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Gallagher Re’s Global Deputy Head of Insurtech, Freddie Scarratt, makes the case for Lloyd’s as an innovation hub, and explores why we should be shouting about our successes.
Creators and Guests
What is Insurance Technology: Fact or Fiction??
Host Georgie Simister speaks with key insurance industry figures to separate fact from fiction in a world of insurance, debunk industry myths and explore the game-changing innovations shaping its future.
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The insurance industry is renowned for being slow, late to the party and behind other sectors. And there's a common phrase being used on panels at the moment when discussing certain topics that we have been discussing these for years. But with emerging technologies are we really that slow to innovate? Welcome to Fact or Fiction with Artificial hosted by me Georgie Simister. This is the insurance podcast that separate fact from fiction in the world of insurance, debugs industry myths and explores game changing innovations shaping its future.
Georgie:Today, I'm joined by Freddie Scarratt, Global Deputy Head of Insurtech at Gallagher Re. Freddie began his career as an intern at Lloyd's and has since carved out an impressive path in the reinsurance world. Now as a reinsurance broker, he plays a pivotal role in helping Insurtech secure capacity and navigate the complexities of the market in all lines of insurance. He's also one of the authors of the Gallagher Re Insurtech Report, a sharp quarterly analysis that tracks industry trends and shares key insights from across the globe. So welcome, Freddie.
Freddie:Thank you.
Georgie:Thank you very much for being here. So as mentioned in your impressive introduction, you are one of the authors of the impressive Gallagher Re Insur Tech report. And if anyone hasn't read it, it's well worth the read. Not just because Artificial were named deal of the quarter last year, but it really does provide great insight into the Insurtech market and into industry trends. So briefly, can you just tell us what you're seeing in the Insurtech market?
Freddie:Yeah. Absolutely. And and thank you so much for having me on today. And, kudos for the insurtech report. Must go to my boss, Andrew Johnson, who's who's the main author and does the executive summary.
Freddie:We came out with the q one report last month, and the big news was $1,310,000,000 was invested in insurtechs in the 2025, which is up 90% from where we ended last year, which is a fantastic statement of intent for the venture capitalists and private equity investors into the insurtech industry. Breaking that 1,300,000,000.0 down, over 60% was invested in AI insurtechs. Now bit of a pinch of salt with that. A lot of insurtechs are selling themselves as AI based ins urtechs, but it is definitely a growing growing trend as we can see not only in insurance, but wider than artificial intelligence is is the theme of 2024 and continues to be in '25. So those are the two real main facts.
Freddie:And I think stepping a bit deeper, you know, we are seeing a huge amount of corporate venture firms investing as well. So those are reinsurance and insurance firms who've got their own VC vehicles. I think that's a great testament to people investing in in the future of the innovation area within insurance in the London market.
Georgie:Okay. So bringing it into innovation then, what does that really look like in the London market today?
Freddie:It's a great question. Before I answer, I'm just gonna say a couple of things, I think, which need to be said before you could get to my answer. You know, firstly, all of my answers are gonna be about commercial insurance, not consumer insurance. That's my focus. That's one of the main focuses at at Gallagher Re.
Freddie:So a lot of these are gonna be about about complex risks within Lloyd's. And then I need to acknowledge two things. Firstly, Lloyd's London is the place of innovation and has been for its entire history. People often forget this. They talk about Lloyd's being slow when it comes to innovation, and that's not true.
Freddie:It was the first insurance policy, the first motor insurance policy, the first satellite insurance policy. And we see that today with the ICX risk code, which allows innovation up to 2% of stank capacity for syndicates, and also the Lloyd's Lab, which is a great incubator as well. So firstly, you know, Lloyd's is a great place for for innovation. Secondly, insurance is always going to be slower innovation because a fundamental nature of our industry is that we are risk averse. And we shouldn't shy away from that fact.
Freddie:We need to acknowledge that we are always gonna be slightly slower. You know, a core business is prudence. Insurance companies are assuming risk and they are pricing up that risk. We're always gonna be slower to adopt new trends because we have to be cautious. Secondly, we favor predictability over experimentation because we are using data, we are using pricing models to get to that risk point.
Freddie:And thirdly, we like long term policies and cycles. Right? We deal in twelve month insurance policies. We can go out to three years. These things means innovations are always going to be slightly slower to adopt.
Freddie:So I kinda wanted to make those two points to say, look. We do innovation
Georgie:Yeah.
Freddie:But we are always gonna be slightly slower doing it. But now to answer your question, how do we innovate? So I see three main models with the insurance market being whether that the London market or the Lloyd's market. Firstly, where you have innovation instilled within the entire company, where innovation is almost institutionalized. It's hard to do that with large organizations, but a lot of the insurtechs which feature in our insurtech report do that really well.
Freddie:So the likes of ManyPets and Marshmallow, the Unicorn UK insurtechs they're built with innovation at the basis of their business model and therefore they can continue to do that. The second way we see innovating in the London market is where the innovating they have an innovation team, but then innovation has to happen in separate p and l's in the product or in the geography. Now that's often the case in brokers and is very much the case at Gallagher Re. We have a innovation team or an innovation group of which I'm part of. But what we do is we help our brokers innovate, whether it be on new structures for clients or on new products and and new types of distribution.
Freddie:So we spend a lot of time with clients helping them innovate, but it sits within the broking team with us helping advising. Now the third way is often seen in Lloyd's syndicates. So that is where you have a stand alone innovation unit that has its own p and l, and that's really important. And the reason that's important is those p and l's are back to win and fail. And what I mean by that is you are ring fencing the innovation part from an underwriting point of view and protecting class of business underwriters so that everyone feels comfortable with innovation.
Freddie:Otherwise, what you have is you have underwriters who might not want to innovate because it might damage their loss ratios, but you also need to experiment. So syndicates where we're seeing that have done really well in the innovation space because they're able to pull on the expertise of their colleagues, but ring fence those wins and those losses with a separate entity which has been signed off from the board. And that's becoming increasingly popular in the London market, and I think it's a a great way of doing it if you're assuming risk.
Georgie:So can you share any standout examples of where you think innovation's worked really well in the London market?
Freddie:Greenlight Re, they've just recently separated out their innovation unit. They have a stand alone innovation unit where they invest and they underwrite within the same group.
Georgie:I have to say, I am Greenlight Re's biggest fan because I think they've absolutely nailed it.
Freddie:They're doing they're doing a a a fantastic job. But part of that is because they sit in this single pillar, and they can therefore underwrite and invest. And they have an underwriting led philosophy. If they don't like the risk, they're not gonna invest in it. And then you have companies like Chaucer and Apollo who are also doing fantastic things and are very public, whether, you know, frankly, they're being interviewed in our InsureTech report, or whether they're very public around the Lloyd's Lab in the fact that they are willing to innovate.
Freddie:But then a lot of even the more, you know, conservative old school syndicates, they're assuming InsureTech risks, and that's fantastic to see.
Georgie:A follow on question from that. Do you think that we shout about it enough then about the innovation that we are doing?
Freddie:I think we do within the innovation circle. Right. But is that enough? Do we need to shout about it in the more traditional circles where know, a lot of people, I think, in the London market, they have their line of business. That's what they concentrate on.
Freddie:Are they hearing about the innovations? Probably not. And we we probably need to do a better job, those of us who are in the innovation area, in shouting about successes as well.
Georgie:Because then I think it would break down that kind of or try to break down the stereotype that insurance is slow. They're all dinosaurs, and we don't know how to innovate, as you said, the the Yeah. When we do.
Freddie:But I think those of us in the industry know that that's not the case. And we just have to make sure and, you know, it goes back to my earlier point around the fact that we do have to be slower than fast tech
Georgie:Mhmm.
Freddie:Because of the nature of our business. So it's making people understand that that's why it's nothing to do with us not wanting to innovate. It's that we just have slower sales cycles because of the type of industry we're
Georgie:Okay. So I guess the report gives you great global insight into the trends. So which parts of the insurance value chain, such as underwriting, distribution, and claims, are you seeing have the most innovation right now?
Freddie:Yeah. So last year, our Insurtech report focused on the four key areas of a reinsurance business. So distribution, risk and underwriting, central business units, and claims. And the you know, after looking at it over 400 pages, where we got to was distribution and claims is where the most amount of innovation has happened and is happening. And what we thought or what we, you know, what we concluded was one of the reasons for that is that it's easier to show a return on capital invested for a claims innovation because you can look at it against your claim ratio or your fraud ratio.
Freddie:Same with distribution. You've invested in in a new type of distribution. Are you seeing those sales coming through that distribution channel? These things are very easily tracked now. What is harder is we've invested a huge amount of money in a new machine learning pricing algorithm.
Freddie:It's going to take two, three years to see if we are getting better loss ratios, and we might be getting better loss ratios or worse loss ratios, but there are so many other factors which affect that. Therefore, CFOs and and innovation leads are more willing to invest in distribution and claims. Now that will change because we've had a lot of that investment in those areas right now. And with the onset of artificial intelligence and all the steps we've been taking there, you're going to see much more effort put into the risk and underwriting because that is the largest percentage of a combined ratio is your loss ratio. So you are gonna need to invest there.
Freddie:So I think we've seen it in claims and distribution, and it's happening a lot more in risk. Now where is it happening in risk? Well, I'm sure everyone in your podcast or I know everyone in your podcast has has spoken about the issues with legacy systems, and that's where the big amount of work's being done at the moment. Right? You need to get your data in order, both your structured and your unstructured data so that you can then have these new types of innovation.
Freddie:So you need to spend a long time making sure that's in the correct way, and that is innovation. Right? You're taking different types of data, and and we're spending a lot of time doing this at Gallagher Re because it's gonna empower us to help our clients more if we know everything about them. So And we're spending a lot of of time and money on that because it's of crucial importance for the job we're doing for our clients, and I I expect everyone else is doing that at the moment. And then lastly, there is a an increased amount of innovation in, like, live exposure management and capital allocation in the complex risk space, especially in the specialty space.
Freddie:So if you can at a, you know, touch of a button to find out where you're exposed in the market when new world events happen, that's gonna put you in a much stronger position rather than a three month true up process, which might originally been happening. So we're seeing some some great success stories coming out. And and, you know, you mentioned, you know, old school underwriters earlier. You know, when they see the power of these tools, they're gonna completely understand because it's gonna allow them to allocate capital better, which is gonna be better for their returns and better for their profit. And that's what's gonna help drive that innovation.
Georgie:Let's hope so.
Freddie:Let's hope so.
Georgie:So as we mentioned, the insurance market has the perception of being slow to innovate, which rightly so because of regulations, etcetera, what are the priorities or success metrics for companies when they want to innovate? Are they looking at speed, customer experience, or is it cost saving?
Freddie:I'll answer that with two lenses. Firstly, looking at product. So when new products are brought to market, number one, the single most important thing is your loss ratio.
Georgie:Right.
Freddie:That is the single most important metric. And that seems very obvious to say because, of course, it's your loss ratio because it's if it's an unprofitable line, you're not gonna continue to write on it, but that has not been the case. What we saw in 2019, 2020, and 2021 was a huge amount of investment up to, you know, $1,415,000,000,000 in one year going into InsurTechs. And those generalist VCs and PE firms who didn't understand insurance as much as, you know, us within the industry know, they were looking at driving those companies forward. It was growth, growth, growth, growth.
Freddie:And you can't do that insurance without profitability. You have to have profitable underwriting because if you write a 150% loss ratio and you triple it every single year, you're not going to suddenly get there's no scale of economy with that in the same way there is a manufacturing. And so that business model of invest in a company, grow it as fast as possible to take market share doesn't work in in our industry as much as it doesn't everywhere else. And so your loss ratio is your number one metric, and we've lucky enough seen a reset in investing and insurtechs where investors know and understand that and don't incentivize growth over loss ratio anymore. I think that's a brilliant place to be.
Freddie:So insurtechs, especially those ones we work with at Gallegree and, you know, we work with trying to get them to market, and we spend a lot of time talking to our clients and talking to underwriters about their appetite and how that how they're seeing these in short text is you need to write a loss ratio which is going to be successful over the long term. Right? Forty, forty five, 50%, whatever it is. Because without that, your business doesn't survive. So number one, loss ratio.
Freddie:And then a long way below that, number two is your sales and distribution. So you can have the best idea in the world, and you can run at a 20% loss ratio. Fantastic. Reinsurance are gonna love that. But if you can't actually sell the product, then it's pointless.
Freddie:You're wasting capital allocation from a reinsurer's point of view. You're annoying the market for want of a better phrase. So you've gotta be at a, you know, do sales. And and one of the big concerns I I get from clients when we talk about, you know, innovation and short x, innovating MGAs is I really love the idea, Freddie. I wanna allocate 5,000,000 of of capacity to it.
Freddie:Are they gonna write that in year one? Because I have other opportunities where I'm guaranteed a return on on that capital allocation. And so what we spend a lot of time doing is what is your distribution channel? Once we've got the pricing and the loss ratio, what are your distribution channels? How are you going to distribute?
Freddie:Because you've got to be able to sell that product. Otherwise, you're you're gonna fail. So loss ratio and then sales. So that that's if you do a product. Now internally, it's two things, and and the first one applies to Gallagher Re as much as it applies to syndicates or or insurance companies, and that is processing time reduction.
Freddie:How can we take, you know, boardroom management and how do we get that quicker? And, you know, that's a very key metric when you're looking at internal processes.
Georgie:Why is no one doing it then?
Freddie:I think I I I think we are. I think we're all looking at it, and there are a number of great insurtechs who are looking at it. And it's just a complex question Mhmm. And it's not an easy fix. And, you know, we have a a brilliant program solutions team at Gallagher Re who who are working all over the world.
Freddie:You know? And they spend a lot of time doing border and management because that's the job. And so, you know, if we're looking at innovating that, a key metric is, well, can we reduce the amount of time? Because if we can reduce the amount of time an account manager spends on a boardroom management system, they can spend that getting to know the client better, which is only gonna help the client get better results Mhmm. Because we can innovate, find new structures, find new products.
Freddie:So I think it's gonna be brilliant because artificial intelligence is gonna help speed up that process. It's gonna free up that account manager's time to spend more with the client, more with the reinsurers, and that's a huge win for everyone. So yeah. So, you know, processing time reduction. Second, from an insurance point of view, quote speed.
Freddie:How quickly can they take a quote from a broker and turn that round? Because if it's two weeks, they probably sold it to someone else. Yeah. And this is very much insurance, right, not complex reinsurance. But that quote speed is really important and is a a key metric I know underwriters are now looking to.
Freddie:Can we get a high level yes or no very quickly? And as a broker, unbelievably important because I don't wanna spend three weeks thinking you might write this if it was a no from day one and you just didn't know that yet. So I think that's gonna be a a key area to look as well.
Georgie:So what are the biggest blockers to innovation in the London market?
Freddie:Yeah. So something I've touched on already, but it's worth making the point again. I think everyone knows this, legacy systems. You know, the cost and complexity of an overhaul and data availability and and data quality. So we all know that.
Freddie:We're all working on it. Well, it still should be set. That is there's a blocker. I think those who get there quickest, they're gonna have a real momentum behind them to actually then utilize the tools and the innovation technologies which are coming through. Second, a lack of standardization.
Freddie:In a previous role, I was a broker in the mortgage reinsurance world where all the data coming out of Freddie Mac and Fannie Mae in The US and all the private mortgage insurers was completely standardized. So we could build one tool, it could bring in all our information, and it meant turnaround times were immediately incredibly helpful. Now that took the Freddie Mac and Fannie Mae, the, you know, government sponsored entities to kind of say, these are the rules, and it was incredibly helpful. Now, you know, we're not gonna be able to standardize everything, but some form of standardization when it comes to data formats and datasets is only gonna help our industry. And thirdly, you know, slight culture of fear of getting it wrong.
Freddie:You know, when you innovate, things are gonna go wrong, so you just need to protect that downside. Whether that be going back to the first question about ring fencing an innovation team, but just kind of getting over that cultural fear of getting you know, what happens to me if this goes wrong? And companies who wanna innovate can make sure that that cultural fear isn't there. Now we do take risk on our balance sheets. Of course, I don't.
Freddie:I'm our insurance broker, but our clients do and and our reinsurers do. And so, you know, it is a harder question for them to answer because if they do get it wrong, it could be quite catastrophic. So how do you protect against that? Well, one of the points is you buy a whole account quota share to protect your portfolio your innovation portfolio. That's a great way of being able to write innovation and then also offsetting risk.
Freddie:So there are plenty of solutions out there, but it is still something I see where people are worried about writing and innovating MGA because what happens if it goes wrong? Well, you're writing a $2,000,000 line and your book's 200,000,000. How big is that downside? But I get it. I do understand it, and there's no quick answer to that.
Georgie:Okay. And then so if you look at the world right now and how fast everything is changing, AI and, you know, everyone talks about the the pace of what everything's of how everyone everything's moving. Do you think that the pace of innovation in the London market is fast enough to meet the rising customer expectations and the global competition?
Freddie:Yeah. This links back to my opening point around insurance is fundamentally risk averse. And so people coming in and a lot of founders are not insurance people, and they don't think we move fast enough. Mhmm. I understand their point.
Freddie:I sympathize because they're building a business, but I don't really think that's true. I think we are moving at a at a good pace. And history has shown that Lloyd's, especially, has innovated, has brought new products to market quickly and efficiently when it needs to be done. And I think that will continue, but we can't rest on that. We can't say, well, we've done it before, so we're gonna do it again.
Freddie:So internally with an insurance, there is a lot of innovation happening. But if you don't think you're innovating, well, you are actually now missing out, so you should be. And, you know, that's where, you know, people like us can help. You know, as a client, we can help you understand that, understand where to invest, understand where to, sorry, invest in terms of your technology. You know, we can under help you understand your innovation journey, but I don't think it's a case of we're not doing it fast enough, but we shouldn't rest on our laurels.
Freddie:But we should also try and counter that narrative that we don't. You know, Lloyd's London is a huge innovation success story. But because of its brand, which is with three hundred years, we're going to pay every claim, which we always have done, in a sense, the innovation's been lost because it needs to be an institution. So, you know, I try and flip that and say, look, it's three hundred years of innovation. That's the story of Lloyd's, not three hundred years of being a solid institution.
Freddie:So, you know, I think we've done a great job. And going back to what you said earlier around, do we need to shout more about it? I think we do between us in the innovation area, but also insurance should shout more about it because we're doing a good thing.
Georgie:Mhmm. Definitely. And besides reading the Gallagher Report, if there's one takeaway you'd want listeners to remember about innovation in the London market, what would it be?
Freddie:I'm gonna start sounding like a broken record, I think. But look, innovation is part of the DNA of Lloyd's. It always has been ever since its first policy, marine policy, you know, over three hundred years ago. So as an industry, we do innovate, and we need to all agree that and bang the drum that we're an innovating industry. However, we're also not the fastest because of all of the points we've discussed, and that's okay.
Freddie:Look, if there's one takeaway, we do innovate, shout about it, but let's keep doing it. Let's not rest on our laurels. Let's make sure we're still spending time writing new products, investing in new technologies, and let's continue that trend. We've had a brilliant over 300 history of innovating, and let's not stop now.
Georgie:Great. Well, thank you so much, Freddie, for joining me today, and thank you everybody who has listened and shown support for the podcast on LinkedIn. Please reach out to me via the link in the show notes or drop me a message on LinkedIn if there are any trends you would like me to uncover. Thank you.