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Duncan Minty on Outstanding Claims on the Price Writer Podcast Ep 19
12 Plays1 month ago
Navigating the Intersection of Insurance, Ethics, and Digital Transformation with Duncan Minty. Join us as we discover the fascinating journey of Duncan Minty, who has a notable career in the insurance sector. Starting in the early 1980s, Duncan explored innovation and the social analysis of risk, eventually becoming head of insurance for Motability, Europe's largest car fleet for people with disabilities. In this episode, Duncan shares his insights on the ethical challenges and technological transformations within the insurance industry. He discusses the evolving landscape of fairness in pricing, the impact of GDPR 2.0, and the complexities of digital decision systems. Learn how Duncan collaborates with insurers, academics, and civil society groups to ensure that insurance remains a fair and socially responsible service.
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Transcript
Duncan's Career Beginnings
00:00:00
Speaker
Hello Duncan and welcome to the show. Yeah, good to see Jeremy. It's brilliant, thanks ever so much for being on today. So the first thing i want to ask you Duncan is how did you get where you are today?
00:00:13
Speaker
but you have to go back a few years I'm afraid as you may tell by the whiskers but around about 1980 I did a master's in Manchester about innovation and science and what makes that work and my thesis was on the social analysis of risk.
Role at Motability
00:00:35
Speaker
and And from that I moved into insurance. It seemed logical step to make. And I worked for 18 years in the market in both personal lines and commercial lines in the north of England, south of England, the middle, most places.
00:00:52
Speaker
My last full-time job in the sector was as head of insurance for Motability, which is Europe's biggest car fleet. It's about 600,000, 650,000 vehicles. And everyone, by definition, has a significant disability. And and I suppose what interests me out of that was not cars, but much but the interplay between people and insurance.
00:01:20
Speaker
And this particular group of people who all had, in one sense, quite different needs. And typically, the disability that required a number of different changes to make everything work as it should do, but also they were very same as everyone else in many ways. So it was that, and it was interesting working with the insurer to understand that and make that part of the service that was delivered.
00:01:44
Speaker
And I found that very interesting. And this would be about
Independent Ethics Consultant
00:01:48
Speaker
2001. i then went self-employed as an independent ethics consultant, which I've been ever since.
00:01:57
Speaker
I've been working with a variety of insurers, big, small, long-term and general insurance markets on ethical issues. so yeah I'm not going in there saying this is what you this what ethics means in your particular situation. I am saying this is how you can think it through. These are the tools that you can use.
00:02:19
Speaker
These are the other ideas which you need to take account of. And I really try and I don't do it for them. ah I don't. I tend to do it with them. And then I generalize and say, great, you've got the idea.
00:02:33
Speaker
um you go. You don't need me anymore. But also for people like professional bodies and a number of bigger insurers who want to understand trends and developments from an ethical perspective and from someone who, to be honest, can be a little bit challenging at times because I've got one foot in the market and one foot outside. So...
00:02:56
Speaker
I have a lot of engagement with academics who find insurance now very interesting, more interesting than most other the business sectors. And with civil society groups who I listen to and I exchange ideas and debate with them about various things. So my work is, yeah, fairly varied, but largely with insurance, insurers and professional bodies, UK and Europe.
00:03:26
Speaker
What's the thing that you find most important in your
Insurance's Transformative Role
00:03:30
Speaker
work? what What's the thing that brings you the greatest joy about it? I think the way in which insurance has such a role in society and the way in which it is rolling ahead with a transformation programme around digital, which is quite revolutionary, and how those two things interrelate.
00:03:55
Speaker
So it does. cause some very interesting interactions and projections of saying this makes great sense. But actually, if it carries on for 10 years or 20 years, what are we going to do? yes but I was on a panel in 2017 in Brussels at the eu main EU data privacy conference of the year. and it's actually on the moment. I'm Very annoyed I'm not there now. But anyway.
00:04:26
Speaker
man And the title of the panel was, will big data drive insurance onto the superhighway or off a cliff?
00:04:38
Speaker
And the if you think most investors would say superhighway, we've never invested in insurance on the basis that it's risky enough to go off a cliff. But it was. And no one had it no one could say one one answer was right or wrong.
Big Data and Insurance
00:04:53
Speaker
But the mere fact that it was being addressed in a big forum was going, hey, insurance is not the same as it used to be, which is both a good thing because you think some of the ideas are very stuck in the mud and are now getting thrown out, which is great. And others are, be careful what you wish for.
00:05:13
Speaker
i think pricing has been key part of that realization of of what transformations could happen. but also what some of the consequences could be. And I'm not saying that ah claims and counter fraud aren't, but I think pricing, questions were first raised around pricing.
00:05:32
Speaker
And some of them have been answered, not all of them. So, yeah, that's that. And what would you say is your mission for Inshare?
Ensuring Fairness in Digital Systems
00:05:46
Speaker
Well, at the moment, my mission would be to look around fairness and how insurance is delivered as both a product and a service.
00:05:54
Speaker
How that ah but measure of fairness is built into the digital decision systems that insurers are using. I'm interested in how social determinants of risk are being used and and whether but ideas like behavioral fairness in pricing is as fair as it actually says it is.
00:06:18
Speaker
And I have great doubts about that. I'm also looking at changes by legislators around what is now being called GDPR 2.0 and how those could really quite contain some of the practices that insurance pricing now feel is fairly straightforward and normal.
00:06:43
Speaker
And actually, they may not be any anymore. I think that If I was designing a pricing system, my flexibility would be, it's absolutely number one ah design criteria, because I think there's a number of things happening around what data can be used, about how analytics can be applied.
00:07:04
Speaker
And to the EU AI Act is bellwether for those changes. It's only a part of it. There are other changes happening, say, for example, around biometric data in the UK and social scoring, the whole idea of it's social scoring is banned in the EU at the now from, I think two days ago when the AI came line that became formally accepted.
00:07:31
Speaker
But actually, if you went, someone in pricing, someone does social scoring all the time because they have to score people's risk using data that is often proxies for the actual thing.
00:07:46
Speaker
And so I've spoken to a number of legal scholars in in Europe and where I'm convening a webinar with them about what does this mean for insurance? Because technically they're not allowed to do it anymore.
00:07:59
Speaker
So that's pretty significant. And you could say, of course, there'll be some sort of way forward to grief, but actually the article five yeah I think it is written in
GDPR's Impact on Insurance
00:08:11
Speaker
stone. It can't be changed.
00:08:12
Speaker
And so it provides an open door. for example, as a consumer group who feels that the insurance sector is not respecting certain fundamental values to say, you're social scoring, you're not allowed to do that, you've got to stop.
00:08:29
Speaker
And so I think that this the whole gamut of it developments which are being wrapped up in this phrase GDPR 2.0 are going to be very significant. and But insurers shouldn't be surprised by them.
00:08:44
Speaker
Because I've been watching some of the developments happen for about five to ten years now.
00:08:50
Speaker
They are ah going to be a ah testing time, I think. Yeah, I find it very helpful to have someone like you to translate and interpret these regulations for us, because it is moving very fast and all of us want to comply with the rules. And that could be quite difficult, actually.
00:09:13
Speaker
Yes, I. think it'd be quite difficult to adapt to those rules. I think there's different digital strategies which makes those rules easier to accommodate than others.
00:09:26
Speaker
And the danger is is that you may use a form of digital strategy which is particularly incompatible with one or two of the main changes happening. And that really does require a sort of, hey, do we have to redesign our whole thing?
00:09:38
Speaker
And there's others who have put that at the centre of what we've been doing because they've listened to, for example, academics who have been saying, This is how we see the future developing around ah insurance and digital.
00:09:50
Speaker
And therefore, they some of them will say, it's fine. We're okay. We're going to steam ahead. The reason they've done that is because they have foreseen some of these problems which are going to emerge over the next few years for those who have followed them. ah Mainly, let's get all the data we can and use it to get closer and closer to the customer.
00:10:10
Speaker
Actually, that's not what customers want. So it may be what they have to be put up with, but who wants to put up with something for too long if and if a nicer alternative comes along?
00:10:21
Speaker
um But I think the sector has to do a lot of listening and learning over the next few years to take on board the various aspects of this GDPR 2.0.
00:10:32
Speaker
but It's quite possible. so that But there's going to be some cultural changes needed to make this less of a reactive thing and say and and more of a this is how the future is developing and let's therefore run with it because um policymakers aren't agreeing to many insurance exemptions at the moment.
00:10:52
Speaker
No, that's fair. That's fair. I did quite a lot of work during the GIP rules coming in on fairness for clients. And what is your view of what would be fair pricing?
Fair Pricing in Insurance
00:11:09
Speaker
I think, What I don't do with clients is say, this is what fair price pricing is. What I say to them is, these are the factors which you need to keep in consideration. So fairness of merit, which is very central to a lot of our work, is fine.
00:11:25
Speaker
But then, as you can see in certain legal developments in the US in the last few months, fairness of access is now being given priority. Yes, I saw that, yes. And then you need to develop a form of equality of fairness within your pricing that makes those different elements come together, suitable for your type of business and your type of customers.
00:11:51
Speaker
So I think the first step in working out what is fair in pricing is to start listening to the other ways, the other voices and and conversations that are happening around what fairness means.
00:12:04
Speaker
And I suppose my role in that situation is to guide people into and through that conversation. And certainly I've been involved in a few with xctu they ah institution of faculty yeah in the the UK who recognize that actually there are a lot of voices out there who have legitimate views on what are the positives and negatives around pricing practices and how they can be adapted.
00:12:35
Speaker
And I think are also willing to work with the sector. Those conversations, those discussions are an actual important part of actually working out what I would call the new landscape around fairness of of em pricing and insurance.
00:12:50
Speaker
And I've been involved one or two of those. And the people who have come along have been very happy to be there. They're still very much wanting to see what they need, but are willing to work with the sector and and engage with them on this journey. And I think the sector needs to respond to that more fully than just on occasional cases.
00:13:13
Speaker
Fairness needs to take account of people who need to access the market, who have a need for particular types of insurances. And there's also the idea that, and this is one something that started me off on this whole thing, maybe about 12 years ago, was, you know,
00:13:32
Speaker
Just because you individualize a price or you personalize a price does not make it a fair one. In fact, and the danger is that it could make it progressively unfair. So I think in terms of fairness, you need to think ahead and say, if what we're doing is going, is it going to be, is it going to help people get value for insurance over time?
00:13:57
Speaker
I think some of the practices of the month would struggle with that. And that's certainly been recognized. but think flood re is a div very interesting example of how pricing can become a social and political issue, yeah which the market has to listen and react.
00:14:15
Speaker
And I think that flood re is a good test case for some of the more difficult discussions and scenarios that will happen around, say, like life and health insurance. And those are just starting to emerge now.
00:14:28
Speaker
So what I try and do is just help people understand that landscape more. um I can't tell if this is what you should do to be fair, because they need to make that decision, which is not me opting out, but it's more me making sure that their voice and their wishes are the centre of what happens.
00:14:47
Speaker
But that is an informed voice and and they understand wider landscape which they're working through Yeah, I understand that. There's a tapestry of companies and they do need to make these decisions themselves.
00:15:02
Speaker
it's fact do Do you think some of that is driven by the complexity, that the level of complexity we've got in pricing now and how that then joins up through an organisation to the people that can put the appropriate messages to the regulators and the industry bodies?
00:15:25
Speaker
I think of the complexities entirely of the insurer's making. I remember being involved in scheme pricing for a household house priceson but household scheme.
00:15:36
Speaker
And yeah we were going to go from one building rate to five. And this was quite a sort of discussion about why we should have been going from, I think, seven car groups to 20 to buy a new computer.
00:15:51
Speaker
There was the times when underwriters would say, my pricing so sophisticated. I don't know how the premiums calculated. It just struck me at the time and it still does as you don't understand how your business works then.
00:16:01
Speaker
So is, and ah there was something in today's or yesterday's news about actually a lot of people don't understand how AI does what it does. yeah So if you're going to use it in your pricing, do you want to get your main revenue engine based upon something you don't know, understand how it works?
00:16:22
Speaker
And he can the fear of missing out means that some will do that, or take that risk.
00:16:28
Speaker
But as an investor, and I think people are starting to pick up on this, that's not necessarily the type of thing I'd expect from insurance. I don't position them in my portfolio in that way. So they're an audience who are going to be knocking on the executive doors saying, please explain what you're doing here.
00:16:45
Speaker
yeah And if I'm driving along a car, along the motorway, And I know it's a complex beast underneath the metal, but yeah but I know how to control it.
00:16:57
Speaker
i felt If I felt that I didn't, I would probably just want to pull over yeah and either get the book out and and understand what's happening or but just think I'll take the train instead and hand over that complexity to someone else.
00:17:11
Speaker
I think that if you don't, yeah you're accountable for the outcomes that your pricing generates.
Complexity in Pricing Strategies
00:17:20
Speaker
And the problem with SMCR, it takes an awful long time for that individual accountability to be enacted and enforced.
00:17:26
Speaker
They need to pay more attention and get more to grips with how the systems work. And that to me seems and absolutely what managers are there to do.
00:17:40
Speaker
Yeah, definitely. i remember I really clearly, distinctly remember in about 2008 when Bob from... diamond from i think Barclays was in front of the select committee and he was asked to explain how they calculated the rate for their complex financial products and he couldn't even begin to he he couldn't even begin to explain it and he also couldn't explain but how they then were able to control the business because they weren't and that's always stuck with me when I work with complicated models and so on I do say it
00:18:17
Speaker
in my book Price Writer that models divide into two types, the ones that you could comfortably explain to a customer how I arrived at your price and the ones where you can't.
00:18:27
Speaker
So just to finish up, Duncan, what do you see as your vision for the future?
Future Vision of Insurance
00:18:34
Speaker
um like to see insurance maintain a big, important role that it's always had, which is to be there for everyone, priced in a way which people can feel is fair, maybe not themselves understand, but the group can rely on someone else to say, yeah, this is a fair price.
00:18:51
Speaker
And that there's a lot more transparency about within the sector about how it goes about these things so that various parties around the public can engage with the sector and understand and appreciate the value that's being created.
00:19:06
Speaker
It's happened before. It can happen again.
00:19:10
Speaker
And so we need to get back to those times when It was thought to be the law courts had for many years a view that and in in answering the question, what is a fair price in the market?
00:19:25
Speaker
Would say it's what the market does. yeah And actually that's now lost. They've got to re retain, regain some basis on which arbiters such as the law courts can say, yeah, that's a measure which I can understand.
00:19:39
Speaker
And I think this case so is in line or not in line with it. We've lost that. And so we need to regain those aspects. Yeah. And that's what I would like to see happen, whether I'm a bit on the old side. So whether we'll have in my lifetime is a mixture of both my sustainability and and the market's evolution.
00:20:02
Speaker
We sure have to see. Brilliant, Duncan. well Thank you ever so much for taking the time. It's been a great conversation. Yeah. Good. Thank you. Cool. Have a good rest your day. Thanks. Bye bye. Thanks.
00:20:12
Speaker
Bye.