The insurance industry can learn from October's Blackberry systems failure and Gerald Ratner's famous gaffe in 1991.
Imagine what it felt like in the Canadian boardroom of Research In Motion, makers of Blackberry smartphones, when it was told the news: "One of our three mission critical data centres has crashed. A few million customers may be a little unhappy." I can only guess.
Silence, fear and the cold clammy hand of fate no doubt descended as they realised that armies of ‘crackberry' addicts who demand instant access to messages and data were left with mere silence.
A couple of days later the poor Blackberry European MD stood outside his Slough HQ (undoubtedly after some intense media training). A spirited attempt ensued, re-assuring his dwindling customers: "All is now well. The backlog will be processed shortly. Trust me."
It reminded me of the hapless Gerald Ratner in his "Because it's total crap" moment that wiped £500m off the value of his company (and he is not alone). It is, of course, possible to recover, as Perrier will testify, even if it's been proven you have the carcinogen benzene in your pure spring water!
Indeed, I too have stood alongside my chief executive as we looked aghast at a red hot power switch. A switch that fed an entire data centre serving over 4000 real-time users. The fright on his face is etched in my memory. This single point of failure threatened a long established reputation.
Fortunately, quick, decisive action and excellent communication averted a disaster (it was Friday lunchtime, so many of the 4000 were out enjoying themselves), thank heavens.
We in the insurance world must heed the warning. Data, and its immediacy, is critical to the modern insurance world. Solvency II has placed operational risk on the agenda, but how many insurance boards are paying lip-service to the risk model?
I'm certain that if this were truly vivid in their thinking we would be seeing greater investment in contemporary technology to address single points of failure and legacy.
For example I know of one Australian insurer running its entire business on systems supported by a team whose average age is 54 (yes, average). Do I have any volunteers to be on their board in 10 years' time? I didn't think so.
Phil Race is managing director of Agencyport Software Europe
With great sadness we confirm that Sir David Rowland, our former Chairman from 1993 to 1997, has passed away. He played a critical role in safeguarding the future of the Lloyd’s market through perhaps its most difficult period.— Lloyd's (@LloydsofLondon) February 18, 2019
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