or revenue should be defined in the same way. So there is a bit of defining the data elements themselves and making sure that the account execs are trained to capture what’s relevant in a library of information. You need all this and obviously to create a long-lasting relationship with the client. Then you’re going to use it for the next step, which is the placement part. And if you don’t have a really good understanding of your client, their risk, and so forth, you got to start to place a risk which you haven’t fully understood, and then it’s going to become really like shooting in the dark. You got to go to multiple markets and it’s going to be very inefficient as a result, and you may not get a sufficient, fit-for-purpose cover. So super important to get that phase of data capture during your client intake.
Juan de Castro: Yes, in that onboarding stage, definitely. One goal is to capture the data. But as a broker, also a very important role is in advising your client on any action the client can do to get the best quotes. And often in certain lines, actually, the client can do things to get a better quote. Or to give a perfect example, would be in cyber, right, where you could say, hey, sounds like you don’t have multi-factor authentication. That’s going to be a challenge to get the best quote, you could do X, Y, and Z. Do you envision a world where you knew how your markets or how the insurers are rating a given risk and almost advise your client on the changes they can make to the risk profile to get a better quote?
Philippe Lutgen: So, yeah, the relationship between the client and the broker will become long-lasting if there is a sense of service. And that’s obviously easy to say, but the truth is clients value exactly what we just mentioned on the extra bit, which is other risk engineering. So having engineers be able to go and inspect the client’s facility and advise on mitigation techniques against fire, flooding, and so forth. We can also have sensors that the client deploys again to detect anomalies in either level of water or cold, actually for that matter, in the temperature. You mentioned cyber. Cyber is a great example also where we have developed in-house, but also we bring in third-party capabilities to go and explain to our clients what could go wrong and God knows a lot of stuff can go wrong in that part. So there’s an entire area of risk mitigation techniques which we see very essential for the brokers deployed just to get a better sense of the risk themselves and then be able to actually then explain those risks to the carriers during the placement side. And the clients value a lot of those services.
Juan de Castro: Also I would see it as a way of differentiating yourself from other brokers. That leads us to the next stage that you mentioned, which is placement.
Philippe Lutgen: Yes, so again, you follow your value chain, you gather the data from the presale, you enriched that data during the onboarding, which gives you then the bulk of information which you have available to start to say okay, how am I going to go and play those risks? And here it’s very important to understand what’s happening downstream. So knowing your market, knowing your capacity providers, and again, this is where local expertise is essential. The CEOs and the account execs don’t shoot in the dark, they don’t send requests for quotes to 50 carriers. It’s all very niche and targeted because they know exactly the carriers which provide what they understand the appetite is, they constantly stay tuned into the carriers’ appetite and so forth. And they’re able therefore to make the placement fairly efficient by going to only those who are likely to provide the best cover. And it’s all about getting the best cover. And I know price is important and the client ultimately will have a view on price, but the broker is very much there to make sure that you get the best cover for the risks.
And the thing we haven’t talked about is some of our territories we have our own wordings, so the wordings are recognised by the industry and that even the carriers want to adopt. So it’s important to get the best cover for the risk. And you do this by knowing what your carriers’ appetites are. So how do you make this efficient? Again, it’s about the data. You can try to automate this. There are multiple examples in our universe, in Europe where you have broker portals for the simpler risks, where you can put out effectively on the portal the risks and you want to be ensured and the carriers will come in and effectively make their own proposals against those risks. It’s all about digitising the process where you possibly can. And then the other part, once the risk has been placed, has been bound, you to have to digitise, make self-service a possibility for the client to be able to retrieve their certificates, know what their claims are when they are claims. So there’s a lot of focus that we have at the moment to make this as integrated and digitised as possible by creating that digital link between the clients, us, and the insurers.
Juan de Castro: In that placement phase. One of the challenges we hear insurers often talk about is that back and forth between the broker and the insurer. About brokers sending a proposal form to an insurer, then insurers going back with well, I need to know X, Y, and Z. And you didn’t include what are the top ten products that the client is manufacturing. That feels like a source of inefficiency. Is that something that you think also data could help your brokers understand exactly what information each insurer needs to be able to provide a quote?
Philippe Lutgen: Absolutely. The cleaner the upfront data is on the risks, the less back and forth you’re going to have. And that brings me back to my days in AXA XL where we had a big global program business. We used to underwrite global programs with policies issued in multiple territories. So when you write on the incoming side of those policies, we had a risk in Bhutan for a very large client. It was a $2500 policy which cost $15,000 just actually put in place because the data wasn’t clean, the instruction to the local fronting company wasn’t clear, so there was a constant back and forth. Which currency do we have to do this in? Is it in Indian Rupee? Because Bhutan uses Indian rupees, was it in US dollars and you spend a huge amount of time and money to see for something which in itself doesn’t bring you that revenue. So if you have the data clean up front if the producing office broker, underwriter have very clear instructions, a data set that goes to the incoming fronting companies, then it’s easier to issue a policy. But if you don’t get it right, it’s going to be a lot of back-and-forth emails and very inefficient. There are zillions of examples in that state.
Juan de Castro: Yeah. And again, that is now done through the experience of your frontline. Hopefully, in the future, this will be done in a more automated way. So you have a client and the technology tells you exactly what data points each of the insurers might need to be able to quote it, it’s time to experience the frontline.
Philippe Lutgen: But I think there’s more and more effort to actually automate this by creating instruction tools where effectively at the centre, once the risk is placed in the mouth, the master policies placed instructions that are created and go automatically to the countries where risk, where local policies have to be issued. And then so there is less ambiguity as to what’s required. It’s a lot more joined up. But obviously, global programs are a very complicated area and often you’re subject to very manual work. But it’s a good example where data is essential just to reduce frictional costs which are so inefficient, right?
Juan de Castro: Definitely. We talked about placement and you touched on a couple of areas already in terms of servicing, providing claims information, copies of documents, et cetera. Is there anything else in that space that you think data could enable?
Philippe Lutgen: I was thinking about this and I think this is really more of a process. The data you would expect is there because the risk has been bound. I think it’s about continuous engagement with the client to understand what’s changed, how risks have evolved, how it needs to evolve, how tolerance to risk may change and the client who may want to retain more self-retention. Those parameters may change and that engagement needs to be, it’s more than once a year. It has to be done very regularly, I think.
There’s also the service part which has a data component is obviously the claims part that needs to happen very quickly. Reporting a claim has to be handled literally hours, it’s not weeks. So weekend night if you have a client where you’re insuring private art collections, you insure classic cars, you insure yachts and we have those clients, they exist. Claim service is super important and this is where I think getting that super responsive approach is important. But all the rest is more a process to accompany the client in the risk assessment, risk mitigation, risk engineering, internet of things, sensors, and use of technology is a very important component to make the relationship stick. You want the client to stay with you because they love you.
Juan de Castro: One of the points you mentioned there was about understanding whether the risk profile of a given client has changed over the course of the policy or not. And I think obviously that is something which is really important for you guys as a broker, but it’s also a very large source of inefficiency for insurers. An insurer is having to manually review their existing policies in their book every year, it’s very much a high capacity consuming activity. We hear from some of our clients’ things like 60% of their renewal book going to automatically renew, but more than 50% of that portion coming back from the broker saying well, we need to make some changes to the policy. So I guess this is an area where some brokers could work better together and better use data to identify if anything has changed in the risk profile? If so, obviously their policy need’s touching. If not it should be a streamlined renewable process for the customer, right?
Philippe Lutgen: Yeah and it’s probably something which I think you’re right, and it’s probably something that doesn’t really happen enough. It’s just this exercise only undertaken at policy renewal as far as the insurer is concerned. In all fairness, as the broker stays in touch with its client throughout the year, that should feed into the insurer during the policy, when the policy is enforced so as to be able to make the renewal as seamless as possible. I think there’s still a long way to go in that area, particularly for large commercial risks actually.
Juan de Castro: Yeah, definitely. I think these are the four steps you mentioned in the beginning, managing the resource pipeline, onboarding placement and servicing. But what I thought what you mentioned earlier on was very important, the use of data across all these four stages is there to ultimately help advise your clients and address the risk of underinsurance.
Philippe Lutgen: Yeah, it’s to address the risk of underinsurance and how to make sure that at the end of the process, you reached a situation where your clients’ risks have been covered. What is not covered, there is a clear standing by the client as to what is self-insuring and what it retains. I think here the role of the broker is to try to stay very innovative. We know there are areas which are complicated. I think cyber is an area where the risk of under-assurance is high. And I think the things we just talked about in bringing third-party expertise or even in-house expertise, when you have people that are very good with cyber to advise clients, test their defensive systems, penetration tests, and so forth, will help minimise the risk that a cyber risk remains uninsured. But you could have to do it through innovation. Another area which is very topical is crypto. There are very few carriers who are willing to actually get into crypto. I was in Israel last few days, which is a big market in cyber and crypto, and a lot of risks and crypto are just not insured because no one wants to touch them. And again, here brokers are trying to see, if the traditional markets don’t want to touch crypto either, do we see some of the more emerging insure tech ventures have a different attitude to risk? Another one which is interesting is in life science, the use of cannabis in medical products. Some carriers don’t want to touch cannabis. So the broker here has to be very aware of what the insurers’ appetites are and underwriting guidelines and be able to guide their clients to navigate through this maze of regulation, policies, and so forth and remain completely on top of innovation.
Juan de Castro: And under insurance is one of those areas where I would hope the industry will make much more progress in the next few years. Because, first of all, the incentives are aligned. The problem for insurers is obviously in the event of the claim the client might not be fully covered and there is a danger of litigation around claims if the client was underinsured. It’s an issue for the broker too. Not just because it’s an opportunity for getting more commission, but more importantly it’s an opportunity to provide a better service to the client. And actually what we are seeing is in the last few years, which is great progress, some insurers are removing the average clause, for example, if they have enough certainty that the broker has advised the client on the right limits and covers.
Philippe Lutgen: Yeah, absolutely. It’s always interesting when you see those big weather events, earthquakes, big catastrophes and you look at the value of the economic losses and the value of interest losses. There’s always a shortfall in between because some risks are simply not covered. The role of the insurance industry, in general, is not only the brokers, both the carriers stretch to close that gap. That’s part of the mission, how you give back to society.
Juan de Castro: Some of them just because they are not covered. Some of them are because the reported insured are lower than reality. And again we see some of our clients looking at things like using data around rebuild cost assessment to better inform clients about kind of the right level of some insured. Really fascinating, all these topics.
And as I said at the beginning, I’m sure like bringing your knowledge and experience from an insurer into broken. I think you will be able to reach all these challenges and align them across the value chain before wrapping up.
Well, Philip, it’s been an absolute pleasure having you on this episode of the podcast. I’m very glad you found a new home at Howden. Sounds like a fantastic role in a superb company. So best of luck and hopefully you’ll join me for a future episode again. Thank you.
Philippe Lutgen: I’m sure. Well, thank you for having me.