Walking a tightrope: Verisk’s new CEO on opportunities and ‘pain points’

To create value for shareholders, the key is not about thinking about shareholders. Instead, a company should focus first on creating value for clients and employees. While it’s not always easy, do that, and the rest will flow.

That is the view of Lee Shavel, the new chief executive officer of data analytics and risk company Verisk. He said that ethos was once explained to him by a mentor. It has resonated with him since and now informs the company’s future growth strategy.

Shavel believes that logic can be more important to the operational and financial success of a company than the traditional value pillars of seeking high returns and looking to achieve maximum profits.

“I was once given the advice that creating value for shareholders is a derivative of two things: creating value for your clients and creating value for your employees,” he said. “This really resonated with me.

“If we achieve those two things, I’m very comfortable that my traditional shareholder value components of revenue growth and margin expansion and good returns will be easily achieved.”

Having spent the bulk of his more than 30-year career in financial services, initially as an investment banker, then working with the electronic trading and exchange industry and eventually becoming the chief financial officer of Nasdaq, Shavel has helped a number of companies make key decisions on acquisitions, capital raisings and initial public offerings.

These experiences, he said, have enabled him to “move from that outside perspective of advising companies to being on the inside and appreciating the financial challenges they faced”.

Since joining Verisk five years ago as CFO and group president, his focus has been on the effective allocation of capital and conducting a review of the businesses to identify value-creating opportunities.

He discussed the company’s plans and the outlook for the market with Intelligentinsurer.com, the digital hub for interviews, debates and panel discussions.

Priorities

Shavel has wasted no time in plotting the strategic priorities for Verisk after being appointed its chief executive at the start of this year. He fully transitioned to the role on May 25, and describes his leadership style as that of a “musician who believes in listening, understanding and working collaboratively” to perform well as a group.

“One ambition I have for Verisk is that we think about our client needs and our industry solution needs to make certain that we are adding and creating value for the insurance industry, which faces a number of technological, environmental, regulatory and consumer challenges right now,” he said.

On the employee side, Shavel seeks to create an environment that “attracts the best talent and people are excited to be participating in working with others”.

“We have spent a lot of time thinking about how we create as exciting and attractive an environment as possible so that we have people who are motivated and feel good about what we want to accomplish.”

Verisk, Shavel acknowledges, sits in a “very centralised and facilitating role” in the insurance industry, so its objective is to “continue to find ways to improve the products that we have as well as address broader and emerging issues the sector is confronting”.

The company is investing in telematics, gathering data on cyber risk, analysing social media data in a life insurance context and investing in marketing technology. Verisk is also building a cloud architecture to help facilitate greater connectivity, access and mobility of data into marketplaces.

Verisk’s expansion into the UK and the broader European market reflects its view of insurance as a “global growth industry”, according to Shavel, who alludes to a strategic shift towards becoming a broader technology partner to the industry from historically being a property/casualty data and analytics-oriented business.

“We are seeing new opportunities to serve the life insurance industry,” he added.

Inflation ‘pain points’

Two years of the COVID-19 pandemic, record-breaking catastrophe activity and the ongoing war in Ukraine have created a lot of macroeconomic and political uncertainty, adding a variety of new and interconnected risks to an already challenging market. But the good news, for Verisk, is that such activity has resulted in more demand for data, information and integration to help improve decision-making and modernise the market as a whole.

“Social media are changing the way people interact and the way people consume. Digitisation of those products is influencing how people buy and utilise insurance. So now we have an environment that is creating change, which we are working to help our clients navigate,” Shavel said.

“Traditional insurers can be very effective competitors in this environment because of their scale, data and their expertise, but they need the toolsets and technology to help them do that more effectively.

“On a global basis the pandemic has created a more remote environment where the connectivity element has become more important and valuable, and has accelerated some of the industry transition to more automation of functions so that companies can utilise information and data as well as their human resources in the areas of greater complexity and where they can add more value.”

Despite the opportunity, there is a lot of uncertainty and anxiety about the tightrope insurers have to walk to minimise the pain of inflation, which is rising steadily across the globe thanks to supply chain issues.

“The first pain point on the minds of insurance industry leaders I’ve spoken to is the impact of inflation in a variety of areas,” Shavel confessed.

“The impact of inflation aggravated by the supply chain restrictions from the pandemic is increasing the expected loss costs in auto, motor, home repairs and in other property damage and liability,” he warned.

As a result, Verisk is putting significant efforts in helping insurers accurately determine the impact of inflation using real-time assessments of materials costs and labour costs and how they are impacting their actual losses. The same applies to finding ways to improve products that exist but don’t fully address the broader and emerging issues that insurers face.

“The other element with the pandemic is the high levels of attrition within the business, the competitiveness from compensation,” Shavel said. “Insurance is still a very human-driven business on the cost side. The emphasis around how we can automate more and use data to use those human resources as effectively and efficiently as possible is another key area.”

Finally, from a technological standpoint, the pace and high level of change, which entails new risks, automated driving and more connectivity from devices and information, have created “overwhelming” complexities for many players in the industry, he pointed out.

“There are a lot of participants within that insurance market who feel as though there’s a greater need for modernisation, digitisation and improvements in technological efficiency,” Shavel said.

“We would like to reach out and pull together groups of CEOs to understand the technological challenges they have, and develop a dialogue within the industry, to potentially serve as an additional advocate on the regulatory side to address the adoption of a lot of technologies,” he concluded.