<p><strong>Speaker 0</strong>: <span>hello and welcome to insure T V's E s G Master class with me Mark Colgate. Today we are focusing on the E of E. S G in particular climate change and what that means for insurers and insurance brokers to discuss that I'm joined here in the studio by Mark Dunham. He is head of commercial lines underwriting at Aviva. We are also joined today by Dr Ian Bartholomew Co-founder and chief underwriting officer at Flood Flash, and Jonathan</span></p> <p><strong>Speaker 0</strong>: <span>Evans, founder of Sustained insurance Brokers. Let's get things underway. Mark, if I can start with you, tell us a little bit about how you're thinking about climate change as an insurer. Um, because these are some very long term trends that are taking place, but you've got to create products that I guess are sold for the year or a couple of years ahead.</span></p> <p><strong>Speaker 1</strong>: <span>So if we think climate change and we take it down a route where we take no action,</span></p> <p><strong>Speaker 1</strong>: <span>then we get to a point where our customers can't afford the insurance products that we write.</span></p> <p><strong>Speaker 1</strong>: <span>So we think in terms of making sure that we are going to be here for now and for the future,</span></p> <p><strong>Speaker 1</strong>: <span>and that's balancing the products we sell the cover that we offer and helping our customers to manage that risk through the provision of risk management.</span></p> <p><strong>Speaker 0</strong>: <span>And how much of that, then, is the pure insurance policies themselves? And how much of that over time do you think is going to be the other ancillary services that you can provide or connect people in with? I</span></p> <p><strong>Speaker 1</strong>: <span>think it's going to vary depending on who the customer is and where they are, because climate change isn't going to affect everybody to the same degree. For those people who are at high risk, then there's going to be an increasing need for them to focus on risk management, either individually or collectively as a community.</span></p> <p><strong>Speaker 0</strong>: <span>But can you tell us a little bit about how you're finding climate change in the E. E. G is affecting your business as flood flash? Um, yeah. I mean, it affects us on on a day to day basis, and it's part of the reason we're here is here as an organisation, um, our product exists to make customers more resilient, and so climate change just increases the need for that. But obviously it creates huge challenges for us in terms of pricing. Um how much?</span></p> <p><strong>Speaker 0</strong>: <span>How much should an insurance policy for for flood cost these days? How much is the likelihood of a river flood going up? How much is the likelihood of rainfall? Flooding going up? How much more likely is a is a sort of coastal surge event. So that is, you know, creating challenges for us, you know, both in the short term and looking out over over several years. Now,</span></p> <p><strong>Speaker 0</strong>: <span>I suppose that a lot of your business model is is is data which must be constantly building up. So, I mean, how how much confidence do you have in the data? You you You know, I guess data tends to be backward looking. How much confidence can you have? You can take that and apply that to the future or yeah. I mean, data very much is backward looking and and the way that a lot of insurers work is you use data from the past 10 years, 20 years, 50 years to try and tune your prices and your models to that.</span></p> <p><strong>Speaker 0</strong>: <span>That's still important and valuable data. But perhaps some of the sort of rules of the games have changed. So in our pricing process, we try to we try to take account for that. We look at sort of recent events. We try to load up pricing to to reflect processes that we that we know are going on and things that are sort of starting to be reflected in in data from very, very, very recent events.</span></p> <p><strong>Speaker 0</strong>: <span>I guess in some respects it's an analogy I might use is sort of, you know, civil engineering. You you build a bridge and you work out how thick your concrete needs to be. Um, but you add a bit just to make sure that when the first trucks go over or the 1000th truck or the millionth truck goes over, it still works. And I suppose that is the The the trick that we've got to work out is getting that balance right between charging enough to make sure we can cover all the risk and the increasing levels of risk, but making sure we can still be competitive and offer something that really does have value for our customers. I describe it as a tight rope,</span></p> <p><strong>Speaker 0</strong>: <span>thank you, and and Jonathan tell us a little bit about sustain insurance brokers because a lot of your clients are in the E s G game itself. Yeah, that's quite right. Um so sustains a purposeful business. It was established to support pro E S G organisations through the use of insurance and and reinsurance products. Uh, primarily commercial.</span></p> <p><strong>Speaker 0</strong>: <span>Uh, and we are seeing an unbelievable amount of engagement both from these pro S E S G businesses, but also other organisations that are looking to understand how they can have a more positive impact on on the world through their processes.</span></p> <p><strong>Speaker 0</strong>: <span>Um, E s G is obviously quite a broad landscape. So could you tell us a little bit about what? Typically what are those businesses like or what sort of areas are they Are they in?</span></p> <p><strong>Speaker 0</strong>: <span>It's a huge range. We've at one end of the of the spectrum, we've got organisations that are purely purely exist to focus on things like climate change. So, for example, renewable energy providers uh, they they may be, um uh providing solar farms, for example, and on all the different elements of of of those solar farms, whether it be the provision of the of the panels or actually operating them or or the investment managers that that fund them.</span></p> <p><strong>Speaker 0</strong>: <span>At the other end of the spectrum are organisations that really one would say have a very little, um, direct impact on on sustainability. Um, for example, a restaurant. However, they may choose to operate in an entirely sustainable manner. So nose to tail dining, for example is is a great concept. Uh, no waste. Um, that sort of thing sustainable sourcing of products and</span></p> <p><strong>Speaker 0</strong>: <span>Mark Aviva in the round is trying to be net zero. I think, by 2040 I think most people are trying to get there by 2050. Um, how does that affect what you're up to? What you're thinking about what you offer clients. So</span></p> <p><strong>Speaker 1</strong>: <span>we think it's really important to be leading in this space and setting an example. If we set a target of 2050 then there's a risk that we procrastinate and we sit on our laurels and we don't do anything. And by setting a target that's closer to home</span></p> <p><strong>Speaker 1</strong>: <span>means that we are going to start taking action now. So we've already made clear that we will move away from high intensity fossil fuel insurance, so things like coal mining or fossil fuel extraction. And then we've focused on our operations to make sure that we can start to make them more sustainable</span></p> <p><strong>Speaker 1</strong>: <span>and then working with our brokers to help them to understand their businesses and how they can change their processes. Now, if we sit there and we wait, we run the risk of not achieving what we need to achieve.</span></p> <p><strong>Speaker 0</strong>: <span>And is there anything in the round that you've learned as you put your own business through through or start to put your own business through hitting this deadline of 2040 that you sort of thought, God, that's gonna be really useful. We need to get We need to have the you know, we can see why this issue with us is going to be an issue for clients as well.</span></p> <p><strong>Speaker 1</strong>: <span>I think what struck us is that actually, a lot of what insurers and risk managers have been doing for decades is transferrable into the into the into the climate space in terms of making sure that we are resilient, that we understand what impacts climate can bring and how we can then mitigate that. Be that through changing how we do things or where we do things or just protecting our assets.</span></p> <p><strong>Speaker 0</strong>: <span>OK, thank you. And I in terms of your business, I mean, are there types of client you won't insure or tell us a little bit more about how you know you You think around this whole issue of great question, I suppose, from a from a pricing perspective. So flash off something called Parametric Insurance</span></p> <p><strong>Speaker 0</strong>: <span>where the the insurance payment is just a function of the event that happened. So how deep is the flood? Or, you know, if it was wind, How fast is the wind or something like that? So from a sort of loss perspective or from a product perspective, we, the customer themselves, sort of is not relevant to the pricing. That said, we find that we are sort of, you know, we do well in certain sectors, so we are very much aligned with sort of customers who have a lot of sort of</span></p> <p><strong>Speaker 0</strong>: <span>physical assets, things you can't move. People who can't just sort of up and get all of their their people to work from home or can't go and move to another store or or or something like that. Um</span></p> <p><strong>Speaker 0</strong>: <span>in the round there, and there aren't customers that we that we wouldn't cover other than, you know, for lots of reasons that you might not might not offer someone insurance. We write a lot of our business through Lloyd's and a lot of our policies are aligned with with with Lloyds around the sort of the businesses and the industries that that that we were right. I think the the key point for us is that our product is very aligned with customers who are</span></p> <p><strong>Speaker 0</strong>: <span>concerned about the environment who are concerned about being sustainable because it's a it's a longevity type product. It's the kind of thing that that increases our customers resilience, and so they tend to be customers who are minded that anyway. But we don't have any sort of specific exclusions. It's definitely case by case basis and out of interest. How often do you find you're paying out? Because I don't know the river was a certain,</span></p> <p><strong>Speaker 0</strong>: <span>but actually it didn't cause a negative knock on effect. I mean, I just I want to get a sort of sense of how so That's almost never happened. Um, which is really interesting for us because That's one of the challenges. So we agree with the customer a depth of water and amount of money. We put a sensor on the outside of the property, and And if the flood comes and the sensor tells us that has happened, our contract is that that we will pay.</span></p> <p><strong>Speaker 0</strong>: <span>Um And so one of the big challenges is to to get that right. So how well does a customer or their or their broker understand? What does 20 centimetres of flooding mean or 50 centimetres of flooding? Um, but we've actually found that something that customers in particular sort of know very well.</span></p> <p><strong>Speaker 0</strong>: <span>Um, and I suppose the value that they're getting from our product is not just the sort of pound for pound or now we're the US dollar for dollar replacement of sort of stock or contents, or or or building damage or whatever it is. It's actually the the speed of payments, the ability to reopen very, very quickly, which is what makes people more resilient.</span></p> <p><strong>Speaker 0</strong>: <span>So I suppose we have found, somewhat to our surprise that that that focus was really, really important. That's a big part of the discussion in the lead up to sort of someone taking out a flood flash policy. But in in the claims process, Um, I guess speech is trumps all in, you know, in that respect. And so we've not really had any cases where there's been a sort of huge, huge mismatch.</span></p> <p><strong>Speaker 0</strong>: <span>And Jonathan, you were mentioning at the start that you've got a broad spectrum of clients, everything from restaurants at one end through to people building or operating solar farms. Um, some of these must be businesses in quite new areas. Is it easy to get insurance for them in the in the round? Sadly not, Um, and that really was was one of the reasons that that I set up to stay.</span></p> <p><strong>Speaker 0</strong>: <span>Insurers have</span></p> <p><strong>Speaker 0</strong>: <span>generally speaking a a tendency to follow the path of least resistance. And so if there is a new technology that's released into the marketplace, it's very difficult for clients to have insurers adopt that technology</span></p> <p><strong>Speaker 0</strong>: <span>and what we're seeing, uh, particularly in the SME space, which is primarily where where we operate between 1 to 250 employees.</span></p> <p><strong>Speaker 0</strong>: <span>A lot of innovation is occurring there, but insurance is a blocker. Uh, every week we we are receiving inquiries and and and more so more so now as as we start to increase our our exposure, our footprint. But we're receiving inquiries from organisations that have have have gone through a rigorous testing phase and are seeking to bring products to market. They're well funded, uh, and they're unable to get insurance.</span></p> <p><strong>Speaker 0</strong>: <span>And for me, it's a really sort of sad position that we're in when the climate crisis is is is so significant. And so that's something that we're we're we're trying to change.</span></p> <p><strong>Speaker 0</strong>: <span>And you said you because this was a problem. You wanted to set the business up. So it sounds like you You certainly set yourself a challenge there. But how do you How do you get cover in cases like that? I mean, do you go with the Parametric insurers and say, as long as there's money behind it and the river doesn't get, you know, sort of, You know, I I'm I have great respect for, for for what I and the guys at have done, I think it is a fantastic, fantastic product. Um,</span></p> <p><strong>Speaker 0</strong>: <span>and I and I think absolutely because, um, as you you've kind of already posed an interesting question that a little agnostic as to what's going on there. Um, that's actually great for, um, the clients that are doing new things because,</span></p> <p><strong>Speaker 0</strong>: <span>you know, it's driven by the weather and the location, So really, um, from their perspective, it's, uh it doesn't matter. And so they're receptive. I think, um, the key for us and and where we've had success is taking that time to properly understand and properly present information to insurers. It's education, you know, and and and I don't I don't claim to be the the world's leading expert on on any, um,</span></p> <p><strong>Speaker 0</strong>: <span>uh, practises that might enhance sustainability, paralysis or or methane extraction, whatever it whatever it may be. But it's amazing how much you can learn if you put a little bit of effort in and and I think establishing a business which UM, which is not driven by volume and is not driven by, um, rapid processes that can afford to take the time to learn and that can afford to take time to educate insurers and work truly in partnership,</span></p> <p><strong>Speaker 0</strong>: <span>is where we've seen some some really good results because, um, it's amazing how people can get enthusiastic about these, um, opportunities when they're given the right information.</span></p> <p><strong>Speaker 0</strong>: <span>Well, can I get your thoughts on that first and then I'll bring you in. But I mean, from your side of doing Parametric insurance, is it a very transactional relationship? Or from what Jonathan was saying, Do you think over time Yeah, actually, we could kind of build a much broader, deeper relationship with clients. I mean, I think I wouldn't describe it as transactional at all, I think, particularly in the sort of in the build up to</span></p> <p><strong>Speaker 0</strong>: <span>to build, creating a policy for our customers. You know, you really work closely with the brokers to understand their business. Why have they come to us? And sometimes it's because the, you know, traditional insurance market can't serve somebody or won't won't serve somebody. But sometimes it's because they sort of, you know, see value in our product. And it's realigned with what what their business is trying to do. So</span></p> <p><strong>Speaker 0</strong>: <span>so certainly in the build up to sort of selling a policy to an individual client, you actually end up knowing quite a lot about them and what what their needs are. And then, you know, we work. We sell retail brokers in in the UK. There are sort of, you know, most important partners. And so we we end up spending quite a lot of time working with those. You know, our biggest team is dedicated to to the success of our our our brokers, um and then, you know, in in the sort of in the claims scenario, which is obviously a much smaller proportion. But but But again,</span></p> <p><strong>Speaker 0</strong>: <span>maybe that is more transactional. But that's the point. It's a really fast transaction, and that's what we're aiming. That's what we're aiming to do. But no, certainly we we feel like we know our customers. Quite Wellmark. What are your thoughts around that? I mean, is there a danger that in the underwriting process, you look at it? Think that's quite interesting? But I don't know. Well, let Zurich underwrite that for a few years, and if it seems OK, we we'll we'll come in. It's it's a great idea, but you know, not quite right for us yet. There's a business risk attached.</span></p> <p><strong>Speaker 1</strong>: <span>Certainly as underwriters, we need to understand the risk that we're writing and the risk it brings so that we can charge an appropriate premium. Um, and with that, provide the right advice and risk management that goes with it. And there are certain areas where I think the insurance industry and Avi have made strides. So if you look at renewable energy, which is one of the points you touched on, uh, in 2019, we launched a dedicated renewable energy team and we now write wind, solar</span></p> <p><strong>Speaker 1</strong>: <span>battery, energy storage. We've just moved into offshore wind and we're gradually building out our propositions, as we better understand and we have the capability to service those customers. There are other areas that are and continue to prove really challenging.</span></p> <p><strong>Speaker 1</strong>: <span>So ensuring large scale timber buildings is a is a real challenge for us. And and we're working really hard to try and find ways to balance the desire to use environmental materials with our appetite to provide cover for risk. And there are some really useful</span></p> <p><strong>Speaker 1</strong>: <span>tools out there that the risk authority published a white paper on how to ensure large scale buildings with sustainable material by using a hybrid approach where you use conventional materials for elements of the building and sustainable materials for other parts of the building. So you create a compartmentalised solution that allows insurers to understand the loss potential and therefore provide the insurance.</span></p> <p><strong>Speaker 0</strong>: <span>I want to come back to some of those issues around, um, materials a bit, but just in broad terms, coming back to this idea about providing insurance or underwriting to businesses that are helping to solve the S G issues, let's call it that,</span></p> <p><strong>Speaker 0</strong>: <span>I mean and you can't form your policy on the basis of a conversation. You know, something that's being held in your TV. But I mean, could you see yourself in a position saying at some point in the future, I don't know, 2% of underwriting portfolio will be in things that we have no idea quite what the risks are. But we know that somewhere in the middle some good things will come out of it, and that's part of our commitment as</span></p> <p><strong>Speaker 0</strong>: <span>a big insurer with a broader responsibility to be out there doing the right thing. Some of this will go wrong for us. Other bits will be great. We can't pick the winners. We got a portfolio of these businesses,</span></p> <p><strong>Speaker 1</strong>: <span>so I think we already do that to a degree where we see that there is a need and an opportunity. We're not going to go from zero to throwing the kitchen sink at something we will learn and incrementally build out our capability and our offering over time.</span></p> <p><strong>Speaker 1</strong>: <span>So we see this as a constantly evolving journey that we'll have to work on, and and I don't think we would ever willingly underwrite something that we don't understand. But we'd certainly work in partnership with people to understand things and start to develop solutions that met the customer's needs. I want to get</span></p> <p><strong>Speaker 0</strong>: <span>some thoughts. Um, Jonathan, are there anything I mean again? You've got a broad range of of clients that you work with, but are there things that as you look at it, you think you know, as a rule of thumb, this just gives insurers or mjs the b GB?</span></p> <p><strong>Speaker 0</strong>: <span>And until we were able to sit down and chat through what's going on, I I I mean, look, the the there are lots of there are lots of examples. Um, that that that I could give you, but I I think the overarching issue is coming back to the point I made before about education and large and and largely what marks saying it's about understanding. Um, and and and And I would be</span></p> <p><strong>Speaker 0</strong>: <span>no surprise on on on the side of your proposal, Uh, and I think, you know, to a certain, Yeah, a a certain element of, you know, I want to, you know, some some of the market have done a similar thing. They call it in. Um, the the problem that I see with that is it's it's innovation, but it it it's still,</span></p> <p><strong>Speaker 0</strong>: <span>uh, provides limited access to the types of clients who I think need to be served. So the SME s, uh it's innovation, but as long as you know, a global entity is doing it, because then they can support the business case by the, uh, 30 million quid premium that they're receiving from from the other side of the of the coin. So I'm not sure it's entirely genuine. Um</span></p> <p><strong>Speaker 0</strong>: <span>uh, to give you an example, uh, of of some of the types of risks that, uh, that we'll find it difficult to place, um, or that we find difficult to to go and cover, uh, three d printing of, uh, of of concrete structures. Um</span></p> <p><strong>Speaker 0</strong>: <span>uh, I've talked about paralysis already. I think when we talk to insurers about anything that includes the word reactor, uh, they have some sort of meltdown, Um, and and really, you know, processes that the the that one would expect to cause a raised eyebrow where things like heat, uh, is involved or, you know, or or or combustible materials, Um,</span></p> <p><strong>Speaker 0</strong>: <span>that that that's where I would say a problematic. I suppose so far a lot of our conversation has been around what insurers M. G A s and brokers themselves and their businesses can control. But I suppose there's another big player in this, which is the government. So without chucking it all on to a completely different authority. But are there any things? Where do you think that sort of boundary lies, and where should it lie between what the industry itself can actually solve around issues like climate change and actually, where there's a point we say, guys,</span></p> <p><strong>Speaker 0</strong>: <span>you know, there's some other people that have to be in the room that will set the parameters that will direct the capital that will set the regulations. There are things we cannot do. Yeah, thanks so much for the question. Um, that's That's a really, really difficult question. I you know, I can give you</span></p> <p><strong>Speaker 0</strong>: <span>my personal opinion on that, which is that the the government sort of effectively sort of creates the environment and the incentives to to sort of do the right thing. But ultimately there's. There's a lot of power in the insurance industry to to make a difference. I suppose Flood is a really good example of that. It is an is an insurance industry solution, but the conditions for it to exist were sort of, you know, put in place at the start. It's got to be a balance between the two things</span></p> <p><strong>Speaker 0</strong>: <span>mark to do. Do you get a sense of the moment? Um, it's not asking you to have a view on political parties, but I mean, we've, uh I think it's fair to say the current government is, uh, probably going through a little bit of turbulence at the moment. It's got quite a lot in its mind. Um, the Labour Party is in an interesting place as well. I mean, just how much bandwidth in general do you think the politicians have got to be thinking about this as a</span></p> <p><strong>Speaker 0</strong>: <span>as an issue and to be working in partnership. I mean, what what sort of feedback do you get? Whether you're talking with them, a Viva is talking with them directly or via the A B I or various trade bodies and associations.</span></p> <p><strong>Speaker 1</strong>: <span>I think there's there's a real challenge in getting some of the topics that we believe are key and important to drive. The environmental agenda forwards onto the top of their list because, as you say, they've got 100 and one other things that they're prioritising and be that their own political views or our relationship with Europe or</span></p> <p><strong>Speaker 1</strong>: <span>how things are going more globally. They're all key and important things, but we need to try and work with them in a partnership to develop solutions that are long term, be that</span></p> <p><strong>Speaker 1</strong>: <span>better and more considered planning so that we develop properties that aren't at risk of things like flooding or when we build buildings that we consider that they may be around for 50 or 100 years, and we need to design them so that they're suitable to be used at that time.</span></p> <p><strong>Speaker 0</strong>: <span>Uh, you mentioned I want to come on to that as a specific example, because we we've heard a lot about flooding the news and then, you know, periods of extreme hot weather. I mean, both around the world and also in the UK. I mean, can you give us some sort of sense of</span></p> <p><strong>Speaker 0</strong>: <span>where that sits as a topic at the at the moment? I mean, as you look at it, I mean, what sort of laid out? I mean, how much of the UK housing or built environment is in danger of flooding at the moment, If things continue as they are, what would that number look like in 5, 10 years? I just want to get a sort of sense of, uh, it is a problem. So</span></p> <p><strong>Speaker 1</strong>: <span>if you look at the e a the E A quote a figure of just over five million homes as being exposed to either flooding or surface water flooding, and under our current</span></p> <p><strong>Speaker 1</strong>: <span>development plans, we continue to build properties in flood plains, so the problem is only going to get worse. And whilst we have flood re in place to help mitigate the cost of insurance for some, it doesn't cover new properties that are built in floodplains. So we're storing up a collection of customers who potentially might not have access to affordable insurance in the future.</span></p> <p><strong>Speaker 0</strong>: <span>And on the I mean, I know we're focused on the environmental side, but the s side of this, I mean, is that gonna be a social problem down the line and because my</span></p> <p><strong>Speaker 0</strong>: <span>call me a sceptic But my guess is that the people who are going to end up in new housing on the floodplains will probably not be from the richer parts of society</span></p> <p><strong>Speaker 1</strong>: <span>potentially, but you only have to look around. Uh, most large cities, the buildings that sit right on the river are normally the most expensive. So I don't think it is just a a social piece. And what we need to be focusing on is building properties that are appropriate, and and we put the right building in the right place using the right material so we can use timber to build properties, but don't build in the flood plain with timber</span></p> <p><strong>Speaker 1</strong>: <span>or raise the timber out of the flood plain by using some other material on the lower floors of the property.</span></p> <p><strong>Speaker 0</strong>: <span>And I that I don't know, but let's let's assume you've You've provided some insurance to somebody who's whether it's a business and they've got a factory on a floodplain and</span></p> <p><strong>Speaker 0</strong>: <span>the inevitable happens. At some point it gets flooded. What do you do afterwards? Do you think we'll never we'll never insure them again? Or we will. But they have to put the following things in place to, you know, So they are fundamentally building back Better. Yeah, absolutely. And that is something we've had to deal with. And there are There are some really different scenarios because there are businesses. There are homes that have been sort of near the rivers for for for centuries, and and we'll find it very, very difficult to to relocate. And then there are sort of new builds who which have been</span></p> <p><strong>Speaker 0</strong>: <span>effectively forced to build on on floodplains and marginal lands. And, yes, we have a sort of planning process around it, and there's lots of sort of considerations about how likely is this to flood and how has it been built? But your point about the the the sort of relative priorities is that you know, there are other considerations around home building in this country as well, which means that a lot of this stuff sort of sort of gets through. Um,</span></p> <p><strong>Speaker 0</strong>: <span>and you know, you you reference, build back better, which is a great scheme, and it flood. We have sort of aligned with this, which which basically, after an event provides extra funding for someone to make themselves more resilient against the next flood, which is which is fantastic but obviously only thinks about customers who have just flooded. It'd be great if we could do something for people who haven't haven't flooded. Yes, yes. Um,</span></p> <p><strong>Speaker 0</strong>: <span>for us, it's very interesting Is we have a I think uniquely in insurance. We have a really strong alignment of incentives with the insured because we we pay cash when water reaches a certain depth. And one of the extensions of that is it should always be cheaper to buy a policy from us for at a higher depth. Um, and it will always be cheaper to have a sort of a lower payout. So, you know, a £10,000 payout at one metre of flooding should cost less than a £50,000 payout at 50 centimetres of flooding.</span></p> <p><strong>Speaker 0</strong>: <span>Um, which means that if a customer can make themselves more resilient. So by putting in some sort of property level protection or whatever it might be, um, and they can increase that that depth at which they get paid, or reduce the amount of money that they need in a disaster. They'll see that reflected almost immediately in their insurance premium, which is unusual. I think that's a you you will know. This is a really, really difficult thing to do, to sort of</span></p> <p><strong>Speaker 0</strong>: <span>take it on spec that the measures that somebody has taken will make them more resilient and therefore less likely to claim. And so for us after her to go back to your original question after a claim that that is the conversation, it's like, How did the product perform? What could you do better next time? Do you need the same thing? Is there something we can do to make it more resilient? And the result of that will be your Your next insurance policy should be cheaper. You mentioned there about sort of the cost of insurance as the um,</span></p> <p><strong>Speaker 0</strong>: <span>if you like the river, the river level keeps rising, but do you get anyone that just think of the other side drought. Do you get anyone where you're running a policy saying If it drops below a certain level, this could be a problem. We're all on clay soil. You know, the foundation. Start cracking. We don't We don't do that. But I mean that that kind of insurance does exist. Um, I know of examples in sort of continental Europe, for example, typically focused on the type of industries which rely on</span></p> <p><strong>Speaker 0</strong>: <span>rivers for transport. So if rivers get in Europe, get too low and you can no longer transport your goods down that river, then you're stuck with it, or you have to pay to transport it over land. Then your costs go up. So there are sort of contingent type policies of that kind. Um, we don't yet have a UK flood policy. Fair enough. Thank you. But I would get your your thoughts. I mean again,</span></p> <p><strong>Speaker 0</strong>: <span>with you, with your clients. I mean, is there anything you see insurers doing well or you would like to see an insurers and m g A is doing after an event to to help create greater resilience in built environment? Yeah, I think so. I mean, the the point that you made earlier was, you know, what can the government do? Where can all the money come from to fix the problem? Actually, I think there's an awful lot of money that we could better deploy here at the A. B. I quote somewhere in the region of £15 billion a year spent by insurers on property damage claims.</span></p> <p><strong>Speaker 0</strong>: <span>And so if if we could consider as insurers or as the insurance industry deploying some of that money in ways which give more consideration to E S G elements,</span></p> <p><strong>Speaker 0</strong>: <span>then we're going to be making a pretty good impact on the problem anyway. So So? So I think things like green clauses in in policy wordings, considering the removal of betterment issues that allow insurers to to to spend the money</span></p> <p><strong>Speaker 0</strong>: <span>in a way which, yes, it it it's giving a better end product. But you know what? It's for the benefit of everybody. Uh, and of course, one's got to manage the moral hazard on that. But I think, um, it's it's probably less of an issue when it comes to, uh, environmental and sustainability repairs than it does to line in someone's pocket. So so I think all those things are very are very doable.</span></p> <p><strong>Speaker 0</strong>: <span>But is there Do you see a long term payout? And the critic might say, if I was watching this and I'm driving, I think he's been very free with my capital. Um, you know, asking me to take a bit of a haircut for a few years. What? What's the long term benefit to me? I mean,</span></p> <p><strong>Speaker 0</strong>: <span>there is a huge benefit in my in my opinion, Um, I I'm a massive believer in those organisations that have positive sustainability credentials being better risks. Um, there was a There was an interesting survey carried out between Howden and Fidelis on 30,000, uh, policies, which which demonstrated significant improvement over and above a standard risk for those organisations that do have, um, clear, um,</span></p> <p><strong>Speaker 0</strong>: <span>sustainability plans and sustainability credentials, uh, particularly on property damage. Actually that that was where they saw the biggest, the biggest benefit. And so I think if we as brokers can start to educate our clients on sustainability,</span></p> <p><strong>Speaker 0</strong>: <span>show them how they can capture information which is relevant to to their sustainability performance and share that with insurers in a consistent manner, insurers can then start to use that data to to prove prove that point. And And you know what? If insurers are not doing it to do the right thing, they're doing it to make more money. But great. So what we get to the same result, which, which is the right place we need to be.</span></p> <p><strong>Speaker 0</strong>: <span>I don't know if you look at individual businesses that you're thinking about doing business with and sort of work out how seriously they take E S G in the round and therefore whether they are</span></p> <p><strong>Speaker 0</strong>: <span>better at quantifying risk in their own business than others. So it's not something we do? No. I think that we probably find that the businesses that we work with probably are more committed to E. S g or think very much about their sort of their recovery</span></p> <p><strong>Speaker 0</strong>: <span>recovery plans in the aftermath of a disaster. But but no, that is the Parametric insurance model. We are. Our underwriting is less influenced by what the customer does and what their property is made of, and much more influenced by where they are and how likely they are to suffer. Suffer an event.</span></p> <p><strong>Speaker 0</strong>: <span>Um, what do you think the next, um, key development will be in Parametric. Sure, I mean, you know, because everybody's business model evolves. What? What? What do you think the next one will be for you? I don't know what the next one will be, but the most important one is making sure getting it established and making sure you it works for the customer. So I've been on quite a lot of panels about Parametric insurance, and they're usually sort of insurance industry ones. And everyone is sitting around saying What a fantastic idea this is. It works really well for the insurer. It works really well for the customer.</span></p> <p><strong>Speaker 0</strong>: <span>I suspect 90% of the people who are at those panels haven't ever tried to sell a Parametric insurance policy. And, you know, there there's there's much less precedent for it, um, which means it's new, and it takes work and time for brokers to understand it and for customers to understand it and get comfortable with it. Which means that every sort of piece of uncertainty around it comes with some questions and the kind of questions that might be equally legitimate on</span></p> <p><strong>Speaker 0</strong>: <span>traditional insurance policy. But everyone's bought that for a long period of time. So it's kind of fine because if you're doing the same thing as other people, that that's great. So so you know there are. There are plenty of bits of technology that will make Parametric insurance better, faster, more accurately price all of these things. But the most important thing is that if it is going to grow and become as big and as important a tool as we think it should be, um, to help people, customers, businesses become more resilient in sort of</span></p> <p><strong>Speaker 0</strong>: <span>in in in the midst of the climate crisis. It's actually that communication piece making it part of the mainstream, making it part of everybody's armoury. That is the thing that will will need to happen. The rest of it is icing on the cake. OK, um, Mark, just coming back to the end, say, consumer or the client, Let's stick with this issue of what? What can people do to, um, if you, like, reduce the risk to themselves? I mean, is it capital outlay is it</span></p> <p><strong>Speaker 0</strong>: <span>is about floodgates. What are what are some of the things that you can do that will mean you're less likely to suffer from something like flood, and even if you do, you're less. It's going to take you less time to recover from</span></p> <p><strong>Speaker 1</strong>: <span>it. So we've already touched on the build back. Better piece. And so when customers have a claim, we need to think about how we reinstate or repair that damage in a way that makes them more resilient,</span></p> <p><strong>Speaker 1</strong>: <span>either using different materials or simple things like raising the electric out of the flood plain. So you may, instead of having your flood your sockets on the floor, have them halfway up the wall might not look good. So good, but actually means that we haven't got to dry the electrics out. Um, from a business point of view, there's some real simple things they can think about, how they store their stock and and whether they can lift the stock to a level that protects it from flooding.</span></p> <p><strong>Speaker 1</strong>: <span>They can move critical machinery, place it on the first floor, don't put your computer servers in the basement, but the one that I'd come to as an absolute must is business continuity planning. Be prepared, understand the risks that you are facing and work out. What are you going to do when the worst happens to actually keep your business going and recover quickly. Because if you plan beforehand,</span></p> <p><strong>Speaker 1</strong>: <span>you actually you're prepared, and it will work far better than if you're trying to make those things up on the hoof when your property is already damaged</span></p> <p><strong>Speaker 1</strong>: <span>in your</span></p> <p><strong>Speaker 0</strong>: <span>experience. Are people good at thinking about worst case scenario? I just think from my own life, the number of times you say What if x happened? People go, Oh, well, it can't happen. And when you ask them why it can't, it's because they really don't want it to, Which is, obviously, doesn't mean it</span></p> <p><strong>Speaker 1</strong>: <span>won't. So I think if we go to flood, I think, as insurers or the insurance industry, we're not very good at explaining to people risk. We'll talk in terms of a one in 100 year risk, which most lay people will translate to once every 100 years.</span></p> <p><strong>Speaker 1</strong>: <span>It flooded last year. I've got 99 years to worry about it, but if you translate that to you've got a 25 year mortgage and we talk in terms of you've got a one in four chance of your property flooding. Same maths sounds an awful lot more scary and actually gets across that they are in a severe risk. So I think it's an education piece and how we</span></p> <p><strong>Speaker 1</strong>: <span>the language we use to describe what the risk that our customers are facing?</span></p> <p><strong>Speaker 0</strong>: <span>I suppose it's not just it's not just the language, it's the framing of it, isn't it? I mean, do you? Do you spend much time with sort of behaviour? I mean, certainly asset management. Behavioural finance is a big thing. How how you how you present potential payoffs to people? Um, you can present them the same payoff, but using a different language and they come totally different conclusions. So how much time do you spend on the sort of the psychological side of it in terms of what you say to brokers and how what you can provide them that helps them with their clients?</span></p> <p><strong>Speaker 1</strong>: <span>Probably not enough.</span></p> <p><strong>Speaker 1</strong>: <span>Um, my observation would be in the commercial space. Commercial businesses are focused on getting back in business, and they want to</span></p> <p><strong>Speaker 1</strong>: <span>make money and continue and survive. So that is their focus. Having a conversation around what may happen in the future when they're recovering from an event.</span></p> <p><strong>Speaker 1</strong>: <span>I don't think there is an open to that type of conversation</span></p> <p><strong>Speaker 0</strong>: <span>and thank. And in just in general terms, we we're talking about what you can do to make yourself more resilient. But how difficult is that as a conversation to have</span></p> <p><strong>Speaker 0</strong>: <span>when we we're in the middle of, you know, very well publicised cost of living crisis? And most people say, Do you know if you if you had this conversation with me four years ago, when I didn't I didn't realise how privileged and lucky I was then I would have funded it. But not now. Yeah, quite understandably. It's an incredibly difficult, difficult conversation. People have budgets, and if if the cost of your insurance goes up, you might have an insurance budget, you're not going to buy additional right now. And you might say, I'm gonna defer</span></p> <p><strong>Speaker 0</strong>: <span>making my sort of property more resilient or or making these investments in, in, in in plans and whatever it might be. So I just think we can't escape that that right now it's a It's a really, really difficult time to do that. Thank you, John. What are your thoughts on that? As you're talking with your client base, is there? I I I think it really comes down to the type of customer that you're engaging with. Um, we are, uh, purposefully working with customers that are receptive to making positive change.</span></p> <p><strong>Speaker 0</strong>: <span>Um, we're business, which is is the leading,</span></p> <p><strong>Speaker 0</strong>: <span>uh, accreditation for sustainability, and and so are a lot of our customers. So, um, they get it. They they see they see value in making these investments and, uh, and and generally</span></p> <p><strong>Speaker 0</strong>: <span>call it a coincidence or or or or call it, um, call it better business, but but they can afford to do it. I think if you're approaching businesses that that have a, um, slightly more selfish, self centred approach to running their organisations and really, all they care about is the profit, the here and now,</span></p> <p><strong>Speaker 0</strong>: <span>Um then in my experience, they'll generally kick the can down the road and and actually will prefer they'll prefer to make that the insurer's problem. Um, we'll deal with that at next. Renewal? Uh, probably not the types of clients any broker wants to have, because that makes the renewal negotiations very difficult. Yeah, OK, um, we've got about five or six minutes left. So you mentioned a couple of times materials. So what are some of the materials we're not using or not using very much today that you you mentioned timber, that you think we'll be making</span></p> <p><strong>Speaker 0</strong>: <span>a bit of a comeback?</span></p> <p><strong>Speaker 1</strong>: <span>So I think the built environment is continually evolving. Uh, there's a phrase that's used modern methods of construction. Um, and that really covers a whole gamut of things. Uh, the things that we see that as insurers, we are more nervous about, uh, large scale timber because of the</span></p> <p><strong>Speaker 1</strong>: <span>not only the fire risk, but also the the problems with trying to repair it when it gets wet. Um, but also things like green walls and blue roofs. So blue roofs capture rainfall. Uh, green walls are living walls.</span></p> <p><strong>Speaker 1</strong>: <span>Um, these are</span></p> <p><strong>Speaker 0</strong>: <span>the things we sort of see where they sort of grow plants. Basically,</span></p> <p><strong>Speaker 1</strong>: <span>Yeah. And you'd think that they they're perfectly safe because they're all plants and they won't catch fire. But the pots that the plants are grown in are quite often plastic. Um, we've seen some industry fire tests that</span></p> <p><strong>Speaker 1</strong>: <span>suggest they're quite similar to some of the cladding issues that we face. So we need to help people understand the risk, help them design in</span></p> <p><strong>Speaker 1</strong>: <span>to the product some resilience that make them safe to be used. We're not going to cross our arms and say, No, you can't do that. You can't build in that way. We want to build in a safe way where the products have been tested. So we understand what will happen if the worst does happen.</span></p> <p><strong>Speaker 0</strong>: <span>And I suppose one other element of this is one of the reasons for climate change. Everyone keeps using more and more power. Fundamentally. Um, and the answer. The simplistic answer seems to be stick, I don't know.</span></p> <p><strong>Speaker 0</strong>: <span>Solar panels on your roof, you know, generate it yourself. Sunshine's free. Um, what are some of the things that can go wrong with with that? Uh, you know, if one of these things catches fire, is it? Is it the same as convention? Is putting water on it? A good idea or a very, very bad idea. How do you work that one through as it is? So</span></p> <p><strong>Speaker 1</strong>: <span>I think as insurance, we need to incentivize people to adopt these local power generation pieces and not put barriers in the way.</span></p> <p><strong>Speaker 1</strong>: <span>But in doing that, we need to educate the manufacturers and the users of the potential problems that are faced and solar panels on roofs and fires is a good example where</span></p> <p><strong>Speaker 1</strong>: <span>the solar panel needs to be turned off from generating electricity. Otherwise, you put water on it and you get a very unfortunate outcome. So knowing that the fire brigade are more likely not to put water on the on the on the roof because they're putting themselves and people at risk.</span></p> <p><strong>Speaker 1</strong>: <span>So it's around designing those things in such a way that if they do have a fault that they don't</span></p> <p><strong>Speaker 1</strong>: <span>impact the rest of the building.</span></p> <p><strong>Speaker 0</strong>: <span>OK, well, we're almost at a time. So we talked a little bit about unintended consequences. I would get some thoughts from the others on the panel. Is there any anything that sort of superficially looks a great idea that, uh, um you know, as you look down, you think up to up to a point, uh, just the law of unintended consequences on on risks around E. S G.</span></p> <p><strong>Speaker 0</strong>: <span>I think</span></p> <p><strong>Speaker 0</strong>: <span>if we if we focus too much on the challenges of of E. S. G. Um, I think we can be guilty of finding ourselves in a position a bit like Y two K. Where, um, certain people spent an awful lot of money to get to the outcome that they thought they needed to get to other people did nothing.</span></p> <p><strong>Speaker 0</strong>: <span>Uh, and the people that nothing sat back and said, Oh, aren't we clever? Because actually, look, there wasn't really an issue here. It wasn't really an issue at the end of the line. Whilst I'm not disputing the fact that of course, we need to do something about this. I think being able to put in step changes for people and making it making it OK not to be perfect, but let's let's just find a way to edge forward together.</span></p> <p><strong>Speaker 0</strong>: <span>Um, I I I think is is is what we really need to focus on and not have this unintended consequence of perfection because we, we we we're not going to get there. I think if we talk too much about E g and we demonise, maybe organisations that that aren't doing quite so well, we we risk we risk that which we don't want to. We want to get to</span></p> <p><strong>Speaker 0</strong>: <span>I your thoughts on that. I don't think I have any better examples. But I mean, I I I completely agree with you. It's that, um, you know, we shouldn't let sort of fear restrain progress. Right? So don't let the best be the enemy of the good. Is that fine? You'll hear that said in our offices, quite a lot. Fair enough. Well, let's get so we've covered a huge amount of ground and there's a lot more we could talk about. We do have to bring it to a conclusion. So I just want to get a final thought from each of you out of everything we've talked about. One key point you'd want to leave us with.</span></p> <p><strong>Speaker 0</strong>: <span>What would that be? So, Ian, can I come to you first? Then I come to you. Jonathan. I'll finish with you. Mark. I think for me, you know being on the insurer as an M g a. The insurer side of this. I think that we we just cannot forget that it's it's all about education and awareness, and that is such a big part of our job and the the the technology advances are fantastic and really important and will enable will enable lots of things. But at the end of the day. Our customers are are people and we're selling via people, and</span></p> <p><strong>Speaker 0</strong>: <span>we have to put at least as much effort into that as we do into any of the the club technology. Jonathan</span></p> <p><strong>Speaker 0</strong>: <span>I I I'd echo Ian's comments on education. It's it's education and empowerment. Let's let's show people what they can do and let's give them the tools to do it and support them along the way. Um, that's That's what I think is important,</span></p> <p><strong>Speaker 1</strong>: <span>and I echo both of your points. Uh, ultimately, I think it's Bolden on us to support our customers, educate them and provide solutions to allow them to become</span></p> <p><strong>Speaker 1</strong>: <span>more resilient to climate in the future.</span></p> <p><strong>Speaker 0</strong>: <span>We have to leave it there. Thank you so much for watching Do stay with us. We've got some information coming up in just a second on how you can potentially use this for structure learning and CPD just remains for me to thank our fantastic panellists. Mark Dunham of Aviva, Doctor Ian Bartholomew of Flood Flash and Jonathan Evans of sustained insurance brokers from all of us here. Goodbye for now,</span></p>