A Risk and Insurance Christmas Carol

Modern Ebenezer Scrooge

In Charles Dickens’ classic, A Christmas Carol, we join a forlorn Ebenezer Scrooge on a journey across his past, present and future. This timeless tale shows us that a lack of perspective, perception and reflection can set us, and those around us, on course for an unpleasant future.

Imagine our friend Ebenezer Scrooge is really a financial institution’s risk and insurance manager, firmly set in his ways and supremely confident that his risk models, underwriting tools, pricing guidelines and coverage terms are more than adequate. He pays little or no attention to the wider pressures impacting the financial services sector, the insurance industry or his firm.

On this fateful eve, Scrooge has once again refused to join his colleagues and associates at the festive company Christmas party and instead has settled in his seat for the long train ride home. As he drifts off to sleep he is visited by the “Ghost of Past Claims” and the “Ghost of Present Coverage,” who take him on a vivid career excursion in which he relives the many successes and failures he and his firm have experienced.

Ghost of Renewals Yet to Come

Still asleep, Scrooge fidgets uncomfortably in his train seat as he awaits his third and final spirit; the “Ghost of Renewals Yet to Come.” Suddenly he is grabbed by a bony hand and dragged on a spectral journey to one possible future. Scrooge finds himself in his firm’s boardroom, listening to very tense conversations between the C-Suite, risk managers, insurance brokers and underwriters. They all seem to be very focused on things that were once only talked about at conferences, written up in blogs or “pitched” by risk advisors and consultants. As Scrooge moves through the scene, he catches whispers of “cyber-attack… system collapsed,” “disintermediation… segmentation,” “crypto-currency… contactless payments.

Initially confused as to why there is such concern amongst the board, Scrooge slowly learns that his firm has failed to respond to the impact of technology on the financial sector and is now on the verge of collapse with an insurance program that is clearly outdated.

Scrooge listens in increasing despair as a man, who appears to be from the regulator, asks the CEO to explain why the firm had not properly managed its risks: “Because Ebenezer was a risk manager of the past, not of the future” responds the CEO, and the room murmurs in agreement as the failure of the bank is placed squarely at Scrooge’s feet. Scrooge realizes that he has been failing to properly respond to the insurance and risk problems of tomorrow. He has missed or ignored important signs that would have positioned him, and his firm, to better respond to the trends and risks shaping the financial sector.

How Scrooge Should Change His Ways

As the image of his collapsing firm fades to black, Scrooge thinks hard about the financial industry risks that should have shaped his thinking:

Financial and Technological Convergence

The convergence of financial and digital innovation presents risk professionals with great challenge and great opportunity. We can, of course, harness this convergence to create better risk management assessment, communications and administrative solutions. We can tap into new and more creative sources of risk capital to build out the types of impactful and substantive risk financing alternatives required by our most sophisticated customers. But, we need to be equally attentive to the challenges of convergence. Where technology and finance meet, a fertile ground for error, cyber crime, espionage and potential “acts of war” has developed. Today’s “product line loss scenarios” will be completely overshadowed by the expertise and imagination of those wishing to disrupt commerce, financial markets and our communications channels. Risk managers, insurance brokers and underwriters working in concert with regulatory bodies will together develop potential solutions to these new and ever evolving risks.

Global Talent and Evolving Workforce

Future leaders will lead by example, driving cultural change and engaging in high ethical and compliance standards. Engagement with clients will be direct and instant, encompassing new forms of social media to manage new risks, such as reputation management. The future workforce will be diverse, dispersed, outsourced, mobile and digitally connected, ready to disrupt accepted approaches to workplace and human capital risk management. As traditional “command and control” workplace hierarchies are replaced by global and mobile virtual teams who may rarely meet in person but remain closely connected and in constant and immediate communication, risk professionals need to re-imagine their approach to managing employers’ liability, employment liability, D&O coverage. fidelity, safety, worker’s compensation, benefits and recognition and rewards programs.

Regulatory Revolution

Regulators will work in increasing unity to create global standards. Regulatory compliance will become a byword for “resilience”, key to a financial institution’s reputation and necessary to attract capital and retain clients. The regulatory environment will require all risk professionals to adapt to the reality that assumptions of acceptable assumable risks will be filtered through a very complex mesh of regulatory interpretation. Insurance brokers, armed with a deep understanding of our clients’ businesses and access to the markets for their risks, are in the perfect position to help their clients manage evolving regulatory pressures to business and assist underwriters in creating more responsive insurance products.

Product and Process Proliferation

Financial institutions are masters of process and product innovation. Millennials are demanding new ways to interact with their banks and this disintermediation comes with unanticipated risk and regulatory challenges. Whether it is contactless payments, micro-banking programs or new synthetic investment vehicles, the risk dynamic will change. Product innovation will likely always outstrip regulation – future success will be contingent on solid product R&D, sound regulatory knowledge and positive relationships with regulators.

Ebenezer wakes up with a start as he hears the conductor announce the train is at his station. As he walks to his home, wiping the cold sweat from his forehead, he is haunted by the vague memories of a dream about renewals yet to come. He enters the warmth of his home, settles into his chair and begins to write his personal objectives for the coming year, entitled “Risk Manager of the Future.”


This post was written with Jagdev Kenth, Director of Risk & Regulatory Strategy in Willis’ Financial Institutions Group, where he advises clients about financial regulation, emerging risks and trends.

About Michael Golden

Michael Golden  is Chief Operating Officer and Global Sales Leader for Willis' Technology, Media and Telecommunica…
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