23 June 2020
Insurers must wake up to 'data complacency'
Insurance tycoon Peter Cullum warns technology could soon put most underwriters out of a job
Peter Cullum has just completed the sale of a major stake in Global Risk Partners, the firm he founded in 2013
Insurers have attracted searing criticism over their response to the pandemic but one of the industry’s most experienced brokers sees a much bigger threat coming down the tracks.
“There's data complacency in many organisations,” says Peter Cullum. “If we're not careful, we'll wake up one morning and Amazon will be the largest insurance company the world has ever seen.
“Because [with] the data they have, they can anticipate what you and I are going to do tomorrow before we've even thought about it. It's extraordinary and powerful and, you could say, scary.”
Insurers sit on enormous quantities of data but a patchwork of legacy systems means they are often unable to quickly or effectively use it, says Cullum, who completed the sale this month of a majority stake in Global Risk Partners (GRP), the independent broker he founded in 2013.
Instead, insurers come to him for data they should already have, taking advantage of GRP’s investment in a digital data warehouse he believes is the best in the business. “It cost a huge amount of money but we're now really seeing the benefits because we have data on tap.”
The sale of a majority stake in GRP to Searchlight Capital Partners is understood to value the business, which sells almost £800m of insurance a year, at about £650m and Cullum’s own stake at about £100m. Penta Capital, which backed the business from inception, will retain a minority stake.
Cullum and his co-founder David Margrett are relinquishing day-to-day control of the company but will remain on the board as non-executives.
In seven years, GRP has become one of the UK’s largest independent brokers, buying up 59 smaller players. Signs are the strategy will continue under the ownership of Searchlight, a private equity firm that counts Hunter Boots among its investments.
“Some of our competitors have put their foot on the ball. They want to pause and see what happens when we come out the other end but we see lots of opportunities,” Cullum says.
Can GRP’s rapid expansion continue when a wave of insolvencies would mean fewer businesses needing insurance?
“As with all sectors, the stronger players survive and thrive; maybe the weaker players find it difficult,” he says.
The pandemic recession has forced brokers to battle insurers on behalf of cash-strapped policyholders who are desperate for payouts under business interruption policies.
Cullum accepts that there is a risk that brokers like GRP will be blamed for selling unsuitable policies if insurers refuse to pay and the courts do not force them to.
“We are working closely with the insurers on behalf of our clients to make sure that they behave both consistently and fairly. At the end of the day, it is the insurers who make the call and we can [only] pressurise them, as we do.
He feels there has been “too much wriggling” from certain insurers. The likes of Hiscox, RSA and Zurich have all been criticised.
“What concerns me is it's taking too long,” he says. “A lot of these smaller businesses, they've got a cash crisis. They don't want to wait weeks until an insurance company decides whether they're going to pay or not.”
Will stepping back at GRP go better than it did at Towergate? So far, the signs are good. “The new investors have behaved exceptionally well, been very supportive,” Cullum says.
But he is not risking everything on the deal working out. He is understood to have cashed out about 80pc of his £100m stake and will use his new-found spare time to focus on his other investments, his entrepreneurship fund at Cass Business School and his work funding specialist schools for children on the autism spectrum.
“I think there's a danger when you enjoy what you do you somehow fail to balance, and I've failed at that.”