Interview: Steve Thompson, Head of Accident and Health at Optio Group
Steve Thompson, Head of Accident and Health at Optio Group, discusses with Chloe Fox the industry changes over the past decade and the challenges of working across multiple international markets
You have worked in a variety of areas within the accident and health (A&H) sector over the past two decades. What does your current role at Optio Group involve?
Optio A&H has a mix of business – Middle Eastern and Asian reinsurance, European travel, medical portfolios, and various global personal accident and sickness schemes. My focus is to continue writing the type of business I know and love – affinity, niche opportunities that tend to have consistent, stable results that are reflected by high-frequency, low-severity losses.
To deploy this business plan requires the support of brokers. We do not distribute on a direct basis, so intermediaries and other managing general agents (MGAs) are our model for growth and development. We have the underwriting capabilities, Lloyd’s, and company market insurers to support our plans, and the opportunities presented by these intermediaries are vital to achieving our goals.
What interested you about the company?
Optio is a proactive, fast-paced company with respected expertise and an appetite for profitable growth. It also has a great culture of empowering staff and providing them with robust support. Optio Group underwrites 11 specialty classes of business, employing 95 people in three offices – London, Dubai, and the US – and is one of the largest independently owned specialty MGAs. Part of that culture is a desire to assist clients with their insurance needs irrespective of class, which empowers me to help them and not just with A&H. If the company can make a positive difference in providing a variety of solutions, then firstly this makes my life easier and secondly it helps fulfil or exceed their expectations. As well as this, they are really nice people to work with!
What are the key challenges you have experienced working across various A&H markets globally?
This is an interesting question, and each territory has challenges that may differ to others, but underlying these is the necessity for profitable growth.
A&H insurance as a profit centre has been labelled by regulators as a ‘high conduct risk’ division (note: reinsurance does not affect this rating in the same way, nor does commercial business where the claimant is not a member of the public). This has been a huge challenge globally for those working with A&H products. Regulatory and policy change leads to increased conduct requirements. These, coupled with an uncertain economic environment, may lead to insurers’ withdrawal from certain markets, rather than exploring how they might continue to do business under new regulation. If, consequently, fewer products become available, this might result in more firms and consumers looking outside the regulated insurance sector to provide products and services.
This, coupled with smaller margins and increased costs – because greater input is required from compliance, actuaries and, for those working with binder business, the support of a delegated team – is resulting in higher costs to write this business than ever before.
The underwriting results for non-catastrophe business are still reasonably stable and consistent, but cheaper premiums are pushing up loss ratios. All the above factors are challenging companies to adapt and change or risk negative results.
What is the biggest challenge faced by brokers working with A&H policies, and why?
One of the main challenges for those writing insurance verses reinsurance is the regulatory environments that insurance capacity and intermediaries now face. In respect of capacity, this means that, for a broker/MGA, finding support for what are non-commercial risks can be problematic; there are far more hurdles to navigate, which impacts margins and time.
Some brokers and MGAs on some of the A&H products have commanded high commission levels, which underwriters are now pushing back on, so smarter ways of distributing and processing business are required to ensure the continuation of these markets. Operating in an environment of high inflation and increasing costs, this ultimately is passed down to the end user, i.e. the public. The insurance market must strike a delicate balance between passing some of these costs on to clients and risking them walking away when there are other options available, versus trying to absorb the costs, finding more business, and accepting the lower margins per risk.
How do you think technology might impact your role as an MGA in the future?
This is a key area for any MGA or underwriter with requirements for management information (MI), aggregation analysis, sales results, and loss details. Optio is tech-enabled, creating a technology ecosystem that supports profitable growth.
Technology has been one of the most significant drivers of change in financial markets, increasing the speed and directness with which consumers are able to engage with insurance products and services.
One of the main challenges for those writing insurance versus reinsurance is the regulatory environments that insurance capacity and intermediaries now face
More direct and accessible technology has been developed in the insurance service industry to keep up with consumer needs, changes in the way we communicate, and to improve margins. Whilst the use of technology has brought about many benefits in relation to accessibility and efficiency, it has also meant that firms have become increasingly reliant on technological systems and consequently more vulnerable to the risks that may arise from using them.
Over the last 10 to 15 years, the rise of comparison websites has changed the ways that consumers engage in the insurance market considerably. Increasing numbers of consumers are relying on comparison websites, both as a means of finding a good deal and as sources of product information. However, while they may have provided consumers with more choice and increased competition on price, it has been suggested that they have also increased the likelihood that consumers will buy a product that is unsuitable or doesn't meet their needs.
Increased reliance on technological developments requires firms to ensure that their systems are resilient, that the way they access and use customer information is not vulnerable to misuse, and that they do all they can to ensure business continuity and consumer protection.
Have the needs of insurance customers changed over the past decade?
Yes, both their needs and expectations. In terms of needs, there has been the development of cyber products, and, for A&H, there has been far more focus on mental illness challenges, requiring changes to benefits, terms, and conditions.
With easier access to technology, customer product knowledge is wider, meaning coverage expectations are set higher, which can be problematic in terms of expectation versus premium cost. Technology can also create unrealistic expectations in terms
of instantaneous response and gratification, which can be hard to meet. Insurance is a highly regulated and professional industry, which provides carefully considered products that protect the lives, livelihoods, and property of clients. Education is needed regarding the giving and receiving of advice and important information, so that clients
can make fully informed and realistic decisions about products that meet their needs and their budget. To achieve this, some markets are now turning to artificial intelligence (AI), which feeds back into the whole technology subject.
What changes (if any) did the Covid-19 pandemic prompt in the insurance MGA industry?
Like most insurance sectors, Covid-19 drove employment changes as well as policy coverage interest. This disaster scenario demonstrated to businesses the need for changes in the way business is conducted, whether that be the distribution method, where internet trading increased and those businesses that had relied on footfall had to adapt and change or be left behind, through to the way businesses treated their employees, and finally the protection afforded by insurance products.
What are Optio Group’s main priorities for the future?
Optio has an established foundation and track record of underwriting complex, specialist niche risks, which we will continue to build on. Organic growth is certainly part of that and further acquisition of businesses or individuals and teams – possibly as insurers exit certain classes – is also something we would consider. This may involve additional specialty classes, but we are equally open to a broad range of different types of re/insurance, with maintaining the right balance and diversification levels an important part of our thinking as we build into the future.
Steve Thompson, Head of Accident and Health, Optio Group
Steve Thompson is Head of Accident and Health at Optio Group. With over 43 years’ worth of insurance and reinsurance experience spanning the northern and southern hemispheres, Steve has spent the latter half concentrating on underwriting international A&H business in both Lloyd’s and company markets. With a breadth of understanding of insurance risk, and having amassed solid territorial experience in the UK and Australasia, with good knowledge of Europe, Asia and the US, Steve provides clients with support that helps grow their business. He is a Fellow of the Australian and New Zealand Institute of Insurance and Finance.
May 2024
Issue
In this issue we examine the use of telemedicine in remote Asia-Pacific facilities; look at traveller safety in Asia; plus we consider Thailand’s healthcare system and ask how it serves the international market.