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A different perspective on insurance

October 20, 2023

Matt Frost discusses why he “hates” the inertia of insurance buying and encourages clients to ask themselves “Why are we insuring?”.
Cyber Risk Management|Financial, Executive and Professional Risks (FINEX)|Workplace Risk|Risk and Analytics
Climate Risk and Resilience|ESG In Sight|Risk Culture

Head of Risk Advisory, Matt Frost, is one of WTW Australasia’s most unique thinkers. Throughout his significant career Matt has worked not only as a risk and insurance advisor but also as a buyer of insurance, including 17 years as Vice President Risk Finance for global mining giant BHP.

Here, Matt tells Tim Cotton about why he “hates” the inertia of insurance buying and encourages clients to ask themselves “Why are we insuring?”. Matt shares fascinating real life examples, including an analytics scenario that led to a WTW client saving millions of dollars, as well as his personal recollection of the Samarco tailings dam disaster in Brazil in 2015.

Episode 2: A different perspective on insurance

A smarter way to risk in Australasia: Episode 2 — A different perspective on insurance

TIM COTTON: WTW acknowledges the traditional custodians of country throughout Australia, and their connections to land, sea, and community. We pay our respects to their elders, past and present, and extend that respect to all Aboriginal and Torres Strait Islander peoples today.

MATT FROST: So that was probably the most challenging and probably the worst because of the emotional impact.

TIM COTTON: Dealing with all these industries in one day, it's amazing. You learn so much.

MATT FROST: Smarter way to risk for me is about really providing that support or the assessment of their risks.

TIM COTTON: Hello and welcome to our WTW podcast, a Smarter Way to Risk Down Under, in Australasia edition, a series where we analyse and dissect a range of local and global complex risk topics and how we at WTW are committed to delivering the best outcomes for clients through managing risk in a smarter way. I'm your host Tim Cotton.

And throughout this series, I'm going to bring in a variety of my WTW colleagues here in Australasia, who have expertise and specialism in different areas of risk, who will all provide their own perspective on what a smarter way to risk means to them and their area of the business. Now, I'm thrilled to have with me today, Matt Frost, who's our Head of Risk Advisory and Natural Resources here in Australasia. Welcome. Matt. It's great to have you join me here today.

MATT FROST: Tim, thanks very much and glad to be here. Looking forward to it.

TIM COTTON: Now, I expect today's podcast to be right up your alley, Matt, given the risk advisory work your team does for clients. So I'm really looking forward to having a chat with you today. To start with, Matt, could you tell us a bit about yourself, your role at WTW, and what you guys do for clients?

I believe you might have worked with us many years ago in another part of the world before having a bit of a break and returning again in recent years. So WTW must be really part of your DNA.

MATT FROST: Oh, I was in short trousers playing in sandpits when I first joined Willis. So yeah, it's a few years ago now. But yeah, back in the UK in Kingston upon Thames, I was working for an insurance broker that was acquired by Willis. So it goes back a long time now. And I worked, I guess, through that process for about 10 years before moving on to the client side and spent 22 years working in two organisations.

One was Diageo, a company in the UK. And then I move over to Australia and joined BHP and worked with them for 17 years before rejoining Willis in 2019.

TIM COTTON: I still haven't been to the UK, Matt. So I need to get there one time. But I think for you to start at WTW or Willis, as it was back then, all those years ago and you found your way back there now into the senior position you're in, I think it's a great story and a testament to what you've achieved in your career so far. But let's change tune a bit because I wanted to move on to a slightly controversial one. And I hope it doesn't put you on the spot too much.

But I've heard you say before that there's some things about insurance that you really hate. Now, what do you mean by that? Hate is a strong word. Maybe we'll say strongly dislike. What do you mean by that?

MATT FROST: I love this question. I'll answer it over the course of the next four or five hours, Tim.

Yeah, it is a phrase I use a bit, but it's a nice conversation starter. And really what I'm trying to do when I'm talking to clients and prospects and using the hate word when it comes to insurance, it is the intrinsic nature of what clients do every year, which is the effectively rolling over insurance programs from one year to another. It lacks dynamism.

It's not even necessarily appropriate to their business and their future business. And it's the process of insurance that I'm really anti. We spend so long preparing for an insurance renewal as a broker, as a client, as insurance companies that we rarely have time to sit back and say, is this actually still the right product for us?

Now, I'm not trying to do my colleagues an injustice there, but you sometimes have to break away from the existing business and take time out and just think, well, what are we doing? Why are we doing it? What can we do better. How do we improve the way we're purchasing insurance? And can we actually do away with it? You don't actually get those many opportunities during the course of a year or even the course of a relationship.

But for me, that's the most important question to ask when I start talking to clients and prospects, why you are insuring, and is it still appropriate to your business, and what can you do better?

TIM COTTON: Yeah. And I guess when there are processes that have been embedded for so many years, it is natural that it stays the same. And we know change is hard. So I think it's important that you raise that to make it a discussion point and ways we can always do things better.

MATT FROST: Absolutely.

TIM COTTON: But that does lead me to my next question. That's a great segue. And what does a smarter way to risk mean to you and your clients, Matt?

MATT FROST: The phrase smarter way to risk is a value proposition that WTW have started to use in the course of the last few months. And I really like it. I actually met with Carl Hess a couple of months ago when he came through Melbourne and actually said to him, I love the phrase. I wasn't just trying to impress him with the question. It was really a genuine comment because in many respects, that's what I'd like to think I do on a day-to-day basis.

When I get involved, we're talking to clients who perhaps have already started to express some frustration with insurance and maybe starting to think for themselves that there's got to be a better way of optimising insurance or reducing the amount of work that it's imposing upon them as an organisation. Or maybe it just needs to change because they're changing. And when I get involved, that's the perfect time to peel back the onion and see what's underneath and really start to think about whether things can be done more efficiently and more value-adding for the organisation.

So a smarter way to risk, for me, is about really providing that support for the assessment of their risks, for the assessment of their future in risk, innovations and analytics to try and produce a smarter outcome. And by a smarter outcome, that could be improved policy coverage, reduced information requirements on the organisation so they spend less time on insurance, it may be just reducing cost.

There may be different outcomes, and that has to be unpacked and discussed with the client. Providing broader perspectives, insights, advising them what the headwinds of insurance might be over the course of the next 5, 10, 15 years, that for me is a smarter way to manage risk. That way, we get away from what I was talking about, which is what I hate, which is the inertia of insurance buying.

Why just assume that what's right for today is what you bought last year? So for me, it's trying to encourage clients to move into a different area to keep pace with that in their organisational strategy, their organisational risk strategies, and try and move insurance into a different space and really shake up what they do.

TIM COTTON: Yeah, and there's a bit in there. And I guess it's our role as the risk advisor to unpack all that for them. And sometimes it's a case of you don't know what you don't know, isn't it? And we've really got to be there to let them know what's happening and just be there for them. We know a big part of what we do here at WTW is use data and analytics to help make the best possible decisions on behalf of our clients. Could you tell us a bit about how your team does this in practice?

MATT FROST: Yeah, so I'm going to use some examples. The reality is that WTW have got some fantastic analytical tools. They'll give you an idea of what limit you should be buying, what losses you should be retaining, etc. etc. But I think to bring it alive, I'll just talk about a couple of examples.

One, we had a client who just had a gut feel that their limit on their property insurance was perhaps too high, even though their risk engineer was suggesting that it was appropriate for the maximum foreseeable loss potential. We ran it through our property quantified tools, and the limit that they were buying was equivalent to a 1 in 5,000 year event. Now, Tim, that's a ridiculously low level of probability.

TIM COTTON: Yeah, even my maths tells me that, Matt.

MATT FROST: Yeah, but we then gave them an insight that the insurance regulator that was appropriate for their particular domicile wanted insurance companies to cover through reinsurance and capital a risk of a 1 in 200 year event outcome. So 1 in 5,000 years against the context of what a regulator wants an insurance company to set aside for capital is a significantly remote possibility.

So that gave them the confidence to potentially reduce their limit, and we then gave them some ideas of what limit the probability would be for a reduced limit. And that gave them the opportunity to save, actually, in their case, millions of dollars by reducing the limit that they were buying in the insurance market. The choice was theirs. It's not a recommendation we necessarily will make, but we give them the options.

And that sort of insight and analysis is what we're talking about here. The other example is one, actually, recently, Tim, it was only last week we were talking to a client who's retaining about 3% of their property insurance portfolio. Very, very small retention, but their question to ask was, should we retain more? Well, the analysis that we gave them was that their technical price for the retention of risk was much higher than the insurers were actually charging.

So in that analysis, insurers were actually charging a very reasonable rate for their insurances. So our recommendation to this particular client was, look, hold where you are, don't necessarily increase the level of risk retention because the price is quite reasonable at the moment, but by holding where you are, you're still putting some premium aside for potentially risk capital for the future in case that equation changes.

And they were very grateful for that insight. It was just ahead of their negotiations in London for the renewal of the program. So if that equation changes, then they already had the insights as to why they would take on additional risk, at what level because they had the technical price in advance of renewal. So that was a very useful outcome to them.

So risk and analytics gives you the opportunity to make smarter decisions, give you an idea of where it makes sense to retain risk, reduce the level of cover that you're buying, or potentially give you the optionality to reduce the level of cover you're buying, and potentially whether you should buy a set of risks together as a whole as opposed to buying single classes of business.

And it gets very complicated and very sophisticated, but, equally, it can be extremely value-adding by looking at risk differently through that data and analytics lens.

TIM COTTON: Well, it may be very complicated and sophisticated, but I think those case studies that you just went through then, you've made them really clear and easy to understand. And thank you for that. I really appreciate that, and I'm sure our listeners will as well appreciate those insights, Matt.

MATT FROST: Pleasure.

TIM COTTON: I want to change tune a bit now to industry specialism because that's another part of our value proposition here at WTW. Within the broader natural resources industry, you guys have subindustries that your team specialise in, don't you?

MATT FROST: Yes, we do. So natural resources, it consists of mining, renewable energy, energy, oil, and gas. So it's multifaceted, but it basically crosses the whole of the energy spectrum.

TIM COTTON: It's evolving that, at the moment, it's so topical. The organisations really have to be switched on with what they're doing in that space and make sure they're covering their risks so smart.

MATT FROST: Well, I think just expanding on that point, Tim, a mining company today is potentially a renewable energy company of tomorrow.


MATT FROST: An oil and gas company today may well be moving and transitioning into other commodities and critical metals and that type of thing. So what we're finding in the natural resources space, and don't just specialise in natural resources, but certainly in the natural resources space, we're finding that companies are transitioning, probably transitioning more than many other industry groups.

And therefore, there is more of a need to have the smarter way of managing risk in those businesses than perhaps a lot of other industry sectors because they have to change. If they stay in the business of thermal coal mining, for example, their basically on a glide path to no insurance.

TIM COTTON: It's a big no-no, yeah.

MATT FROST: It's a big no-no. So they've got to change, and they've got to move into other commodities or other lines of business. And certainly, the insurance process, it can't be stuck in the era of, let's renew what we had before. It's all about helping them transition their insurance and risk financing program to meet the new needs of the organisation and the risks that organisation will be facing in those new areas.

TIM COTTON: Yeah, 100% agree with you there. Now, this might go down memory lane a bit or it might be something that was fresh in your mind. I know before you said something that was just from last week, but have you had a worst experience which comes to mind during your whole time in this industry? Or at the other end, can you recall something that stands out as being particularly rewarding? I want to go through the best and the worst in the industry for you, Matt.

MATT FROST: I think from a personal perspective, BHP had the Samarco tailings dam disaster in 2015. And I remember being in the office that day. It was a Friday. Can you imagine being in the office on a Friday?

TIM COTTON: That doesn't happen as much these days, does it?

MATT FROST: Yeah. And suddenly, there was an announcement the CFO wanted to discuss with all employees an issue. And he basically gave up an open speech across the floor of what had happened in terrible circumstances in Brazil with the collapse of a tailings dam that eventually killed 19 people and damaged 450km of the River Doce and was one of Brazil's worst ever environmental disasters.

And of course, you're working for a company that's got a substantial interest in the underlying business in Brazil that was at the heart of that particular incident. So that was a horrible moment in my career. It was a defining moment in many respects because it triggered a huge amount of extra work and a huge amount of learnings and education and insight into what it takes to be involved in a major disaster that had impacts on literally hundreds of thousands of people, millions of people in another country.

So that was probably the most challenging and probably the worst because of the emotional impact.

TIM COTTON: I was going to say, that word emotional, it'd be so hard to differentiate your professional and your emotional cap, wouldn't it? It'd be so hard. I couldn't imagine going through that.

MATT FROST: Yeah, Tim, I think what brought it home for me was that, largely because I had a an English passport, I was able to travel to Brazil literally the following week and see it firsthand the damage that had been caused to villages and towns within the immediate vicinity of the tailings dam. And that really brings it home, just the scale and magnitude of the disaster. And of course, it impacts you.

And it's confronting. It's really confronting. And you have to continue to try and be professional and deal with the aftermath in the lane that you're in, the insurance lane in my case, and try and get that message over to insurance companies and colleagues internally about what and how insurance is going to respond to such an event, both within my organisation and actually the subsidiary that was at the centre of it. So yeah, that was by far and away the worst scenario that I've ever had to deal with and an emotional one as well.

TIM COTTON: Yeah, do you have one on the other end?

MATT FROST: Yeah, on the other side, probably the challenge where the company, again, in this case BHP, made a decision to self-insure their property damage business interruption risks. And I was at the centre of that. It was born out of a number of issues. The company was strong, had a hugely strong balance sheet, still has. And frankly, it was outgrowing some of the insurance buying it was doing at the time.

And my challenge was to take them to a self-insurance position, which I did, using, actually, at that time, Willis, as it was known, their data and analytics arm and providing all the evaluation that was needed to model how much we could expect in terms of losses each year and what premiums should be paid into an insurance company to retain those losses and make it cost-effective for the group to self-insure rather than insure.

So for me, that was the most rewarding part of my life, actually being involved right at the start of the self-insurance journey, if I can call it that, for BHP, and really has made and shaped me into the career that I'm doing now helping clients and prospective clients in WTW to re-evaluate risk using some of those experiences.

TIM COTTON: I think you've just articulated there the roller coaster of life and of a career, that there certainly are ups and downs.

Yeah, we've just got to navigate through them the best we can.

So we'll fast forward to today again, Matt. Would you say there's anything that's really a risk that's really hot or topical at the moment, which is extremely prevalent to your area of the business? And how is your team approaching it?

MATT FROST: I'll let other colleagues talk about cyber. Cyber is obviously a key risk. For me, it's a key risk to evaluate, not just from a quantification and risk assessment perspective, but also if you're buying insurance do you buy it for services or do you buy it to try and cover the catastrophic risk limit? And I'm finding a lot of clients are in that space are not quite sure where does cyber fit in with our organisation.

But apart that there, I think for me, if you look at natural catastrophe, just think of the next 5, 10 years, bushfires, floods, cyclones, will you as an organisation always be able to buy the right level of insurance in the future or do you think insurance will perhaps be less available, not available? If your answer to that question is one of those two answers, then really you need to be planning for the future.

So I think the availability of natural catastrophe insurance for those companies that are particularly exposed or could potentially be exposed, for those Nat Cats, I think, need to really be well-planned and rethink their insurance buying, smarter way to risk, back to that subject. And then perhaps the final one I'd mention is something that I've termed exclusion creep. So we're finding more and more within liability insurance policies.

For example, insurers are excluding certain risks very quietly, very quietly just adding in a little sub-limit here or a complete exclusion there for things like climate change or PFAS in relation to chemicals from fire extinguishing materials, that type of thing. And they're coming and creeping into clients' insurance programs across the board.

My question to the clients is, if it's been excluded from the insurance program, would you self-insure it and potentially put it through your own self-insurance structure, captive insurance company, for example, or do you just note that if something happened in that space, it's uninsured, and we're going to lose cash if something happens? So I think, for me, exclusion creep, if I can call it that, is an area that I'm keeping a very, very close watch on and trying to help clients think about and prepare for what happens if that's eventuating in their insurance program.

What do they do to plan for that eventuality in the future? Do they live with it in terms of cash or can they structure some self-insurance around that?

TIM COTTON: That leads me to my next question as we move into 2024 and beyond, Matt, which is, what emerging risks can you see coming next that clients might want to put on their radar sooner rather than later?

MATT FROST: Before talking about emerging risks, I might just comment on what's happened since 2017 in relation to environmental, social, and governance. We've seen a whole plethora of insurance and reinsurance companies. Now, take a view on underwriting certain risks. And we'll talk about coal and oil sands and new oil and gas projects and that type of thing in relation to what they'll do in that space over the next few years and a glide path to zero insurance.

So when you're starting to look at what's going to happen going forward, I think there's going to be more in the ESG space, more insurers are going to take a view of certain risks in the future that don't naturally fit within their environmental, social, and governance strategies. And I would highlight the word S, the social side there. We see that in things like sexual abuse and molestation for faith groups and school organisations, sporting organisations. It's been a real challenge.

And that's as much about the S as anything else. There's also areas such as licensed betting, that type of thing where insurers could just easily take a view that, look, that's not something we want to be seen to be promoting or underwriting in the future, and we're going to take a view, and we're going to start to reduce capacity or increase price or whatever it might be. So I don't have a huge list here, Tim, of emerging risk issues apart from the normal sort of Nat Cat and cyber-related type risks.

But I would suggest that when we are talking to clients and prospects, really thinking about the ESG elements and how broad that could be, not just within the client's business itself, but also against the suppliers and customers it's using and what the potential impact could be on the future procurement of insurance. I think that that's an area that's ripe for a discussion and could be an area where looking at alternative risk financing techniques is going to come to the fore more in the future.

TIM COTTON: I know at the start of our chat we briefly talked about what you disliked about insurance and some of the concerns and pain points you have around our process at the moment as an industry collectively, but if there was one thing we could change as an industry, what we could do better, for example, what would you say we could do better?

MATT FROST: Certainly, I think we've got to start to move away from this complete DNA that we've got around the annual insurance buying process and try and get into a position where both clients and brokers are really challenging whether they still need to buy certain insurances and whether there's a smarter way to buy those insurances. I know that's very easy for me to say that because I'm in that field, but we still have a lot of clients who just buy insurance. And maybe that's OK, but, for me, that's likely to lose value for an organisation.

So that's something that I would really like to try and change. It's probably the one big issue is it's almost lazy insurance buying, and that's something that I find difficult to accept and always try and challenge.

TIM COTTON: If I could go back to the theme of today's podcast one more time, being a smarter way to risk, I think our global network is probably one of, if not the strongest, asset we have in managing risk smarter. I know you're a colleague that can be up in the really early hours in the morning sometimes on calls with global colleagues, but how do our clients benefit from this global network we have to allow them to manage risk smarter?

MATT FROST: There's a global network in many components. There's the placement of risks within Australia, outside of Australia, Singapore. Globally, we've got a number of clients who even travel to different parts of the world to help sell their risk with our brokers to the insurance market. So certainly a smarter way to risk involves the procurement of insurance with the best possible insurance markets on the planet, not just Australia.

So for me, that's a really, really critical part of that. The other one is the management and service of clients on a globalised basis. Now, I've been a client of Willis for many, many years, and now I obviously work for WTW. But as a client, I saw firsthand the collaboration and skills of coordinating large, complex, global insurance programs. And WTW certainly do that better than any other broker that I came across in my 22 years on the client side.

And finally, just industry specialisms. A smarter way to manage risk, I go back to that comment I made about industry insights and providing some information to clients that they're not necessarily aware of in their industry sector. I cut across not just natural resources, but things like healthcare and faith groups and school groups and all sorts of associations and businesses outside of natural resources, and we've got industry specialisms all around the world that are doing business with those sectors every day.

And what I like doing is getting the insights from them so I can bring that news and thoughts and the innovations to our clients in this region.

TIM COTTON: Yeah, I remember when I started here, Matt, it was the first week or so, I couldn't get my head around it, but it was in such a good way, the fact that one hour I'd be talking to schools and the next would be dealing with post offices and then electricians. And it's like you're dealing with all these industries in one day. It's amazing. You learn so much. And I think that's why I've stuck around. It's just there's always so much to learn across the whole of Australia and globally.

So I think it's fantastic. I love the global networks we have and the industries we deal with. I think it's awesome.


TIM COTTON: That's all we have time for today, Matt. It's been a pleasure. Thank you so much for your honesty and giving us your time today. I found it to be a really authentic chat. Did you enjoy being here?

MATT FROST: Loved it. I'm always happy to talk to you, Tim, anyway, but doing it in this forum is even better. Thank you for your time.

TIM COTTON: Thanks, Matt. And I'm sure our listeners found your insights enthralling as well. I know I certainly did. But we'll wrap up today's podcast. Thanks again, Matt, and it's bye for now.

MATT FROST: Thanks. Bye.

TIM COTTON: If you'd like to hear the remainder of our Smarter Way to Risk podcast series, we encourage you to stay tuned on our WTW website, follow us on LinkedIn, and listen to our latest content wherever you listen to your podcasts.


Tim Cotton
Digital Marketing Lead - Australasia

Tim is our Digital Marketing Lead – Australasia based in our Melbourne office who has been with WTW since 2016. Since conceptualising the idea of this inaugural podcast series, Tim has played the ongoing role of director, producer and host.

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Matt Frost
Head of Risk Advisory

Matt Frost, is one of WTW Australasia’s most unique thinkers. Throughout his significant career Matt has worked not only as a risk and insurance advisor but also as a buyer of insurance, including 17 years as Vice President Risk Finance for global mining giant BHP.

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