Biggest challenge is demand for differentiated value: Plumeri

One of the biggest challenges facing the insurance industry is the demand for differentiated value, according to the chairman and chief executive of Willis Group Holdings Joe Plumeri, who concluded the Insurance Institute of London (IIL) 2007/2008 lecture programme at Lloyd’s last week.

He highlighted several other insurance industry megatrends from the changing nature of risks to the war for distribution and the convergence of capital and insurance markets. Plumeri encouraged the industry to find innovative ways to meet these new challenges.

Addressing an audience in the Old Library at Lloyd’s, Plumeri stressed the need for brokers and insurers to demonstrate what he termed their ‘value gap’ to clients who today demand exceptional quality and best cost.

‘Value is the gap between what clients can do for themselves and what we can do for them. As an industry we do not have great self-esteem and as a result we don’t get adequately compensated for the value we deliver,’ said Plumeri. ‘Our industry only gets paid for the placement of business and not all the invaluable advice and service that we provide clients throughout the entire process. What you put into that gap will differentiate your client offering.’

Plumeri discussed the volatility of today’s risk environment and urged the industry not to try and give old answers to new questions like cyber risk, terrorism and climate change. One way to do this is to embrace technology for improved productivity. ‘I believe in enhancing technology not instead of people, but on behalf of people,’ he said.

The demand for and retention of professional talent was flagged up by Plumeri as another megatrend for the industry to take action on. ‘We have to stop recycling people. We need an injection of fresh, new talent into the industry because that’s the only way we will grow our business,’ he said, citing investment in training of staff as a critical component in retention.

A passionate advocate for the industry, Plumeri concluded by saying, ‘The insurance industry is the DNA of capitalism and we have a responsibility to the global economy to meet these new challenges. We need to navigate all these megatrends to define our future success.’