003 CIOAPR07

Few corporate interviews begin with big game hunting and feng shui – but Robert Hiscox is an unusual man. Just back from holiday in South Africa, he is keen to discuss the plethora of buffalo in the country.

Minutes later, we are in full swing on the ancient Chinese art of placement and arrangement, after he comments that I have chosen the ‘best’ seat at the round table in his City office. He is passionate about the benefits of feng shui – likes its combination of intense practicality and common sense.

“If anybody argues about it, I say, ‘go and sit down’ – and they always choose that seat,” he smiles.

"I’m a wartime general. I take no prisoners. But I’m hopeless in peacetime"

Robert Hiscox, CEO and chairman, Hiscox

Art collector, business-man and father of five sons, Robert Hiscox is known, he says, as a ‘difficult’ man. “I am critical – I see faults and how we can improve things,” he says. “I’m a driven man. I like everything to be done well – and I am never satisfied.”
At his 30th anniversary with the company last year, affectionate speeches were made about Hiscox, but the word ‘difficult’ kept coming up. When it was his turn to speak, Hiscox pointed out that a number of his senior management team had been with the company for many years – some for decades. “What keeps you hanging around?” he asked them. Querulous he may be, but he clearly commands loyalty.

Father’s legacy

Robert Hiscox was destined for the world of insurance. His father, Ralph, joined the Roberts agency at Lloyd’s in 1938 and started Syndicate 33, writing non-marine insurance. In 1946, Ralph Hiscox and the Roberts family formed the Roberts & Hiscox partnership, as member’s agent and managing agent.

On his graduation from Cambridge University in 1964, Hiscox joined a small insurance broker as a trainee underwriter. A year later, aged 22, he joined Roberts & Hiscox, as an underwriter for Syndicate 33, specialising in fine art and personal accident insurance. “I joined my father thinking the business could be run a lot better – and we clashed,” says Hiscox. “He said it would take years to learn: I thought it would take six weeks. I was deemed arrogant but I think I was just confident.” Hiscox’s first day at Lloyd’s was his best moment. “I was stepping into life,” he says. It also coloured his business career: he realised the most important thing in business is who you employ. “I wasn’t thinking about external competition that day – I was thinking of the other syndicates I was up against,” he explains. “I thought, ‘there’s a lot of business here – and I’m going to get it’. I realised, immediately, I would do that if I employed the best people.”

In 1965, Ralph Hiscox was elected chairman of Lloyd’s. “He was a good man, an honest man,” says Hiscox. “He was not commercial but he loved committees – completely the opposite of me.” He has inherited his father’s guiding principle. “I would want honesty as a reputation to leave,” he says. “I like the fact that we pay claims fairly.”

The younger man had ambition and when his father died in 1970, Hiscox sought control of the business. “I was determined to make changes,” he says. After a “bloodless coup”, he became senior partner, aged 27 years, with 10 employees.

Turning point

He made the best decision of his business career in 1973, he says, when he employed Nicholas Thomson, as his deputy and underwriter. “Behind the public face of every successful business-man, there is an ‘engine room’ – a man who’s doing the work and underpinning the company. I absolutely relied on Nick to ensure the figures were right.” Thomson remains as non-executive director, having left the company in 2004.

Despite his love of agility, Hiscox was prepared to put down firm foundations. “I have always seen building this company as a marathon, not a sprint,” he says. “Even now, I have the feeling that we have just got started.”

"A good underwriter knows a good or bad risk. The role of IT is to clarify that"

Andrew Turner, IT director, Hiscox

Today, Hiscox is a FTSE 250 company with offices in 10 countries. It has a market capitalisation of £880 million, an income of £1.2 billion and 650 employees.
The company was quoted on AIM in 1993. In 1997, it branched out of Lloyd’s and was fully quoted on the London Stock Exchange.

The group is known as a specialist insurer, with three main underwriting areas. Hiscox Global Markets underwrites large, complex and mainly international business through the Lloyd’s market, which accounts for 60 per cent of overall business. “Geographically, we can write anywhere in the world through Lloyd’s,” he says.

Hiscox International has offshore operations in Bermuda, Guernsey and the US. In order to increase its reinsurance and retail business, the company raised £170m through a rights issue, to create Hiscox Bermuda in December 2005. “Bermuda is intending to write £200m worth of business this year,” says Hiscox.

The big apple

In 2006, the group opened Hiscox in New York, to focus on specialist retail products such as professional indemnity insurance for small and medium-sized business.
“We wanted to open an office with small, well-spread, non-catastrophe business, as a balance to our art and high net wort h business,” explains Hiscox. “Retail is writing risk by risk: it takes a long time but it’s solid when it grows.”

UK and European policies up to £10m are underwritten through Hiscox’s retail business, Hiscox Insurance Company. “Where we can underwrite 100 per cent of the risk, we might as well be outside Lloyd’s,” explains Hiscox.

The company’s specialist insurance to high net worth individuals accounts for 25 per cent turnover and is growing steadily.

The group took a battering from the four US hurricanes of 2005, however. There were 400 catastrophic natural and man-made events officially recorded that year, with an estimated $83 billion insured damage. Hiscox’s results for the year-end, 31st December 2005, saw it record a £165m net loss as a result, with pre-tax profits down to £70.2m from £89.5m the year before.

Pirate mentality

Hiscox likes the word ‘buccaneer’ and has fond memories of his early days as a small syndicate. “We were up against some very big competitors,” he says. “I immensely enjoyed going up against them. We were nimble and light – able to zip round and send torpedoes into the big cruisers with their fixed guns. We were hard and pretty ruthless when we wanted something.”

Strategy still consumes his interest: how and where the company grows. “I think we’ve got a very good balance at the moment,” says Hiscox.

The challenge, he admits, is to keep his growing company fast on its feet. “Bigger becomes ossification, bureaucracy and treacle-like decision-making. People get so turgid at meetings – I think all committee meetings should take place standing up.” He is aware that the lines of communication can get muddied.

“The challenge is trying to stop head office telling people in the field to do things, and that requires discipline,” says Hiscox. “It’s the old saying, ‘trust, but verify’.”

Antiquated system

Robert Hiscox has been a keen proponent of IT in the insurance industry since his father, Ralph Hiscox, put in a central accounting system to Lloyd’s in the late 1950s. “He said it was the finest bit of progress Lloyds had ever achieved,” says Hiscox. Since then, however, technological progress has been slow. Hiscox is not proud of the insurance industry’s reluctance to embrace technology – especially Lloyd’s. “Risk assessment operates in the same manner as it did 40 years ago, as a paper-based system,” he says.
“A broker visits Lloyd’s, a piece of paper in hand and persuades an underwriter to do a deal. The underwriter sits at Lloyd’s without a modelling team around him, without his researchers around him – apart from his computer screen. It’s a wonderfully old-fashioned system and the brokers love it – bags of paper around and people filling in proposal forms by hand.”
Hiscox’s new IT director, Andrew Turner, has worked in the insurance industry for seven years. “There is a lot of focus on personal relationships, particularly at Lloyd’s and ‘big ticket’ risk business,” he says.

Turner believes a healthy dialogue between the brokers, agents – such as Hiscox – and the customer, is still vitally important. “Millions of pounds worth of risk is being underwritten,” he says.

Technology inroads

While IT was not perceived as having a huge role to play in the insurance industry in the past, Turner believes most people now accept the ‘appropriate’ use of technology.

“Technology does not replace personal interaction but it does make it easier to track back the risk and increase the through-put,” he says. “A good underwriter knows a good or bad risk. The role of IT is to clarify that.”

He would like to see Lloyd’s embrace the technology utilised by Hiscox Bermuda, founded in 2005 to write a mixture of worldwide reinsurance and group retail business.
Away from the constraints of the Lloyd’s market, Hiscox Bermuda operates electronically.

“I love the idea of computers doing the underwriting while I am asleep,” he says.
Hiscox Bermuda receives details of the risk electronically. The office assesses it with its modelling team and goes back to the broker with a fast, reasoned argument. “You are able to assess the risk with much more expertise than talking with someone at Lloyd’s with half the information,” says Hiscox. The future, he thinks, is for brokers to partner three to four suppliers and to set in some low cost IT.

“At the moment insurance is a people-intensive, fragmented industry with high costs,” he says. He believes electronic trading would save Lloyd’s brokers “a fortune” in costs but admits the move would involve laying off about 40 per cent of the London market brokers.
This year promises substantial investment for Turner and his IT team of 80 people. “There is a strong desire at Hiscox to recognise the role that technology plays in giving the company competitive advantage,” he says.

Strengthening relationships

A key objective at Hiscox this year is simplification. One aspect is to improve functionality on its website to strengthen customer relationships and, for the brokers, to provide more electronic routes.

“We want people to know that it is easy to transact with Hiscox,” says Turner. This will be backed up by a number of system replacements this year, which aim to streamline Hiscox’s application portfolio. “Getting several systems down to one will provide big cost benefits in maintenance,” says Turner.

A major project this year is the Hiscox Underwriting Tool (HUT). Currently at the prototype stage, HUT aims to find easier ways for Hiscox’s internal customers to access the system. “It’s a ‘window on the world’,” says Turner. “It will provide a web front-end that mirrors the way the high street banks operate their internet services.”

The hinterland: patron of the arts

Since the age of 16, Robert Hiscox has been a passionate collector of modern art. Not surprisingly, the company is one of the world’s leading fine art insurers.

At his Wiltshire country house, Hiscox is in the process of building a warehouse to house part of his collection. “I love owning paintings and looking at them,” he says. “I like the idea of going to my warehouse on a Saturday morning, sitting in a director’s chair and enjoying my art.” Based in the City of London, the company’s state-of-the-art headquarters is a stone’s throw from Swiss Re’s ‘Gherkin’ and 50 yards across the street from Lloyd’s. Hiscox’s glass-fronted foyer is hung with art and beside it is the Hiscox Art Café, which holds regular exhibitions. Robert Hiscox’s huge collection of paintings is spread through the company’s global offices, as well as his homes and those of his sons.

In February 2005, he launched Hiscox Art Projects as an exhibition space for contemporary art in London. He enjoys spotting and encouraging emerging talent and has a large collection of young British artists. He speaks witheringly, however, of the government quango that writes to him, regularly urging his help in getting business interested in the arts. “Done that” he says. Hiscox likes contemporary art because it is happening around him. “I know many of the artists,” he says, pointing to a favourite John Virtue painting on the wall of his office. “It’s wonderful to be involved.”

Contemporary art is sexy, he thinks. “Values are astronomical because people want to buy it and there is a lot of money in the UK. They don’t want old stuff – it’s like brown furniture,” he says.

The key for HUT, he believes, is simplicity and accessibility. “We are removing the complexity by building a simple front end to the system,” says Turner. “Technology has gone through an evolution: there has been a trend towards providing more and more functionality. Now, people are getting tired of learning to use demanding bespoke technology on items such as mobile phones: they want simple interfaces.

The challenge for today’s CIO, believes Turner, is to give the business what it needs to do the job, but at the same time, make the technology simpler for people to use. “The best is yet to come,” he says.

As chairman of Lloyd’s during the crisis years of 1993-1995, Hiscox was, “pretty effective. I’m a wartime general. I take no prisoners,” he says. “But I’m hopeless in peacetime,” he admits.

If Hiscox set up a business school, he would allocate to cash-flow only a single day of teaching. “The next three years I’d teach people how to judge character: the HR element is the most important thing in business,” he says. Hiscox has two overriding fears in his business life. The first is when someone says to him, ‘Robert, can I have a word with you?’ “It means they are going to leave,” he says.

The second is a lack of intuition in the people around him – or losing his own intuition.

Gut instinct

“Intuition has been a very strong influence in my life,” he says. “I have watched underwriters at Lloyd’s writing risks that turned out to be wrong. Technology is a recent phenomenon: we had no computers adding up risks, no aggregate liabilities in the early days. Decisions were made by intuition – sometimes by the seat of our pants. It was a question of balancing, ‘do I feel this is a good one or a bad one?’ And, also, where we should go with the business?” Hiscox has yet to find an analytical tool that surpasses his gut instinct, he says. Part of the business lost money in 1998/1999, which he puts down to the hiring of the “wrong” type of staff. “We employed these clever people with 2.1 degrees and above,” he says. “They used logic and academic thought and not their intuition. Hopeless. Now we have the right balance – and fantastic technology to help.” He loves underwriting. “I am not a gambler but you get hooked on it,” he says. “It’s the constant assessment of risk – a test of your judgment. It’s about balancing the books.”

Stolen moments

Hiscox’s biggest art claim was for two J M Turner paintings stolen from the Tate Gallery in 1991. The company paid out the £24m insurance claim but the Tate could not spend the money in case the paintings were found.

Robert Hiscox led a negotiation with the Paymaster General, Geoffrey Robinson. They agreed that the Tate would pay back £12m. If the paintings were returned within a year, Hiscox would reduce this to £8m.

To the best of Hiscox’s knowledge, the paintings were in the hands of Serbian bandits.

“We were not confident they would be found in good condition, if at all,” says Hiscox. The year duly passed and the Tate paid back £8m. Then, five years ago the paintings were found – through agents of the Tate).

Fortuitously, the Tate had £16m to spend and its paintings were returned.

Hiscox has strong views on the lack of resources available to the police in the hunt for stolen goods.

He sees Britain as an increasingly lawless land and believes the police are largely ineffective against theft. “They are hidebound with rules and regulations, to the point where anything outside the police force has no validity,” says Hiscox.

One answer, he thinks, would be for the insurance industry to finance the police to track down thieves. “We are highly motivated to find things. In non-violent theft and fraud cases, I think the insurance industry would do a much better job. We have resources the police haven’t got. We listen to informers, which is how you find out where things are.”