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A Healthy Lloyd’s Outlook and Software for Falsehoods

Posted By Thom Young, January 20, 2017

Apologies for the missed issues since September. I’ve been pretty busy for the past couple of months due to travel through four provinces and five states, a convention and trade show, Canadian Thanksgiving, American Thanksgiving, two company Christmas parties, Christmas and New Year’s celebrations, along with some particularly time-consuming business projects. This project is now in its sixth year and, for the most part, I’ve made that deadline every two weeks without very many interruptions.

A number of people have approached me at various functions asking if I’m still writing and indicating that they aren’t receiving the email with Young’s Stuff in it. The full text version of the essay is not sent out by email anymore because IBAA is striving to keep to a minimum the number of emails sent to members. When the blog is posted on the IBAA website, those who have subscribed through the website are emailed a link to click on and open in a web browser. (You can subscribe through the Blog Subscriptions section in your profile.) A link to these blogs is also included in IBAA’s monthly bippler email. Some of you may have missed the link and not forwarded it on to your staff because the link was buried under other information and promotions. IBAA has informed me that the new bippler format will open with a link to the most recent editions of Young’s Stuff. I do strive to get information into this essay that’s of some value to all members of our industry. Hopefully that information is important enough to get circulated to the staff at the brokerages who receive it. I’ve also been posting links to Young’s Stuff on Facebook and LinkedIn and sending links to it via Twitter. If you see something in my stories that you think should be shared, don’t hesitate to send it on if you know how.

For my “old” friends who have difficulty with links and such other complicated internet and computer terms, send me an email and I’ll send you the blog in text form so you can have your assistant print it out for your later reading pleasure. If you’re reading this, you obviously somehow have found the link on the IBAA site. Just in case you want to forward it on to someone who isn’t as astute as you are, here it is:

If you don’t know how to copy and paste a hyperlink, ask someone younger than you in your office for some help.

It Almost All Began (and Continues) at Lloyds

If anyone is telling you that our industry is suffering in any of the world markets, don’t believe them. Lloyds has posted another record year of over 1.4 billion pounds in profit for just the first six months of 2016. While a number of insurers seem to be floundering around with lack-luster results and less than stellar projections, good old Lloyds continues to show how it’s done. Lloyds is leading the way for expansion of the insurance industry in Eastern markets, and the numbers appear to indicate they’re doing it right. As Europe and North America continue to pull out of the economic malaise that began nearly nine years ago, the future seems bright. The Lloyds financial performance model is unique, but Lloyds goes to great lengths to make it comparable in review to what people are used to, even though the ownership structure at Lloyds is also unique. According to the published financials (see Insurance Business), Lloyds seems to be producing an enviable return on equity of about 8% and is having absolutely no trouble attracting capital investment to meet the reserve requirements of its business model (which well exceeds those legally mandated in any jurisdiction). This strength means that rates will remain fairly stable in the immediate future and, barring any huge catastrophic losses in the coming months, Lloyds will be sending out huge dividends on its reporting date. How well Lloyds performs indicates how the industry will, at least in my opinion anyway!

One wonders, though, how Lloyds is going to deal with the Brexit issue, which is certain to impact its UK operations. As the UK pulls out of the European Union, Lloyds will likely have more difficulty keeping the staff that is now able to move seamlessly between their home country and the UK for work and lifestyle. Still, with modern technology people can work wherever there’s a good internet connection. The main impact will be that they’ll be spending their paycheques somewhere else. The leadership at Lloyds has clearly indicated that they are not going to leave London as a result of the Brexit vote and their outlook for the future is more of the same. The Brexit issue will, in my view, have more of an impact on the UK than on Lloyds anyway. Time will tell, but barriers to the free flow of commerce are not a benefit to anyone in this new-world economy where (at best guess) the assembly of any complicated product includes nearly 25% of parts and materials made in another country. Trade barriers of any sort that could interrupt these complicated supply chains will make for serious challenges in the ability to deliver a competitively priced finished product.

Is Big Brother upon Us?

I was recently discussing with some colleagues the use of linguistic analysis software in the adjudication of claims. Science seems to have developed some pretty reliable technology that can analyze speech patterns to determine whether or not someone is telling the truth in a discussion (see The New York Times). No longer the stuff of science fiction, this kind of program is apparently surprisingly cheap to acquire and implement. The analysis is done in real time and available to the user during the interview process.

Imagine that you’re called into your manager’s office to discuss just about anything, and your boss is constantly glancing at his laptop during your discussion. Is he dealing with emails while talking to you, or is he looking at a graph measuring your sincerity in your answers to his questions? Are you really in favour of his proposal or just telling him what he wants to hear? How do you feel about the new person he hired? How do you feel about his decision on the firing of a colleague? In the normal course of interaction with your manager, you formulate your answers to protect your position in the hierarchy of the organization. I’m not talking about lying in your answers but about answering in such a way as not to harm your relationship with your boss and your future in the organization. Is this new tool that gives your supervisor the further ability to analyze your responses a personal intrusion into your privacy? Some think that good managers already have the people skills that give them this ability, but studies show that such is not the case. Analysis of a software review of people’s opinions about the truth of answers showed that 57% of the answers reviewed were accurately determined to be false by human beings while the software was able to determine 70%. That’s a 23% improvement in accuracy. How would you implement this software into your life choices? Imagine running a review of an investment proposal or perhaps a financial report on a company in which you are involved. The real question is whether our personal relationships will be tempered by degree with an application on our smart phone that is running a truthfulness review of what we’re being told in real time during our discussions. I know my mother didn’t believe some of the excuses I gave her for many things, but I got the benefit of the doubt more often than not. Can you imagine those same discussions with an amber or red light flashing on her smart phone indicating that the story I was telling was clearly not being bought by the software analysis?

In our business, the process of claims adjudication is currently using this technology when collecting information on claims reports. I don’t think there are any precedents yet where this review would be the single deciding factor in denying or limiting a claim, but no doubt it is influencing the adjuster’s review of other factors when verifying claims reports. Brokers often have a hard determining the adjusters reasoning for a position taken on a claim. This software may be the “secret” part of the equation working against your client. I guess a broker could easily record a discussion with a claims adjuster and run it through this software to verify the answers too.

Technology is advancing at a huge rate and will continue to be the prime disrupter of many businesses, and very definitely ours!

Winding Up

The New Year is here! The reset of the calendar marks the end of our very small planet’s complete revolution around our rather insignificant sun and the 2017th year since the majority of us agreed that the modern era began. Archaeological research reveals many other methods of measurement based on other assumptions, but the trip around the sun seems to be a common denominator in how most calendars work. Another common denominator is the perspective that each culture marks the significance of the New Year as a time to wish each other good health and prosperity in the coming year. For all of my readers, I certainly endorse this tradition and wish you well in the coming year.

The opinions expressed in this blog are not necessarily those of IBAA.
Comment on this post below or email Thom Young privately. Thom also encourages suggestions for topics.


Tags:  Brexit  claims  lie detection  Lloyds  technology 

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