WEBVTT - Lloyd’s CEO Explains Why Insurance ‘Matters’ Again 0:00:03.080 --> 0:00:10.119 Bloomberg Audio Studios, Podcasts, radio news. What's the coolest thing 0:00:10.160 --> 0:00:10.880 you've ever ensured? 0:00:11.600 --> 0:00:14.520 I remember guy turning up once and a blind man 0:00:14.560 --> 0:00:16.959 was trying to break the land speed record in a 0:00:17.040 --> 0:00:21.240 car and you're thinking, right, and he was doing it 0:00:21.239 --> 0:00:24.520 on Maplin Sands. So actually it's the biggest sand stretch 0:00:24.600 --> 0:00:26.760 you could imagine and about as safe and as managed. 0:00:26.840 --> 0:00:29.800 So actually the risk is awesome, but it sounds nuts. 0:00:29.840 --> 0:00:31.280 You got a blind man trying to break the land 0:00:31.280 --> 0:00:33.480 speed record, and then when you hear the story, you're thinking, 0:00:33.560 --> 0:00:37.680 this is absolutely fine, so you insured it. He needed 0:00:37.800 --> 0:00:40.760 insurance for Ruffian hour and was prepared to this is 0:00:40.760 --> 0:00:42.760 back in the day, prepared to pay two hundred and fifty. 0:00:42.640 --> 0:00:47.879 Quick Welcome to in the City, a podcast from Bloomberg 0:00:47.920 --> 0:00:50.839 about the stories important to the city of London. I'm 0:00:50.840 --> 0:00:53.199 Francin Laqua. Now you just hearde a bit of our 0:00:53.240 --> 0:00:56.800 exchange with this week's guest, John Neil. My co hosts 0:00:56.960 --> 0:00:59.600 David Merritt, Alegra Stratton and I sat down with John 0:00:59.640 --> 0:01:02.280 a few weeks ago. He's a chief executive officer of 0:01:02.280 --> 0:01:06.160 commercial insurance market Lloyd's of London. Now the marketplace is 0:01:06.200 --> 0:01:09.920 basically made up of more than fifty companies who underwrite 0:01:09.959 --> 0:01:13.120 a large range of risks, from accidents to war to 0:01:13.160 --> 0:01:17.200 climate change. They also saw over fifty billion pounds worth 0:01:17.240 --> 0:01:20.080 of premiums pass through last year. He's been in the 0:01:20.080 --> 0:01:22.640 business for more than forty years, giving him a front 0:01:22.720 --> 0:01:26.360 row seat to the changing risks facing global business. So 0:01:26.440 --> 0:01:29.640 we spoke to him about those changing risks, how Lloyd's 0:01:29.640 --> 0:01:33.240 has continued to adapt and what challenges he sees next. 0:01:35.720 --> 0:01:37.600 Welcome to the City of London. 0:01:37.680 --> 0:01:41.080 The city of the city, the city of London in 0:01:41.319 --> 0:01:47.160 the bank's mind, the gap between the tree and the platform. 0:01:46.440 --> 0:01:54.160 The financial hearts of the country, the city, the city. 0:01:54.560 --> 0:01:59.880 Welcome to in the city. Stand clear of the door. 0:02:02.200 --> 0:02:03.720 Thank you so much for joining us on the show. 0:02:03.800 --> 0:02:05.240 John, that's great to be with you. 0:02:05.320 --> 0:02:08.440 Our Dave Merritt was dreaming working at Lloyd's of London 0:02:08.480 --> 0:02:09.960 in insurance growing up. 0:02:10.160 --> 0:02:11.760 Well, you know, my dad was a broker who was 0:02:11.760 --> 0:02:13.600 a shipping broker a Lloyds, So I think it was 0:02:13.600 --> 0:02:15.320 the first. If you asked five year old me what 0:02:15.400 --> 0:02:17.200 he wanted to be when you grew up, it was 0:02:17.240 --> 0:02:17.880 basically your job. 0:02:17.960 --> 0:02:23.280 John, Wow, I was the opposite. I did languages all 0:02:23.280 --> 0:02:25.639 the way through college, and then stupidly thought I'd trained 0:02:25.680 --> 0:02:27.519 to be an accountant, which clearly I wasn't going to 0:02:27.520 --> 0:02:30.440 be any good at, which I wasn't, and then ended 0:02:30.480 --> 0:02:32.560 up in insurance thinking what am I doing here? And 0:02:32.600 --> 0:02:33.919 I've been there ever since. 0:02:34.120 --> 0:02:35.960 Well, it was always my dream. 0:02:36.120 --> 0:02:37.200 We're making your dream happen. 0:02:37.280 --> 0:02:39.440 This is it that as close as I've ever got. 0:02:39.520 --> 0:02:41.280 I mean, it's a very complicated job. How much do 0:02:41.320 --> 0:02:41.959 you love your job? 0:02:42.160 --> 0:02:44.399 You've got to be right and ready to do the job. 0:02:44.440 --> 0:02:48.200 And I thought I was right and ready. So I've underwritten, 0:02:48.240 --> 0:02:51.600 so I've been an underwriter in Lloyd's, I've run insurance companies, 0:02:52.240 --> 0:02:54.640 so I just felt I was ready. And you're at 0:02:54.639 --> 0:02:56.840 a stage in your life where you can cope because 0:02:56.840 --> 0:02:58.919 you're right. You've got fifty insurance companies and four hundred 0:02:58.919 --> 0:03:01.840 broking firms, all of whom have got at least that 0:03:01.919 --> 0:03:03.840 many number of views on how you should do things. 0:03:03.960 --> 0:03:06.360 So you've got to feel at a point where you 0:03:06.440 --> 0:03:09.600 can be valued, but you can give some clarity as 0:03:09.600 --> 0:03:11.440 to the direction you want to want to give or get. 0:03:11.560 --> 0:03:13.280 It's a unique place, Lloyd, ye, isn't it? And there's 0:03:13.280 --> 0:03:13.720 no one like it. 0:03:13.760 --> 0:03:14.160 In the world. 0:03:14.200 --> 0:03:17.119 There's got a confidence of companies and underwriters and brokers. 0:03:17.800 --> 0:03:20.400 Some people have said over the years that it's outdated 0:03:20.400 --> 0:03:22.120 that concept, but it seems to be flourishing, Like what's 0:03:22.160 --> 0:03:25.239 the sort of health check of that unique institution From where. 0:03:25.120 --> 0:03:28.240 You're sitting, insurance is It's slightly odd, isn't it? Because 0:03:28.280 --> 0:03:30.519 you get people competing tooth and nail with each other 0:03:30.520 --> 0:03:32.320 for the business they want to win. But then the 0:03:32.360 --> 0:03:35.200 business is so complex and of such a scale you've 0:03:35.240 --> 0:03:38.720 got to participate to solve the problem. So actually somewhere 0:03:38.720 --> 0:03:42.000 where people can genuinely gather to create the solutions and 0:03:42.000 --> 0:03:45.720 co participate has a unique value proposition. You've got fifty 0:03:45.760 --> 0:03:48.720 insurance companies, most of whom you'd recognize so are represented 0:03:49.120 --> 0:03:51.920 at Lawy's, and you've got four hundred broking firms. So 0:03:52.280 --> 0:03:54.720 I think we see four hundred billion dollars a flow, 0:03:55.560 --> 0:03:58.920 and we've got sixty three thousand insurance professionals within two 0:03:59.000 --> 0:04:01.200 kilometers of our front door. So you can talk about 0:04:01.760 --> 0:04:04.080 the licenses and the global reach and all sorts of 0:04:04.120 --> 0:04:07.120 stuff that people talk about, but it's flow and talent 0:04:07.520 --> 0:04:09.800 are the two things that are utterly unique. 0:04:09.800 --> 0:04:11.600 This is what I've always found so fascated about. It's 0:04:11.600 --> 0:04:15.480 about that building, that confluence of experience, of talent and 0:04:15.520 --> 0:04:18.880 the pedigree or the history hundreds of years built up, 0:04:18.920 --> 0:04:21.919 and the fact that that is still pre eminent in 0:04:21.960 --> 0:04:23.800 an age went so much stuff has gone electronics, so 0:04:23.880 --> 0:04:26.920 much stuff that's done transactionally across different continents, but actually 0:04:27.000 --> 0:04:29.080 just everyone being in the city or congregating, and that 0:04:29.160 --> 0:04:30.400 still matters for insurance. 0:04:30.600 --> 0:04:34.120 It does still matter because you know, I think the 0:04:34.160 --> 0:04:36.240 flow of the data and the digital information you get 0:04:36.279 --> 0:04:39.560 is all incredibly helpful in measuring the risk, managing the risk, 0:04:39.600 --> 0:04:42.640 pricing the risk. But ultimately there's a conversation, what is 0:04:42.680 --> 0:04:44.840 the solution you're trying to create. Why is it a 0:04:44.880 --> 0:04:46.840 little different to what the piece of paper's telling you. 0:04:47.320 --> 0:04:51.799 It's important, and I think that conversations actually become more important. 0:04:51.920 --> 0:04:53.919 It feels like I've been in insurance four hundred years, 0:04:54.680 --> 0:04:58.320 let's say forty, and I've put this picture up on 0:04:58.360 --> 0:05:00.240 the wall of the last two hundred and fifty years 0:05:00.279 --> 0:05:02.160 of history, and so insurance has mattered three times in 0:05:02.200 --> 0:05:05.240 two hundred and fifty years. Eighteen fifty to eighteen seventy 0:05:05.360 --> 0:05:09.119 world was at civil war with itself to world wars consequences. Now, 0:05:09.600 --> 0:05:12.800 because you've got everything. Now, we've got financial risk, you've 0:05:12.800 --> 0:05:15.919 got systemic risk evidenced by an industrial disease called COVID. 0:05:16.480 --> 0:05:19.479 You've got war on lands, you've got climate. So I 0:05:19.520 --> 0:05:22.640 think the world is in a risky space, and suddenly 0:05:22.680 --> 0:05:27.200 insurance is interesting and matters. So I think, oddly the 0:05:27.279 --> 0:05:29.320 value I'm phound to say this an't I Oddly, I 0:05:29.320 --> 0:05:30.880 think the value proposition's going up. 0:05:31.560 --> 0:05:32.840 How much are you using AI? 0:05:33.080 --> 0:05:35.800 I think if you think of AI or the complexity 0:05:35.800 --> 0:05:39.120 of AI, I mean it'll be significant in everything we do. 0:05:39.800 --> 0:05:43.120 But it's a digital transformation program, which means it's flipping 0:05:43.200 --> 0:05:46.640 hard and it will be expensive. So everyone thinks it 0:05:46.680 --> 0:05:49.520 will save it won't. What it'll do is it'll create 0:05:49.760 --> 0:05:53.080 an ability to manage the flow more elegantly and manage more, 0:05:53.640 --> 0:05:56.200 you know, because I'm so flipping old now, you know, 0:05:56.240 --> 0:05:59.479 I started life with no PC. All the investment in technology, 0:05:59.600 --> 0:06:02.599 it has not saved a dollar. In fact, it's cost 0:06:02.720 --> 0:06:05.359 a lot. But what it's allowed us to do is 0:06:05.400 --> 0:06:08.360 to be much better at scale. And I think AI 0:06:08.480 --> 0:06:10.760 and jen AI and the flow of information, the manager 0:06:10.839 --> 0:06:13.680 information will do exactly the same. It's not to say money. 0:06:14.360 --> 0:06:15.880 I don't think and I don't think there's going to 0:06:15.920 --> 0:06:18.200 be this mass loss of jobs that everyone. 0:06:17.880 --> 0:06:20.440 Thinks, John, what are you experimenting with AI? 0:06:20.600 --> 0:06:23.240 Because you can either you know, you can have recognition 0:06:23.560 --> 0:06:27.000 of whether patterns, which I imagine that helps, or it's 0:06:27.040 --> 0:06:28.760 actually whether claims are real or not. 0:06:29.040 --> 0:06:32.720 So the front end, how do we identify the risk 0:06:32.880 --> 0:06:34.400 to be able to measure the risk, manage it, and 0:06:34.440 --> 0:06:37.200 price it without having to ask people seventy two questions? 0:06:37.680 --> 0:06:41.400 The reality is, you know, if you can answer one question, 0:06:42.279 --> 0:06:45.880 and that question is who are you? Everything else is there. 0:06:46.680 --> 0:06:50.240 It's somewhere, so it is quite it's actually quite a 0:06:50.240 --> 0:06:53.480 hard question to answer, funny enough, and that's why it'll 0:06:53.520 --> 0:06:55.480 take us time to get there. So if you can 0:06:55.520 --> 0:06:58.280 answer that question, you can find everything you possibly need 0:06:58.320 --> 0:06:59.960 to know about the risk to be able to say, yes, 0:07:00.080 --> 0:07:02.000 we can accept that risk and yes we'll price it. 0:07:02.240 --> 0:07:04.160 Just because when you're saying who are you, so you 0:07:04.200 --> 0:07:06.680 say your name, you say your age, and immediately the 0:07:07.040 --> 0:07:10.360 AI can crunch enough about you to price price whether 0:07:10.400 --> 0:07:12.160 you're a good insurance risk or not. 0:07:12.400 --> 0:07:14.040 That the problem is is not that easy a question 0:07:14.120 --> 0:07:16.640 to answer you think it is, but it's not. So 0:07:17.440 --> 0:07:19.320 that's where that flow's going to work. And then when 0:07:19.320 --> 0:07:21.680 you get to a claim at the end of the day, 0:07:21.800 --> 0:07:23.880 you want to find a way to pay the claim 0:07:23.920 --> 0:07:26.760 as quickly as you possibly can. So is the claim 0:07:26.760 --> 0:07:30.080 a valid claim? Do you need someone to investigate or 0:07:30.080 --> 0:07:33.280 assess the circumstances? Again, if you can use a form 0:07:33.320 --> 0:07:34.880 of tech and data to help you with that, it's 0:07:34.880 --> 0:07:36.880 going to save an awful lot of process and time 0:07:36.960 --> 0:07:40.160 and the value proposition of insurance and being able to 0:07:40.200 --> 0:07:41.400 pay a claim. 0:07:41.760 --> 0:07:43.080 The concern is always biases. 0:07:43.200 --> 0:07:45.600 Is that if you make a machine do something that 0:07:45.680 --> 0:07:50.480 there's a certain pattern and so you basically replicate some 0:07:50.560 --> 0:07:52.400 of the biases in society. 0:07:52.000 --> 0:07:55.160 When it comes to insurance massively, and they get accelerated 0:07:55.360 --> 0:07:57.000 or accentuated. 0:07:56.720 --> 0:08:00.520 Massively, and they're hard questions. Let's take so of auto 0:08:00.640 --> 0:08:04.480 insurance or motor insurance, and you get the regulators looking 0:08:04.520 --> 0:08:07.200 at that and saying, hmm, you've got to be careful 0:08:07.200 --> 0:08:09.920 that you don't create a bias. So the classic example 0:08:10.000 --> 0:08:14.480 was EU law saying you couldn't differentiate around people's attributes 0:08:14.520 --> 0:08:17.080 or characteristics if you were male or female. So we 0:08:17.200 --> 0:08:19.240 know that female drivers are better than male drivers. There's 0:08:19.320 --> 0:08:21.600 enough statisticalle and the answer is no, you can't use that, 0:08:22.360 --> 0:08:25.840 And so you think, well, hang on a minute. What 0:08:25.920 --> 0:08:27.840 you've got to do is be satisfied that you can 0:08:27.920 --> 0:08:31.920 solve for risk. You've got to ensure that society's covered. 0:08:32.720 --> 0:08:35.360 But to allow us to do that, you've got to 0:08:35.400 --> 0:08:36.840 allow some form of differentiation. 0:08:37.080 --> 0:08:40.000 Mick Lloyd's was always prided itself, hasn't it on the 0:08:40.040 --> 0:08:43.160 fact you could ensure anything. So are some parts of 0:08:43.200 --> 0:08:46.400 the world now becoming uninsurable or is there anything possible Alloyd's. 0:08:46.520 --> 0:08:50.120 I don't think anything's insurable. I don't think it ever was, honestly. 0:08:50.600 --> 0:08:52.800 So if we do sort of weather related stuff, I mean, 0:08:52.840 --> 0:08:54.560 we've got all the measurement tools in the world, but 0:08:54.600 --> 0:08:58.800 we don't know. You had more hurricanes make landfall in 0:08:58.800 --> 0:09:01.080 the US than they have done for decades, but they 0:09:01.120 --> 0:09:04.000 didn't really cost very much. So wind is really quite 0:09:04.000 --> 0:09:09.360 difficult to predict. Actually, water and fire isn't. So when 0:09:09.400 --> 0:09:11.199 you think of flood and fire and everywhere in the 0:09:11.240 --> 0:09:13.520 world you look at flood and fire as being a risk, 0:09:13.880 --> 0:09:17.080 it's all ensurable. It kind of needs a different form 0:09:17.080 --> 0:09:19.240 of public and private partnership. I'm desperate to call it 0:09:19.280 --> 0:09:22.320 something else because everyone hates it. Everyone hates it. But 0:09:22.320 --> 0:09:24.520 when you really think about it, the one thing we've 0:09:24.520 --> 0:09:26.679 got to work out societally is the government can't ball 0:09:26.720 --> 0:09:30.400 its out every time something happens and industrial disease comes along, 0:09:31.559 --> 0:09:35.839 it's a form of fluenza vaccinate you know, it's not 0:09:36.000 --> 0:09:38.240 you know, but we've shut society down. We borrowed twelve 0:09:38.240 --> 0:09:40.720 trillion dollars. You borrow twelve trillion dollars interest rates at 0:09:40.720 --> 0:09:43.840 four percent. Can't do it. So somewhere in this story 0:09:43.880 --> 0:09:46.880 we've got to work out how the partnership works. And 0:09:46.920 --> 0:09:49.520 as insurers, if you look at the complexity of flood 0:09:49.520 --> 0:09:52.600 and fire, we can help. But it's going to need 0:09:53.000 --> 0:09:55.319 the government. Where we were going out on the regulator, 0:09:55.720 --> 0:09:57.880 the bank and the insurer all in the room. How 0:09:57.920 --> 0:09:58.959 are we going to solve this problem? 0:09:59.040 --> 0:09:59.880 But John just on that. 0:10:00.080 --> 0:10:03.160 I mean thinking of the example of Tenbury Wells, which 0:10:03.200 --> 0:10:06.080 is the Worcestershire town which where the people up and 0:10:06.080 --> 0:10:08.600 down the high street are saying and the question really 0:10:08.679 --> 0:10:11.280 is about cost. It is insurable, but they can't afford 0:10:11.320 --> 0:10:13.560 the insurance and just wondering how what you say to 0:10:13.559 --> 0:10:14.680 people in a town like that. 0:10:14.760 --> 0:10:16.720 So I think that's why I think everyone needs to 0:10:16.760 --> 0:10:19.760 be in the room. So you know, and I'm not 0:10:19.800 --> 0:10:21.480 trying to be provocative for the sake of it, but 0:10:21.520 --> 0:10:23.920 if you know, nine times out of ten the banks 0:10:23.960 --> 0:10:27.280 loan the money on the basis of the asset being available, 0:10:27.320 --> 0:10:29.600 so they've got to take some responsibility for the risk 0:10:29.960 --> 0:10:32.720 that's there in reality, you know, they can't just leave 0:10:32.800 --> 0:10:37.040 that bear. And I think therefore, you know, can the 0:10:37.080 --> 0:10:40.000 insurance if there is some sort of protection offered by 0:10:40.000 --> 0:10:42.240 those that are providing finance, and the insurer can sit 0:10:42.280 --> 0:10:45.760 behind that, And then if it gets particularly fraught and complex, 0:10:46.040 --> 0:10:47.760 then we've got to leave the government right at the 0:10:47.800 --> 0:10:50.679 back in a very last resort situation. If you think 0:10:50.720 --> 0:10:54.880 of the UK, we're fluvial. We live on rivers. I 0:10:54.960 --> 0:10:57.280 mean that's what we do. You know, we draw maps 0:10:57.280 --> 0:10:59.600 of the Thames where we are. We're sat in London. 0:10:59.760 --> 0:11:02.280 By the way, it floods two miles south and half 0:11:02.320 --> 0:11:05.640 a mile north. I mean it floods completely. So we 0:11:05.720 --> 0:11:07.720 know these things are going to happen, So we just 0:11:07.760 --> 0:11:09.240 need to take a step back and say we know 0:11:09.280 --> 0:11:12.240 they're going to happen. So how do the various constituents, 0:11:12.240 --> 0:11:15.679 those that are in the asset, those that provide insurance, government, 0:11:15.760 --> 0:11:19.079 how do these components all fit together? Because they can. 0:11:19.559 --> 0:11:22.080 But Premium's right, even if you look at geopolitics, I 0:11:22.120 --> 0:11:26.280 was told of, you know, a big tanker carrying I 0:11:26.280 --> 0:11:29.240 think Ukrainian grains in the Black Sea that was still 0:11:29.320 --> 0:11:30.760 ensurable at a million a day. 0:11:31.320 --> 0:11:32.080 And that's not really. 0:11:31.960 --> 0:11:34.920 Interesting, No, it's not. It was quite an interesting conversation 0:11:35.960 --> 0:11:38.080 at the time of you know, the ability to move. 0:11:38.280 --> 0:11:40.760 I thought it was grain. Actually the problem was fertilizer. 0:11:41.200 --> 0:11:44.400 So you know, we had the UN approach. US Secretary 0:11:44.440 --> 0:11:46.360 General approached us and said, look, the problem with solving 0:11:46.360 --> 0:11:48.200 the problem here is you insurers not being prepared to 0:11:48.200 --> 0:11:51.600 provide insurance. So I didn't know the Secretary General at 0:11:51.600 --> 0:11:53.160 the time. I wrote a nice letter back saying, I 0:11:53.160 --> 0:11:56.640 think the problem sanctions actually because it's a little tricky. 0:11:57.040 --> 0:11:58.880 And he wrote back and said, we'll sort the sanctions 0:11:58.920 --> 0:12:02.360 out the pathway, we'll make sure that Rusha's on the pitch. 0:12:02.440 --> 0:12:04.839 Can you provide the insurance? And the answer is yeah, 0:12:04.880 --> 0:12:07.560 And then we move thirty million tons of grain and 0:12:07.600 --> 0:12:11.320 several million tons of fertilizers. So again, that to me 0:12:11.400 --> 0:12:14.320 is about the partnership. If you've got the governments involved 0:12:14.360 --> 0:12:16.880 in that story able to say there is a form 0:12:16.920 --> 0:12:20.559 of a framework that we can permit, then the insurance 0:12:21.080 --> 0:12:24.520 genuinely can apply. How much, so it's going to be 0:12:24.600 --> 0:12:27.120 more so on average, when we were moving the grain 0:12:27.280 --> 0:12:29.960 through the Black Sea, it was probably costing half as 0:12:30.000 --> 0:12:32.679 much as it normally would have, not twice surprise or 0:12:32.720 --> 0:12:35.800 three times the price. But I think, don't get me wrong, 0:12:35.800 --> 0:12:37.440 I think one of the things we're not great at 0:12:37.679 --> 0:12:42.000 is selling ourselves and explaining the value proposition of insurance. Yeah, 0:12:42.040 --> 0:12:44.679 because everyone thinks the same done, we will think it's 0:12:44.760 --> 0:12:47.520 not us that's going to be burgled, it'll be somebody else. 0:12:47.600 --> 0:12:50.280 But that's the principle of insurance, isn't it. The premiums 0:12:50.280 --> 0:12:51.800 of the many paid for the losses of the few. 0:12:51.920 --> 0:12:54.400 But we've we've kind of got to be able to 0:12:54.480 --> 0:12:58.160 sell the value proposition. It's just starting to happen. We've 0:12:58.160 --> 0:13:01.960 been selling cyber insurance policies foot almost thirty years. But 0:13:02.120 --> 0:13:05.079 you know, when you think about it, it's just now 0:13:05.120 --> 0:13:08.400 that people are thinking about cyber insurance. You know, if 0:13:08.400 --> 0:13:11.079 you looked two years ago, ninety percent of the cyber 0:13:11.120 --> 0:13:13.120 policies were brought in the US. No one else in 0:13:13.120 --> 0:13:16.160 the world was buying them, no one else, So you say, well, 0:13:16.200 --> 0:13:18.719 we're partly responsible there because we need to explain why 0:13:18.760 --> 0:13:21.600 it's slightly different and why the value is what it is. 0:13:21.800 --> 0:13:23.319 One of the stories that's gripped the world the last 0:13:23.360 --> 0:13:26.480 few weeks was the murder the executive in New York. 0:13:26.720 --> 0:13:31.400 Horrible story. Also, the reaction from a lot of the 0:13:32.120 --> 0:13:36.520 on social media has been fairly shocking and but very 0:13:36.559 --> 0:13:38.680 compelling to look at. How did you feel when you 0:13:38.679 --> 0:13:41.880 saw that? To your point about the image of insurance, obviously, 0:13:41.960 --> 0:13:43.640 I think the question of health insurance in the United 0:13:43.640 --> 0:13:48.000 States is particularly different. It is different, but that was 0:13:48.000 --> 0:13:50.319 an event where we're seeing people change their behaviors or 0:13:50.360 --> 0:13:52.800 executives that started to think we're particularly about the insurance industry. 0:13:52.840 --> 0:13:53.640 How did that make you feel? 0:13:54.040 --> 0:13:57.760 The bit that worries me is you want the smartest 0:13:57.800 --> 0:14:00.600 people to be leaders, you know, whether that's government or 0:14:00.600 --> 0:14:03.920 business or whatever you want, and societally we're making it 0:14:04.040 --> 0:14:07.320 really difficult because you don't want to pay them. So 0:14:07.440 --> 0:14:10.600 everyone talks about the pay and yeah, well, why are 0:14:10.600 --> 0:14:12.679 we paying them, and you want to pay them, They 0:14:12.720 --> 0:14:15.920 get regulated in a manner which is frightening, and then 0:14:15.960 --> 0:14:20.040 they are exposed. You know, whether that exposure is is 0:14:20.240 --> 0:14:25.000 social media or whether it's terrifyingly some form of attempt 0:14:25.000 --> 0:14:27.320 on your life. And that's the bit that worries me. 0:14:27.360 --> 0:14:29.400 And we've got to work out how to get the 0:14:29.600 --> 0:14:31.440 balance right on. 0:14:31.920 --> 0:14:34.200 Climate change and some of the things you're talking about 0:14:34.240 --> 0:14:37.280 with that, with fluvial nation and so on. Do you 0:14:37.400 --> 0:14:39.920 find as a company that you're wanting to get involved 0:14:39.920 --> 0:14:43.360 in policy around adaptation in a particular area to help 0:14:43.400 --> 0:14:46.600 a community head off these problems, or do you find 0:14:46.600 --> 0:14:47.560 that isn't useful. 0:14:47.760 --> 0:14:49.600 I think it is useful, and I think we've got 0:14:49.640 --> 0:14:52.840 to have a noisy voice in it because I think 0:14:52.840 --> 0:14:55.160 I've said this to your leadership as well. Yeah, and 0:14:55.400 --> 0:14:56.720 I think you're never going to get an insurance to 0:14:57.000 --> 0:14:59.600 deny climate change. So if you look at our data, 0:15:00.200 --> 0:15:03.680 the severity and frequency of natural power losses has doubled 0:15:03.720 --> 0:15:06.040 in the last twenty five years, doubled, and we think 0:15:06.080 --> 0:15:08.080 it's going to double in the next tent. Does that 0:15:08.200 --> 0:15:11.320 trouble our ability to provide some form protection. It does not. 0:15:11.840 --> 0:15:13.640 I mean it goes to a bit of a cost argument, 0:15:14.000 --> 0:15:16.360 which is why I think we've got to get everyone 0:15:16.360 --> 0:15:18.760 around the table. I think if we can then tell 0:15:18.800 --> 0:15:22.040 and tell that story more clearly, then I think society 0:15:22.120 --> 0:15:25.640 will understand the value and be prepared to appreciate the 0:15:25.680 --> 0:15:28.760 cost for it. If you look at say California, nine 0:15:28.760 --> 0:15:31.280 percent of the population by earthquake insurance, ninety one percent 0:15:31.320 --> 0:15:34.560 don't and we don't think, my god, John, the San 0:15:34.560 --> 0:15:37.440 Andreas fault, you must buy earthquake insurance. And they've taken 0:15:37.440 --> 0:15:39.200 a step back and said, well, it's not happened this year. 0:15:40.240 --> 0:15:42.600 But we've got to work out without telling people they 0:15:42.640 --> 0:15:45.080 have to do something. You know, we will buy car insurance. 0:15:45.120 --> 0:15:47.120 Why because the law says you've got to buy car insurance. 0:15:47.480 --> 0:15:49.840 But that can't be the answer to everything. We've got 0:15:49.840 --> 0:15:53.320 to work out that there is a risk and that 0:15:53.360 --> 0:15:55.240 you can spread that risk differently, which is why I 0:15:55.240 --> 0:15:56.480 think we've got a bit of a job to do 0:15:56.520 --> 0:15:59.520 in this. So your adaptation question is right, so we 0:15:59.520 --> 0:16:01.160 should get in the conversation. 0:16:02.160 --> 0:16:04.520 I always think insurance actually is on the front line 0:16:04.520 --> 0:16:07.040 of climate change because I think you're you're the ones 0:16:07.080 --> 0:16:10.240 having the very, very bread and butter conversation with a 0:16:10.280 --> 0:16:12.880 household about whether you know everything you've been talking about 0:16:12.920 --> 0:16:16.480 in this podcast around affordability and whether it's worth it 0:16:16.560 --> 0:16:19.440 and so on. Whereas I think banks it will change 0:16:19.440 --> 0:16:21.000 in the years ahead, but at the moment they're still 0:16:21.000 --> 0:16:23.440 in that place where they can choose how much they invest. 0:16:23.480 --> 0:16:26.480 I think for you, are these are really really linked 0:16:26.520 --> 0:16:27.480 to your bottom line? 0:16:27.840 --> 0:16:30.560 I think you end up with the societal problems that 0:16:30.600 --> 0:16:34.160 you end up reporting on. So I think it's seven 0:16:34.160 --> 0:16:36.760 million homes that are not properly covered flood in the UK. 0:16:37.360 --> 0:16:40.640 But it's a trust problem, yeah, because you'll go through 0:16:40.680 --> 0:16:42.720 insurance or you'll get a new credit card or something. 0:16:42.760 --> 0:16:44.920 If a friend says, oh, they're very good, it's worth it. 0:16:45.600 --> 0:16:47.840 So how do you, I mean, how do you change 0:16:47.840 --> 0:16:48.920 the conversations around it. 0:16:48.960 --> 0:16:51.360 We've got to change the way in which the product's presented. 0:16:51.480 --> 0:16:54.680 If you think about the complex climate related covers we've got, 0:16:54.720 --> 0:16:57.960 you end up with these odd things called parametric covers 0:16:58.360 --> 0:17:02.080 where the trigger is predefined, and they've now got quite 0:17:02.120 --> 0:17:05.720 clever ones where it's a variable trigger. So in advance 0:17:05.800 --> 0:17:09.560 you turn around and say, let's pick the Caribbean. So 0:17:09.920 --> 0:17:12.760 you've got a hurricane that will go through. We can 0:17:12.840 --> 0:17:16.680 measure what's happened, and you can categorize the wind speed 0:17:18.000 --> 0:17:21.000 or the severity category one versus two, Calgary three, and 0:17:21.040 --> 0:17:23.480 you can say in advance, if it's category one, it'll 0:17:23.480 --> 0:17:25.399 be a twenty five percent payut, if it's category two 0:17:25.400 --> 0:17:27.480 will be fifty it's category three or more one hundred, 0:17:27.600 --> 0:17:29.680 and it could be variable. And I think we've got 0:17:29.680 --> 0:17:31.840 to get a bit more there on insurance products where 0:17:32.320 --> 0:17:36.280 it's not perfect, but the customer is at the outset 0:17:36.359 --> 0:17:40.159 what will actually happen, and then bang it happens and 0:17:40.200 --> 0:17:43.399 then the payment is immediate. So some of those covers, 0:17:43.440 --> 0:17:45.920 so just give you a feel that the two big 0:17:46.000 --> 0:17:49.320 it's brokers in the world that deal with that type 0:17:49.359 --> 0:17:51.960 of cover have sold two hundred covers of that ILK 0:17:52.080 --> 0:17:54.840 this year. So I think it's starting to happen because 0:17:54.880 --> 0:17:57.240 we can't end up in the situation we did in 0:17:57.280 --> 0:18:01.160 a COVID world with business interruption insurance of people saying 0:18:01.680 --> 0:18:03.840 have I got cover? I thought I got cover? No, 0:18:04.960 --> 0:18:08.679 you know, we've got to create policy covers of certainty 0:18:08.720 --> 0:18:11.080 because that's the trust point you mentioned. 0:18:11.080 --> 0:18:12.760 The's got a big moments in history or at this 0:18:12.800 --> 0:18:16.280 moment where the insurance market needs to scale up in 0:18:16.320 --> 0:18:19.800 a massive way to deal with the new level of 0:18:19.840 --> 0:18:22.240 risk that we've don around it, specifically about climate. 0:18:21.960 --> 0:18:24.600 So we can do it. Honestly, there's no lack of capacity, 0:18:25.160 --> 0:18:30.000 there's no lack of money. It's the conversation we're having today. 0:18:30.040 --> 0:18:34.280 It's an awareness and instability for people to co participate. 0:18:34.480 --> 0:18:37.000 If I look at the climate related and whether related risk, 0:18:37.080 --> 0:18:39.359 can we ensure them? Yeah, we can, but we've got 0:18:39.400 --> 0:18:41.119 to create that awareness and then there's got to be 0:18:41.119 --> 0:18:44.280 a determination that the risk is mitigated. We'd all say 0:18:44.280 --> 0:18:46.119 the same thing. I mean, don't get me wrong. COVID 0:18:46.240 --> 0:18:50.679 was terrible, but was it worth increasing debt to GDP 0:18:50.800 --> 0:18:54.280 by one hundred percent for almost every country. If you 0:18:54.320 --> 0:18:56.399 look at the UK government, the overrun spend on the 0:18:56.480 --> 0:19:00.680 NHS was one hundred billion in two years. That's really 0:19:00.680 --> 0:19:03.000 fraught for a government in terms of managing its finances. 0:19:03.200 --> 0:19:06.439 You can insure against it. We do that every day 0:19:06.440 --> 0:19:08.800