With a wealth of actuarial experience behind him, Jason Hurley tells Johanna Gornitzki of industry challenges amid a price war and what the US can learn from the UK market
Having once won a maths competition open to every child in Liverpool, it should be no great surprise that Jason Hurley became an actuary. However, this was not his initial plan, he says, admitting it was more of a fluke that he went down that route. "I went to medical school at the age of 17 but failed my biochemistry exam and that was the end of that career. So I did a degree in maths and went to SunLife in Bristol as a student," he says.
After spending seven years doing a variety of different jobs at the firm and studying for his actuarial exams at the same time, Hurley went on to work for Hazell Carr Training, spending three years driving up and down the country teaching actuarial students about being insurance actuaries. He then went on to work as an actuary in the sales team for IFAs at AMP-NPI before joining RGA in 2002 as head of sales and marketing for the reinsurer's UK operation.
While fairly new to the UK market, RGA started over 30 years ago in the US as a division of a life insurance company called General American. In 1994, the reinsurer opened an operation in Canada and then launched in Australia and the Asia Pacific region. Four years later, in 1998, RGA opened its office in the UK and, in 2000, received its license from the Financial Services Authority.
When arriving at RGA, Hurley's job was to diversify the client base. "Although we had done very well since entering the UK we had 90% of the business coming from Norwich Union, Legal & General and Aegon. We now have in-force treaties with 13 of the top 15 companies," he adds.
Besides trying to gain more UK clients, Hurley says the company is also trying to expand worldwide. "We have recruited an actuary in Germany and one in the UK to look at new products and new markets of business where we can carry on growing without doing anything stupid," he says.
That said, RGA has so far been mostly successful in English-speaking countries, with 64% of its business taking place in the US, 11% in the UK and 9% and 8% in Canada and Australia respectively. Hurley thinks part of the problem is there is a relatively small amount of business passed to reinsurers in other markets. "A large reason for using a reinsurer is because of the capital advantage. That hasn't happened yet in some markets, but we believe that it will," he says.
Because of the capital advantage there is a large amount of UK business being covered by reinsurance. This could make it tempting for life offices to be controlled by their reinsurers. However, Hurley believes a good company would not let that happen.
"In 2003, when there was not much guaranteed critical illness (CI) reinsurance available and the reinsurers that were left were increasing prices and doing things like removing angioplasty and limiting the maximum cover, companies realised that reinsurers had influence over their business. However, insurers are now in a position where they wouldn't allow that to happen and the better companies didn't allow that to happen in 2003 anyway," he says.
He adds that he thinks reinsurers get a lot of stick for things that really are beyond their control. "I think reinsurers get blamed for a lot of things that quite frankly have nothing to do with them. An insurance company always has the option of not using a reinsurer. There is a competitive market of nine reinsurers in the UK, and I don't think they have as much influence as it's made out in the press."
Accountability
Some people say reinsurers are partly to blame for the lack of true innovation in the market and for forcing insurers to compete on price alone. Strongly disagreeing with the sentiment, Hurley says: "I think it's the other way around. In fact, I believe reinsurers are probably guilty of coming up with all kinds of high-brow solutions that are innovative and technically correct but just impractical, which you can't underwrite or can't sell."
In terms of the price war going on in the market, Hurley does not think reinsurers are guilty of starting it. However, he cannot see much of an end to it.
While some industry commentators argue that insurers and intermediaries should focus more on quality and less on price, Hurley does not think it will happen. He says: "Quality is fine in theory but what does it mean and how does that translate into something tangible for the customer? And while there are times when you can offer tangible solutions like add-on benefits, how do IFAs choose between A or B?"
Working for a US-based firm, it would be understandable if Hurley believed the UK market should look more towards its US counterpart. However, on the contrary, he thinks the US sector has a lot to learn from the UK. For example, he believes the UK protection market is more advanced than the US one in point-of-sale underwriting. In the US, protection is hardly ever sold with mortgages – another area where Hurley thinks the UK market excels.
However, when it comes to issues like non-disclosure the US market is well ahead of the UK. All insurance policies in the US come with a non-contestability clause, which states that after two years an insurer cannot decline a claim due to non-disclosure unless it is fraudulent. This may become the norm in the UK after the Law Commission's recent proposals.
Hurley is not sure adopting the clause would be a good thing for the UK sector. He says: "What it means is you are fussier about who you put on the books in the first place. For example, there is an industry-wide fraud register called MIB in the US and as a part of the application process customers go through that process so insurers can check if they have been turned down by any other insurers. It is also unusual to offer CI cover and if they did, the maximum cover is much lower than in the UK. There is also no ombudsman in the US, so straight away you're in court and spending millions in legal fees."
He warns: "I think if we do adopt it we need to be wary of where the long-term position will be, which is slow underwriting and low levels of cover and more people that are non-insurable. I cannot help thinking that it would be easier if people just told the truth. But maybe I am just living in a reinsurance world and not in reality."
Changing landscape
The landscape for reinsurance is changing. With new EU legislation coming into effect Hurley argues that reinsurers have to move away from their traditional role of pushing products and become more like risk-management consultants. "This is the real challenge, which could effectively make the reinsurer-insurer relationship more stable," he says.
Moreover, he thinks there are still too many players in the market. "I think we will be seeing some consolidation in both the reinsurance and insurance sectors," he says. While refusing to be drawn on which companies may be considering such a move, he admits, "There have been plenty of talks".
Looking ahead, Hurley hopes that RGA will be able to catch up with Swiss Re, which managed to overtake the firm after it bought GE Insurance Solutions. On a personal level, however, he is looking forward to leaving the battles behind. "I will be 40 in January and my wife is having another baby, but I am not planning to buy a Harley Davidson and run off with the secretary," he adds.
