This article first appeared in Ivey Business Journal.
As the chief executive officer of Intact Financial Corporation, Charles Brindamour leads the largest property and casualty insurance provider in Canada and a leading provider of specialty insurance in North America. But unlike most insurance operations, his company doesn’t rely on investing premiums to make a profit. Intact makes money selling insurance. Period. Any revenue generated by investing premiums is used to expand and innovate.
After graduating Laval University with a degree in actuarial science, Brindamour joined Intact when it had a Dutch parent in 1992. Following a series of progressively senior roles within Intact and its former affiliates (in Canada and abroad), he was appointed CEO in 2008. Under his leadership, the company has become an independent and widely held market force with a reputation for leading digital transformation and pushing boundaries. With the largest database in the industry, along with significant investment in artificial intelligence, Intact deploys data mining to: improve efficiencies; find a better match between the price of policies and the cost of claims; identify trends affecting the insurance industry; and find new ways of improving customer service.
Known for being a quietly disruptive CEO, Brindamour manages with atypical leadership skills in listening and empathy, while deploying a business model unique for the sector. In this Ivey Business Journal interview, he talks with Ivey Professor Gerard Seijts, Executive Director of the Ian O. Ihnatowycz Institute for Leadership, about the disruptions in today’s business environment and the leadership skills needed to navigate them.
Gerard Seijts: What are the significant disruptions (technological, social, political, environmental, etc.) you see on the horizon that are likely to have wide-ranging effects on businesses and society?
Charles Brindamour: The theme of disruption may occupy space in the media now, but our organization has always been on its toes. We’re getting to be a decent size now, but we were small and viewed our size as a threat. We always felt like we were about to be disrupted and have had to think about established and new forms of competition for many years. So, we’ve always questioned what we do and whether we have the right leaders for where the organization needs to be today. We use this as a way to create hypervigilance in the organization and challenge ourselves on the quality of the experience we provide. There is no doubt that, in the past few years, technology has increased the speed of change and potential for disruption.
For the last five years, we’ve been focused on three trends: changing customer expectations, software, and data explosion and democratization.
If we leave technology aside, the biggest and most important change in my mind—and the one that we’ve been focused on—is customers’ expectations of their suppliers. There is a widening gap between what customers expect and what suppliers are providing. And that change has certainly accelerated in the past few years; it’s changing faster than the suppliers are changing. The widening gap between what customers expect and what we deliver is the big vulnerability in our business. And while we might think Intact offers a better experience than our peers, it’s still well short of customer expectation. The gap drives our customer-oriented agenda.
GS: Where does the increased customer expectation come from? And why now?
CB: Software has provided greater access to information, and greater social interaction has created a much higher sense of entitlement. Together, they are generating expectations of transparency, simplicity, fairness, and value for money. This is totally fair, but the expectations are rising dramatically.
Customers also have more levers they can use to pressure suppliers. Customers have more options and they feel more empowered to use them. For example, traditional media can be used to pressure suppliers to a greater extent than it could be 10 years ago, in part because traditional media is now enmeshed with social media.
This is where disruption is coming from for us. We’re crafting our objectives to meet our own customers’ expectations, as opposed to focusing on competitors or new forms of competition.
The second big trend is the change software is bringing to how people access information and, more importantly, to how they share expertise and experience.
Software is also changing our approach to goods and assets. Information technology is now a part of many products. For example, a small electronic device converts a car into a device that doesn’t just get us from one place to another, but also provides complex information about driver behaviour. That information can be used to price insurance policies, predict traffic patterns, and identify safety concerns.
Broadly, software is affecting how we live. This trend is driving our digital agenda.
The third big trend has to do with data, and this is a trend that is really important for us. We’ve outperformed the industry ROE by about 600 basis points in 10 years (close to 700 bps last year), and a third of our success is the competitive advantage we’ve generated with data management and risk selection. When a third of your competitive advantage comes from data, disruptive change in that area is pretty nerve-wracking.
Data generation is growing exponentially and is being democratized—easier to access and cheaper to store. There are new techniques to store, access, and treat data. Historically, what you would call data was structured information that was largely proprietary. Today, widely available data—generated in part by how people exchange information and use online resources—has created an explosion in unstructured data. Ninety per cent of the information or data available today has been created in the past two years. It’s now very inexpensive to store data—over 10 years, the cost of data storage has dropped by a factor of 30—so it’s possible to amass significant data resources.
That in itself doesn’t do much, unless you have techniques to treat the new sources. But we have been dealing with massive amounts of data historically—text, policy notes, and so on—so we already had data management skills. We were ready to take on non-proprietary, unstructured data, which is so much bigger. Machine learning is not new but having machine learning and deep learning to work with the explosion in data is relevant. It’s a game changer for us.
Climate change is another trend we’ve been tracking for about 10 years. Property insurance is now our most profitable line of business. It’s where we have the greatest growth. So, preparing for changes in weather patterns is very important in making our business sustainable.
Climate change is also where we are investing in society. Intact has a foundation that donates over CA$4 million annually to charitable foundations in two main areas—child poverty and climate change. With climate change, we want to invest in solutions that help us adapt to the changes in climate and we want to educate Canadians about the increasing impacts of climate change.
Another trend in our industry is global consolidation. It’s not technological disruption, but it changes the chessboard.
“Our strategy and strategic priorities address the opportunities we see in the big trends of change. You have to start with where the world is going—envision a result—then figure out what core skillsets and talent you need.”
GS: How do you set yourself up for success in an environment where there may or may not be a lot of disruption coming your way?
CB: I think there will be disruption coming our way and we’re rapidly preparing for it. Our strategy and strategic priorities address the opportunities we see in the big trends of change. You have to start with where the world is going—envision a result—then figure out what core skillsets and talent you need.
Disruption and preparing for disruption is, in my mind, a continuum. It’s not just buying or building the technology and investing in ventures, which I think is often what happens in many companies. It’s a continuum, which is what we’ve built in our company.
The first step is dealing with the basics of disruption, which can take place in the field—that is, challenge the status quo on basic processes. That doesn’t have to involve technology. Improve the basic customer service experience—service levels, phone management, the claims process, and so on. This is tactical and operational improvement, and this is where basic innovation can take place.
You must challenge the status quo every day and want to raise your game. Because the processes are distributed across almost 14,000 people in our organization, culture is key: the need to challenge the status quo has to be part of the culture as a key ingredient. So, we are deliberate in putting emphasis on that in our values and paying people for their ability to improve their game every day. It’s a key leadership attribute. We call it “challenge the status quo,” but it’s basically asking why. It’s not something adults do naturally.
The second step in the continuum, which is very important, is to invest in enabling technology and skills. This is not about mobile development, but about investing in agile back ends, investing in software engineering. It means shifting the culture of development. Instead of the underwriting experts telling the engineers what to code, we have to approach it as an underwriting problem and ask the engineers to help us solve it. It sounds like a simple switch, but it’s very difficult to execute. We’ve been trying to shift toward a software engineering culture on basic problems—and I’m not yet talking about disruptive stuff—and it’s very difficult to get the experts to handle the problem as opposed to starting with a solution to code.
Enabling technology and expertise has been a $200-million investment in back ends for us. Not very sexy, but now our back ends are modern, or will be modern within 18 months. Our systems now interface with other systems, and especially with brokers and clients. It’s made us more customer-driven. We’ve invested aggressively in design thinking, mobile engineering, and artificial intelligence. We haven’t changed the business model; we’ve just used enabling technology. This is massive.
You have to balance that investment with your performance and margins. You have to make a call about what resources you’ll take away from traditional areas and shift to the enabling technologies and skills you’ll need to innovate. That is a big difference between established businesses and start-ups: in our business, you have to be brave as a leader to make those calls.
The third step in the continuum is to invest in innovation itself. Now I’m talking about our design labs, digital labs, and artificial intelligence labs. We have a hundred people on the payroll involved in those innovative developments. They have monthly deliveries in design, digital, and AI. We also have 25 academics working on our problems, backed by the federal government, which is great.
To give you one example, we have a considerable data science group, internal as well as academics, working on a problem such as telematics. We’re collecting information on how our customers drive. Today, we have information from close to four billion kilometres driven, and for every second of driving we’re collecting 20 points of data. This is a new source of information we didn’t have. We thought we were master risk selectors but with machine learning, we found a variable that is 35 per cent more predictive than what we had found over 20 years working with our own structured data.
We have similar things happening in design. For example, we’re redefining how you can obtain a quote. Going from 40 questions to less than 10 reduces the time involved from 13 minutes to two. That’s real innovation. It combines AI and human-centred design, and obviously technology.
The fourth stage of the continuum is what I call research and venture. We focus top talent on research and development on key issues and opportunities across different horizons. That roadmap for where the world is going drives our investments into enabling resources, which is where the innovation is coming from, and is where these ventures are going. This is the continuum: research tells us what we need to look at, what we could do better, and that drives us back to the beginning and challenging the status quo.
GS: In light of these disruptions, what are the leadership requirements—the competencies, talents, and character dimensions—necessary for leaders to effect positive change in their organizations and in society?
CB: To shape our ability to go through that continuum as an organization, we have a number of key attributes we need from our leaders.
The number-one attribute we seek is the ability to challenge the status quo and ask why. It sounds simple, but it is not.
People do not naturally challenge established boundaries. People also get stuck in their contexts; for example, they may fail to see how our relationship with brokers is different in Western Canada than it is in Ontario. You’ve gotta challenge those basic premises! It doesn’t happen naturally. So, challenging the status quo and asking why is an important leadership attribute.
Another critical leadership attribute is curiosity. A number of the investments we’ve made started with leaders going out of their day-to-day to understand, for example, what machine learning is all about, or what agile development is all about. They have the fortitude, appetite, and energy to go and sit with an expert in the field. To visit a start-up. To read a book on it. It’s tough to do when you have a big job, but if you don’t do it, you can’t move the organization. Curiosity is critical. When you think about the continuum and where innovation takes place, curiosity is key, in my mind.
The third attribute in a big shop, I think, is to be able to drive energy and optimism around change. So, a can-do attitude and being able to energize the troops around change. It’s different in an established enterprise than with a start-up, where everybody comes on board for change. We view that ability as being very important for leadership.
I think the fourth attribute is being brave, because if you really want to prepare your organization, you need to make some trade-offs. If you shift resources in a granular fashion, you’re not going to get there, but making bold shifts in your resources are tough calls to make: you have to engage your leaders and you have to assess the risk. Big projects can fail, in which case you write off your investment. But that then becomes public and touches your credibility. Not all leaders are brave enough to make those kinds of calls.
If we choose to invest a few hundred million in enabling technologies, we stop doing smaller, more tactical things. For example, we under-invested in customer interfaces for a few years because we needed to make sure, first, that the back end was enabled to support changes at the interface. The upside is, because we were able to redirect resources, we now have a lower cost base and we’re 18 months away from completing those enabling technologies. In two years, we can massively increase that investment back to customer interface. But that was a tough call to make.
When making trade-offs, it is also important to find the right balance between stability and dynamism. It’s hard to do. We have six million customers; the trains need to run on time while we’re transforming the organization. That is not as much about being brave as having judgment and the empathy to find that right balance.
GS: Reflecting on your own organization in a time of disruption, how do you shape an agenda for talent development? What are the current approaches to leadership development that you believe are most effective?
CB: Well, it starts with choosing leaders who have a can-do attitude and are excited themselves by change. Our succession-planning model is built on choosing leaders who are thrilled with change as opposed to burdened by it. We’re really focused on our 1,500 leaders in the field. We spend a lot of time on these people because they’re the ones creating the excitement. Seeing what needs to be changed and the reasons for making change are with them. We try to choose properly and select people with can-do attitudes. The result is we have a lot of keeners, and that is good.
We also have a very focused list of strategic priorities and we define success very clearly. That helps people anchor to what is really important and not feel completely overwhelmed.
Leaders are transient. For example, in the Canadian industrial complex, it’s not unusual to see CEOs change every three to five years. It’s hard to have a clear sense of what you’re good at and what your priorities are when there is a new leader every three years. It’s also tough to transform over a short period of time; if transformation includes cultural change, it takes years. To be effective, organizations need to understand what their core competency is so they know where to invest. We’ve known for a long time that one of our advantages is data management, and we had identified that as a strategic priority. So, when people started to talk about artificial intelligence and neural networks, we knew we had to be on it because it goes straight to our heart.
Still, people will feel overwhelmed at times, so another key to creating enthusiasm around change is spending a lot of time explaining why the change is taking place. We use a lot of different platforms to communicate with people and with managers to drive their ability to explain change.
And incenting. It’s basic, but it works. We have about 10 strategic priorities and leaders of the organization are largely measured by how we do as a firm in beating our competitors and delivering on the priorities.
Another key incentive—one of Intact’s key objectives—is to be a best-employer company. When you want to create positive wind around change, you have to be close to the employees. Leaders need to be empathetic to what people are going through. A high-engagement environment like the one I think we have makes it possible for people to get excited by success. And success requires change. That’s how we communicate with the organization.
Leadership attributes are key, but leadership attributes take a long time to develop. So, we also have a well-established succession-planning process. Each key person has a number of potential successors. It’s tricky to have a massive internal succession pipeline and transform, so going back to leadership attributes, you need people who are curious and challenge the status quo. We’re exposing them to research and we’ve tweaked the emphasis of who we promote based on their attributes—their curiosity and the ability to question the status quo. We also rotate people. A quarter of the pool change roles every 18 months. We move them between functions and so on. We hope core leadership attributes are well engrained in these people so that as we move them around, they’ll continue to challenge the status quo.
GS: What role should the business school play in light of the disruptions we have discussed? What should we be doing to educate leaders who can create positive change in this environment?
CB: I’m not as close to business schools as others perhaps, but as an organization, we are a consumer of your product, so to speak—your graduates. We want people who went to the business school because they were curious, as opposed to wanting a promotion, and who have an ability to challenge the status quo. I don’t know how you recruit or select students, but I would over-index those kinds of skills. That is one thing.
A gap in the business school, I think, is the process of learning not as an individual or a leader, but as an organization. There may be a lot of literature on it, but this is a tough challenge: how do you orchestrate learning across 14,000 people in a world where skillsets need to change? We’re grappling with that at the moment, and it is an area where business schools could contribute to a greater extent. It’s not leadership learning, but organizational learning.
I would also probably zoom in on the top key trends. Some trends come and go, but there are a few key persistent trends. Climate change is a key trend that is undebatable in my mind. Also, AI and design thinking. I don’t know to what extent they are an integral part of the curriculum, but I think they have to be. The disruptors are not software geniuses; they are the ones who see the gap between what is and what is expected and provide tremendous design ideas. Often, the technology in the back is secondary to the whole operation. IT is all about enabling us to be super-customer-driven, and using human-centred design to crash the boundaries of traditional thinking is what gets us there.
I’d integrate a number of those skills in the curriculum explicitly, as opposed to referring to them as sources of disruption. In the past, when Asia was the big area of focus for most companies, schools partnered with Asian schools. Now there is a need for partnership with non-traditional educational organizations, such as design schools. I would establish formal partnerships with schools like that.
The collaboration is not just across universities. A clear opportunity in my mind is for business schools to get involved to a greater extent in shaping the public agenda. We hear from individuals from time to time, but I think business schools have an important role at the forefront of thought. It seems to me that business schools could play a much bigger role in shaping the public agenda. It is an amazing opportunity to influence how we prepare Canada for disruption—and to promote your school for the exercise.