Knowledge Center: Podcast
Driving value creation and developing talent in the insurance industry in Asia9/4/2019 Heidrick & Struggles
In this podcast, Heidrick & Struggles’ Rob Speers speaks with Adrian O’Connor, former regional chief financial officer of Prudential Corporation Asia, a life insurance and asset management business. O’Connor shares his experience in developing talent and how technology is evolving the role of the CFO to help make strategic business decisions. He also talks about digital and regulatory disruptions in the insurance industry and the role of the board.
- (1:25) What specifically did you do in your role as CFO of Prudential Corporation Asia to ensure that financial growth in business models was sustainable across highly diverse, high-growth markets after the global financial crisis?
- (4:19) In the Asia Pacific region, what specific challenges or opportunities do you see around talent development and succession, and how were you able to address them in your role as both the CFO and a board member?
- (8:18) As new technologies change both the day-to-day work of the finance function and the competitive landscape, what advice would you have for CFOs to stay ahead of the curve?
- (11:06) What can CFOs do to help their companies disrupt rather than be disrupted?
- (15:32) What do you think board members will need to know about navigating digital and regulatory disruption?
Below is a full transcript of the episode, which has been edited for clarity.
Welcome to the Heidrick & Struggles Leadership Podcast, the premier provider of leadership consulting, culture shaping, and senior-level executive search services. Every day, we’re privileged to talk with fascinating people who are shaping the future through their leadership and vision. In each episode, you’ll hear a different perspective from thought leaders and innovators. Thanks for listening to the Heidrick & Struggles Leadership Podcast.
Rob Speers: Hello, I’m Rob Speers, a principal in Heidrick & Struggles’ Financial Services Practice, focusing on the insurance industry in Asia. In today’s podcast, I’m speaking to Adrian O’Connor, former regional chief financial officer of Prudential Corporation Asia, or PCA. Adrian joined PCA as their chief of staff in 2007 and served as CFO from 2008 to 2018. Adrian also sat on the boards of Prudential Corporation Asia, ICICI Prudential Life in India, Prudential General Insurance Hong Kong, and Prudential Vietnam. His previous roles were with New York Life International, AIG, Aviva, and Zurich, working across all regions in the United States, Europe, and Asia. Adrian, welcome, and thank you for taking the time to speak with us today.
Adrian O’Connor: Thank you, Rob. Great to be with you.
Rob Speers: Adrian, during your tenure at PCA, you were tasked with ensuring that financial growth in business models was sustainable across highly diverse, high-growth markets post the global financial crisis. What specifically did you do in your role as CFO to make that happen?
Adrian O’Connor: The simple answer to that question, Rob, is focus the organization on what drives value creation. That was absolutely the one thing that I was focused on—what drives value creation—and it differs in different markets. For a developing market, very key to it all is growing profitable new business sales and accelerating that growth. There are three key words there: growing, profitable, and accelerating.
Growth is all about size, quality, and growth of the distribution channel. Where the CFO gets involved is in the profit piece, and that’s all down to product mix. As insurance companies manufacture products for the customer, and to meet both their savings and their protection needs, savings tends to be longer-term savings, while on the protections, they cover life insurance, critical illness, and other health insurance products. And put simply, protection products are much more profitable than savings products; that is a factor of five times. So getting that mix right and tilting it more toward protection makes an enormous difference on the profits, the value, and the financial outcomes in an organization, and that was what I was relentlessly focused on.
What is the difference between markets, you may ask, in Asia? In some markets, they were well developed; they needed little help. In other markets, they were less developed, less disciplined, and looked for the quick sale. That’s where we got much more heavily involved in keeping the discipline, keeping the focus, and over the 10 years, it proved to be incredibly successful.
Rob Speers: Fantastic. And I know that that can be quite challenging, given there’s been a general aversion by customers in Asia to buying protection over savings in a lot of those markets, so I think that’s a great testament to your leadership.
Adrian O’Connor: There is a vast need for protection in Asia, as pointed out by a number of reports, including that one by Swiss Re. So there is a need there, and the need still hasn’t been met on the protection side.
Rob Speers: Very true, and that creates a gigantic opportunity for insurers for a long time.
Adrian O’Connor: Absolutely. It’s all boats will rise in Asia for many, many years to come.
Rob Speers: Changing tack slightly and thinking specifically about the Asia Pacific region, what specific challenges or opportunities do you see around talent development and succession, and how are you able to address them in your role as both the CFO and a board member?
Adrian O’Connor: I think this was the most important part of my job after that focus on value creation, and I had a particular way about it, a particular focus. I tried to hire great people, or potentially great people, and then help them develop through experience—specifically on the job. My role was coach. I was not the financial expert in the room, and I think that’s one of the areas where a lot of CFOs get it wrong. They think they have to be the smartest person in the room, the most expert, the master of the subject matter. You have to be an expert in the area, but you don’t have to be the best. So my philosophy was, I brought in far smarter people than me and helped them get on with it, and the way I did it was we agreed on priorities at the beginning of every single year, and I basically got out of the way.
I was the sounding board. They came to me, I gave them my views, and they took them on board or they threw them overboard. And, in reality, they made the decisions, and there were times where I didn’t agree with the decisions, and that was a real challenge for me to just back off, because it was far more important for them to take the ownership and to develop themselves. Now of course there were the occasions where I had to step in, but I tried to keep that to as few as possible because development of people was far more important. And the reality is that once you bring in great people, they just thrive in the environment if they can actually do stuff themselves. Allied to that—and that applies not just in finance; it’s across the whole piece—I think we developed a philosophy in PCA which was very similar to that.
My own view in regards to what is the type of people that you need to recruit is I think they need to be smart. I think they need to be curious, curious about what they don’t know. Third, they need to be really driven, driven to make a difference. Collaborative, and that in Asia more than anywhere else is so important, collaborative with your colleagues, with your seniors, with the countries, absolutely getting on with lots of people, to work through organizations, which are very, very complicated; you have to have that skill set. And I think, finally, they need to have the capabilities of building great teams themselves. And I must admit, my legacy, I think, is I have great people, and I hope I developed them. And I was just privileged to work with the people I worked with, really privileged. Hopefully that gives you some insight into talent development.
Rob Speers: That’s great. That’s actually a fantastic talent philosophy, and it’s something that we speak about often with boards and executives, around what to look for in searching for upcoming leaders and the development of that talent. And the point about curiosity really hammers home, I think, what we’re looking for, especially in the insurance industry today.
Adrian O’Connor: Absolutely. It’s grow, grow, grow, develop, develop, develop, and that’s all underpinned by curiosity.
Rob Speers: Now, what everyone’s been waiting for, some questions relevant to what is on everyone’s mind in the insurance industry today: technology. As new technologies change both the day-to-day work of the finance function and the competitive landscape, what advice would you have for CFOs to stay ahead of the curve?
Adrian O’Connor: Well, I’ll give you a bit of context and a bit of background, Rob. I am a valuation actuary at heart. I spent a lot of the earlier part of my career in that space. So working on systems and working with the IT people and the tech people was core to my job. Over my 10 years at PCA, the challenge that has been left unmet is a complete overhaul of the financial system. There are reasons for that, and the main reason is that, in the 10 years that I was there, we had the introduction of the capital system called Solvency II from Europe, and currently we’re doing another major change in financial reporting, IFRS 17. And all energies, in terms of development, were focused on both of those, not in the overhaul of financial systems.
And any company that I’ve been with, there have been problems with the financial system. They’re old, they’re not integrated, and there’s a lot of manual intervention by very smart people, and every organization I’ve been with, we’ve seen spreadsheets everywhere. If you’ve seen spreadsheets, you know you have problems with your financial system.
So where do I see the future? I think once we get over this, and it all depends on when IFRS 17 actually gets put to bed, I think there does need to be an overhaul of financial systems. Once that’s done, I think the real core is the CFO needs to find his or her job, and I do not see that job—what I call the compliance of financial reporting and capital reporting—I see that as being outsourced somewhere else. The role of the CFO is on financial information systems and actually having information that drives the business and drives commercial decisions.
Rob Speers: That’s a fantastic insight. So if I hear you correctly, the industry at the moment needs to get over these regulatory hurdles that are both time- and cost-intensive, so that CFOs can essentially look and find the tools and the technology that can help them provide more strategic advice to the business.
Adrian O’Connor: Rob, you’ve put it far more eloquently than I could have done.
Rob Speers: And if we think about the role of fintech and insurtech today and these new competitors, what can CFOs do to help their companies disrupt rather than be disrupted?
Adrian O’Connor: Well, let’s back up a little bit. Let’s talk about digital disruptions, and I see there are two places where digital disruption is happening or will happen that are sort of strategic or key, and they are in the product design and product pricing space and also in the actual distribution space. My own view is that disruption will happen much more quickly and much sooner in the product design and pricing space. The reality is that there’s very little customization in pricing for products in the life insurance space. The normal pricing is by age, sex, smokers, nonsmokers, and the only part of the world up to now—and it’s been up to relatively recently where there was a differentiation beyond that—was in the United States of America, where you had good life, better life, and super life, and there was some differentiation there. With the advent of AI, big data, and you’re already seeing it, it’s already happening in the US with a company called IQHealth, we are going to see some more customization around pricing on products.
Separate from that, I see the whole thing on distribution very differently. In Asia, the main distribution channels are agency and bancassurance. They will continue to be in place for many years to come and be, I believe, the strongest distribution channels for a long time to come. The big challenge for distribution, and disruption of the distribution channel—that is, meaning I’m going to get directly digitally to the customer rather than going through an intermediary—is all about the customer value proposition. And that has got to be very clear, very simply and very quickly understood by the customer, and then executed quickly. All those in the life insurance business are extremely difficult because life insurance is sold not bought. And what I’ve seen in the last few years, there has not been a focus around the customer value proposition; there’s focus around getting customers and getting an ecosystem, but not on that core thing. Because if that’s not cracked, and I believe it will be cracked and it will be cracked in different ways, that’s where the focus of attention should be. So going forward, I think the role of the CFO is to milk as much out of from a financial viewpoint, and there’s still lots of low-hanging fruit in the current distribution channels.
And then this is the big challenge: devising a financial framework that makes sure that you invest appropriately in the digital space. And that’s a difficult one in terms of balance because you don’t want to go after what I call shiny objects, things that will never work out but they sound great. On the other hand, you don’t want to suffocate great ideas, or potentially great ideas, because we all know, in this new world, most things will fail, 90% of your ideas will fail. So a complete change in the financial framework in terms of what the CFO needs to bring to bear, and that is a big challenge at the moment. I think the last thing that the CFO needs to do is get completely up to speed with everything that goes on in the digital space, particularly around AI, big data, etc.
Rob Speers: That’s really, really sound advice, and I really like your point of view there: ensuring that the CFO is keeping abreast of developments, providing sound strategic counsel around technology, but not stretching themselves too thin and taking their eye off of what is their most important function in the organization.
Adrian O’Connor: Absolutely.
Rob Speers: So, Adrian, as you enter the next stage of your career, what do you think board members will need to know about navigating digital and regulatory disruption?
Adrian O’Connor: Well, first of all, as you well know, the requirement on boards now in terms of expertise—definitely every board now has a digital expert, particularly around cyberspace, and every board in the regulated businesses, especially nearly all the financial services businesses, have also got and need to have experts. So what do the nonexperts do? Well, the nonexperts have a role to play. They need to understand the essence of the digital and the regulatory space, and they need to learn that from the experts in the room and elsewhere. It’s the essence; it’s not down in the detail. Because once you get to the essence, other board members, from their other areas of experience, can bring that to bear in making decisions around those spaces, because the expert may not have what you have. And someone put it very eloquently to me—what’s the role of a board member? And it’s fingers out and noses in; don’t get meddling in the detail, but you need to have a nose for the big things that may happen.
Rob Speers: Excellent advice. So, Adrian, just to wrap up, if you were to give one piece of advice to future leaders about what they most need to do today to thrive, what would that be?
Adrian O’Connor: We’ll start with a quote from Stephen Covey, and that is “the main thing is keeping the main thing the main thing.” Quite easily said but very, very difficult to execute on a day-to-day basis. What are my priorities today, and keep focused on that.
I’d add to that delivery and development, two things that have been my mantra since I’ve been at PCA. The CFO has to deliver the financials. If he or she doesn’t deliver the financials, they have no credibility and no right to have a seat at the table in the organization at the highest level. And “develop” means developing your own people, the organization, and yourself, and there are many aspects of developing yourself, including connecting with people within your organization, outside your organization, your own subject-matter expertise.
But for me, really what was a key part to all of that, and really beyond my own subject-matter expertise, was dipping into many different areas. Me in particular, I love business books, and I love positive psychology. Because you can always bring knowledge and insights from other areas into your own job, and it enhances that.
Rob Speers: What a fantastic way to finish up: learning is a lifetime journey, and it never stops, regardless of where you are in your career.
Adrian O’Connor: Or how old you are.
Rob Speers: Correct. Adrian, thank you so much for making the time to speak with us today.
Adrian O’Connor: Thank you very much, Rob.
Rob Speers: Thanks for listening to the Heidrick & Struggles Leadership Podcast.
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