I’m Paula Jarzabkowski; I’m a Professor of
Strategy at City University. I’ve been studying reinsurance markets which are really important
financial markets, because when the ‘big bang’ happens – the hurricane Sandys, the big tsunamis
that we’ve seen – that’s the market that pays out on all the insurance policies around the
world. The best way of thinking about it is that
it’s a laying-off service for heavy bets. A bookie, if he gets too many bets on a horse,
has to lay off the bets with other people. If you are an insurance company in a place
that either is very prone to windstorms or earthquakes or something, you will need to
lay off the risk of having a very severe problem. And the reinsurance industry is a method for
insurance companies of spreading the risk. So what we’re doing as ethnographers is to
really understand how judgement informs risk. Probably the average return always used to
be ten across the cycle. One of the things about reinsurance judgement
is that individual underwriters become very skilled in knowing a territory and exactly
the way that a risk may perform in that territory. As we began to discuss with the buyers, the
insurers themselves – particularly the big global buyers, what they wanted – we found
that they were changing the way they buy risk. So instead of buying local specific risks
to a territory, they were bundling risks and buying global risks. Once you bundle risk,
no individual can make those kinds of judgements. We think that’s very dangerous, we can show
how important the judgement is, on an everyday basis.
The reinsurance industry has undergone quite a bit of change because of the way in which
the capital markets have developed in the world, and I have a feeling that Paula was
able to hold up a very interesting mirror and bring some academic rigour to analysing
big trends. We provided actually something like 58 tailored
reports to firms, about what we saw in their firm. Most of them wanted at least a workshop
on that just to the senior managers. After that, some such as Hiscox and others asked
us to come back and do a further workshop with them.
She would embed herself for various periods into our teams, both here in London and in
Bermuda, and she was ‘fly on the wall’ – studying what went on. Then she would come and feed
back some of the things she had learnt in order to try and get comments from us about
whether we felt that they were true or not true; to validate things.And then we could
all go to feedback sessions where she would give aggregated feedback of what she’d discovered
within the industry which led up to her final report.
This research has been a moving feast; we ended up doing three projects for the industry.
In the first one we really just looked at the operational processes and how they can
improve business relationships, improve the efficiency of their processes, and also more
effectively apply the different types of judgements: the technical judgement and the more personal
or tacit understanding type judgement appropriately. Then it really moved on more to industry dynamics
as we became more global and we began to show them things like — you know — if you move
into different spaces, you might need new skills because you’re writing different kinds
of risks. I was attracted myself by her work and, in
fact, so attracted that we commissioned some additional work on the side thinking that
we would be able to steal a march on our competitors, and I was amused to read in Paula’s submission
for the prize, that in fact we were not alone in doing that, in fact around half of the
people had done that as well. Ethnography lets you see the little pieces
that go into judgement. The great thing about being an academic is you can do this type
of very close research with business, but you’re impartial. My findings don’t belong
to anyone except the scientific community. The really surprising thing for me is that
an academic has managed to change people’s thinking in an industry. The real test is,
well, do you change the way in which you do your business? And we have changed the way
in which we do our business thanks to it. We have restructured our organisation and
I think we will do further things, and certainly to find that the respect of an alpha male
industry has been earned by this feisty Australian is quite a compliment for her.
What we’ve found about reinsurance is so critical because reinsurance underpins insurance; if
we didn’t have insurance much of our economy would collapse. We’ve shown what is involved
in quality risk-taking so it helps improve the quality of their business portfolios,
their survival, their ability to be there to pay for tomorrow.