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Ruud Bosman will retire as vice chairman of Factory Mutual Insurance Co., which does business as FM Global, on Nov. 30 after four decades with the company. Mr. Bosman recently discussed changes in the insurance industry, loss control and how forces like technology will drive the industry in the future, in an interview with Senior Editor Mark A. Hofmann.
Q: What have been the greatest changes in loss control and insurance since you began your career?
The first one is, without any doubt, globalization. When I joined the company, I joined as part of our international operation. At the time, “international” meant something very different from what “global” means today. The biggest change that impacts us in loss control really is the extent to which the world is sort of an interwoven place of exposures, of manufacturing, of vendors and of supply chains. You really can't talk about countries or nation states anymore. Our client base is large corporations, and their playing field really doesn't recognize any borders, so to speak, in terms of how they arrange their business.
Through that, their exposures have changed very significantly, which is where the loss control comes into it. They're not controlling loss within four walls in a specific location. They're trying to manage all aspects of risk around the world, and not only in their own facilities. In many ways, through their outsourcing of production, they're outsourcing risk. It clearly is a very different environment.
If you put that in the loss control arena, I think the biggest change is what you are controlling is significantly different. It's harder to put your arms around it and make sure you do a good job of assessing where the risks are and how they can be controlled. The actual mechanisms of how you control it haven't changed all that much. Obviously, there are improvements in protection systems and new ways of installing protection and new versions of sprinkler systems that may or may not be more effective.
But I think the bigger change is really in the underlying risk and really understanding how we should deal with that, and how companies need to be much more global in their thinking about risk.
Q: What impact has technology had on the industry in general and loss control in particular?
From my perspective, the second biggest change is technology. Again, it goes across all sorts of different ways that impact us.
The first one is clearly the communications cycle and the way we interact. When I started 40 years ago, the interaction between London, where I was based, and the United States would be in a two- or three-week time cycle. Now it's instantaneous and much more efficient. We're in a position to be much more effective in how we deal with clients, how we help with their loss-control activities and how we provide services.
Of course, technology has changed the nature of our clients' operations very significantly, too. An assembly line today looks a lot different than what it looked like 40 years ago, a lot more automated, a lot less manual—in a way subject to interruption in different ways, which obviously imposes different protection requirements and just a whole different world to deal with.
In terms of loss control, technology has provided more efficient supervision of protection systems. It's very much helped in understanding the risk because the technology allows us to do a much better job of analyzing data and really understanding exposures better. A good example would be catastrophe models and analyzing natural catastrophe exposures. In our world, where we work a lot with the data about clients' businesses and clients' exposures, we are in a much better place to help clients understand risk and differentiate between the quality of risk and be much more focused on prioritizing where risk improvement activity should be undertaken. The analytical piece that technology has brought to the world has been very, very helpful. We just understand things better and more quickly.
Q: Do you have any thoughts on what the future will hold?
Where we are today is just the first steps. Global integration will continue. It's very hard to predict what the world will look like in 40 years, but it will be significantly different. The integration around the world—and certainly in the commercial property arena where we operate—that's going to be significantly multiplied. And one of the things that is clearly happening today is the establishment of large businesses outside of our domestic world. There are so many global companies domiciled outside of the United States and working around the world as well. You have an environment where competition can come from anywhere. It's exciting but also challenging trying to anticipate where it will end up.
The same is true for technology. I know it will look significantly different. Just the interaction between people with our current technology is hugely different from 40 years ago. I suspect that's going to continue to be the case.
Where today we still have an environment of travel around the world, I'm not sure how much of that will be necessary in the future. You can never eliminate all the contact between people personally, but I think technology will allow us to do all sorts of cool stuff that will make that process that much more efficient as well.
Technology will continue to make this world a more efficient place. I'm sure in the arena of loss control it will be the same as well. It's hard to predict, but I think the big challenge for the world is to recognize new exposures as they come along, because you don't really know what they are until losses start to occur or unless you have some real insight into how manufacturing and processes are changing. There's a challenge there: that we stay on top of how exposures evolve.