Jayne Plunkett, chief risk officer (CRO) of pan-Asian insurer AIA Group, has held leadership roles across the full spectrum of insurance products and services, including primary insurance, reinsurance, frontline underwriting, and risk management. In a conversation with Bernhard Kotanko, McKinsey senior partner and head of the firm’s Asia–Pacific insurance practice, Plunkett shared her perspectives on the role of insurance, her approach to risk management, and her personal journey as a leader. An edited version of their conversation follows.
McKinsey: As someone who is well-versed in risk, how do you think about the role of insurance in taking and mitigating risk?
Jayne Plunkett: On the surface, the role of insurance in our society is relatively straightforward—to ensure the safety of our physical and financial assets, our healthcare, and our plans in life. However, carrying out this role is more complex, because to take these risks, we have to understand and assess the risk in question, consider various scenarios and outcomes, and eventually determine a price for each risk. Equally, we need to consider risk mitigation. What are the things that can be done to reduce or manage the risk? One important role for insurers is to help people prevent damages and protect themselves and their assets.
McKinsey: We all read about the wide insurance gaps in society that leave many people vulnerable in critical moments. What do you think is the missing link that would allow the insurance sector to better address customers’ latent needs?
Jayne Plunkett: There’s no doubt that there’s still a significant amount of uninsured risk around the world, but we also need to consider how much the industry has developed over the years and how well it has responded to societal needs. Without insurance, many aspects of our modern lives would not function: investment in physical assets and supply chains, financing of healthcare, protection of families, preparation for retirement.
Cyber insurance is a good example. This protection has developed significantly over the past 20 years, because of increasing incidents, awareness, and need. The industry generally does a good job of understanding and quantifying new risks, like cybersecurity, and providing risk management alongside risk protection in these areas.
It is important to note that the private insurance sector cannot take on all risks on its own. Many risks require partnership models across various business sectors and governments to offer full protection. That said, there’s still enormous potential to further reduce insurance gaps and provide more protection and security to people over the course of their lifetimes. If there’s a missing link in terms of addressing insurance gaps, maybe it is about figuring out how to engage more effectively with people to help them understand and minimize their risks and to frame how insurance really works for them. Such efforts would help increase the understanding of risk principles and the role of insurance and could mobilize what you call “latent needs” into stronger demand for insurance.
McKinsey: You’ve spoken about how insurance has responded to society’s needs. Do you think core insurance principles can be applied more broadly to areas beyond the insurance industry?
Jayne Plunkett: The longer I work in the industry, the more I can see it distilled into a pretty simple formula of identifying risk, understanding it, quantifying it, and then managing it. We do this through complex models of assumptions and algorithms, but what we are doing, in the end, is using scenarios to project potential outcomes and then managing for those. Simple principles from the insurance sector—including risk pooling, basic financing, and prefunding—can be applied to many other areas. Examples in place today—like terrorism pools and partnerships between public and private healthcare financing—are a good foundation for further thinking in these areas.
McKinsey: AIA, the largest pan-Asian life and health insurer, aspires to help its millions of customers lead “healthier, longer, better lives.” What role do you and your team play in fulfilling this purpose?
Jayne Plunkett: We take our purpose very seriously, across all functions and all employees at AIA. It guides and inspires us in everything we do and provides a lens through which we can measure our actions and decisions. Our purpose forms the foundation of the corporate culture at AIA.
McKinsey: You mentioned “culture.” The industry talks a lot about “risk culture.” What does it mean for you to have a strong risk culture at a company?
Jayne Plunkett: At any company, there needs to be one overall enterprise culture that everyone shares, and dealing with risk is one aspect of this culture. AIA’s culture is propelled by our purpose and built on a collective commitment to ensure we have a sustainable, resilient company that is prepared for the risks that come our way.
Culture is demonstrated by our daily actions. When someone feels comfortable coming to me to discuss a concern, when proposals take multiple outcomes into account, and when contrarian views are welcomed into a discussion, I know that our culture is strong and risks are being well managed.
McKinsey: As CRO, you deal with a range of complex risks—mortality, critical and chronic diseases, the full range of balance sheet and market risks, and operational risks. Which ones are most critical for you? And what are the future risks you see as most important—both as an opportunity for insurers to define solutions and in terms of protecting the company?
Jayne Plunkett: I see risk management as looking beyond the current horizon, thinking about what could happen, and making sure we are well prepared for any such scenario. We need to have one eye on today and the other looking around the corner.
I see risk management as looking beyond the current horizon, thinking about what could happen, and making sure we are well prepared for any such scenario.
I like to group our risks into two segments. First are the risks for which we can control the inputs and outcomes. These include many of our core insurance and operational risks that we can define, measure, and control. We can also limit our exposure to these risks as needed.
The second segment of risks is much more challenging. These are areas where we are not in control: macroeconomic factors, policy changes, and even human behavior. Risk management in this segment requires an understanding of various potential scenarios and outcome ranges and preparation for any of those potential outcomes. Personally, I feel that managing these more complex risks is the most critical part of my role as CRO.
McKinsey: How do you balance risk-taking with protecting the company?
Jayne Plunkett: We are in the business of risk-taking, which means understanding risks, taking the right ones, and ensuring we are managing and controlling them. Frameworks and policies provide the foundation, but constant communication and discussion of issues are essential to achieving the right balance.
Risk management goes hand in hand with the company’s strategy. Moving into new products, new areas, and new businesses requires an expanded approach to risk management. The dynamic nature of managing risk in a growing company and an ever-changing environment requires building capabilities, processes, and tools that can adapt and develop with the business.
McKinsey: Jayne, turning to your personal journey, you’ve held executive roles at companies including Swiss Re, GE Insurance Solutions, and John Deere Insurance. What are some of your reflections on your journey? And what advice would you give your younger self?
Jayne Plunkett: I’m most amazed at how an industry that many think of as old, and perhaps even a bit boring, has been a very exciting and rewarding home for me over all these years. I would summarize my reflections and advice in three points:
- Geography: I’ve worked and lived in Asia, Europe, and North America, and the need for both basic and complex protection is a common thread throughout the world. It is meaningful to work in an industry that makes a tangible difference to people’s lives and contributes to their success in life.
- Experience: With each new role, we collect experiences, overcome challenges, and learn new things. This collection of experiences is always in our “backpack,” and we bring it to each new role and challenge. Collect as much experience as you can—fill up your backpack.
- People: The industry is full of extremely bright and well-meaning people. Meet as many as you can and make time for these important connections and relationships.
