IF Webinar Chaired by Des Harney of Grant Pearson Brown Consulting Ltd (GBP)

On 16 June 2020, Des Harney of Grant Pearson Brown Consulting Ltd (GBP), a specialist adviser in the field of effective and persuasive communication, chaired the third of Intelligence Forums’ video conference webinars. Over forty members - our largest online audience to date – joined to listen to and question our speakers. 

It was a privilege to welcome our first, Lord King of Lothbury. Mervyn King is an economist and public servant who served as the Governor of the Bank of England from 2003 to 2013. Most notably, he oversaw the bank during the financial crisis of 2007–2008 and the Great Recession. He was appointed a life peer and entered the House of Lords as a crossbencher in July 2013. 

Lord King acknowledged that decisions facing the government on coronavirus are unenvious but are ultimately a simple trade-off between the level of economic damage (10-20% loss of GDP being £200-500m) and the number of those who die from the disease. The cost of the pandemic, he argues should not be measured by the numbers who sadly die. The real cost is the lost income, output and GDP resulting from government actions and the uncertainty created by the virus.

The Government’s biggest mistake, he believes, has been its lack of clarity on this trade-off from the outset. Further, it should have spelt out the challenges, the difficult judgements to be made and that as it learnt more as COVID progressed, the course may be changed if necessary. He also believes that the UK could have drawn more from the experience of other countries which were 2 to 3 weeks ahead of it. 

He said that government decisions should not be pinned purely on science, and cautioned about being overly reliant on models to direct it to the “right” answer. The pioneers of epidemiological models, Roy Anderson and Bob May, told him that models are good for teaching about the spread of epidemics but are not good at predicting the future. Any model which requires an assumption about human behaviour, which by its very nature is unpredictable, will be flawed. The modellers at Imperial College neither knew enough about the virus itself nor importantly, the human response to it, to make a reliable forecast. In any event scientists will have a single objective - to keep the number of deaths as low as possible. The government on the other hand needs to take account of many factors to make a balanced judgement.

In their book, Radical Uncertainty: Decision-Making Beyond the Numbers the authors Mervyn King and John Ray highlight “the faux-precision of mathematical models”. They suggest that the standard approach to modelling seeks to attach a probability to all possible outcomes and argue that probabilities of outcomes really only exist in stable and repeated scenarios. In other situations, this type of analysis often gives a false sense of precision, and usually where good decision making matters most. By an arrogation of scientific respectability, probability analysis can turn evidence-based policy into policy-based evidence.

When NICE assesses the value of a particular drug/intervention, the number of healthy years of life that it will achieve for an individual is calculated. If the cost exceeds certain thresholds the treatment will not be approved. Lord King pointed out that the economic cost of lockdown has far exceeded the value that NICE would have assigned to the lives potentially saved through its implementation. He asked whether we would ever take the view that because nearly 30,000 people die or are seriously injured on the roads each year, we should limit the speed on all roads to 10 mph?  

On the government’s financial measures, he said that central banks do not always have the answer to stimulus requirements. In the current situation monetary stimulus is not required, so central bank intervention is not warranted. Increasing the supply of credit through ever lower, even negative interest rates, won't be useful stimulus because individuals, nervous about coronavirus and worried about their jobs are more likely to save than borrow to spend. We cannot rely on the “model” that lower interest rates naturally result in higher spending. Monetary easing in such circumstances simply inflates asset prices. 

The loss of GDP will have a serious impact on people’s lives, so the key issue is to get the economy back and running. Fiscal stimulus is required, and government borrowing to fund it is entirely appropriate, particularly as interest rates are now very low. A debt to GDP ratio even in excess of 100%, would be acceptable because with the passage of time, and provided that GDP recovers, the ratio should decline without the need for tax rises or spending cuts. He wasn’t optimistic, however, that GDP would quickly recover. 

Recognising that the market economy is not currently working, he said that now is not the time to allow it to decide which businesses should succeed and which should fail. While this time may come, the government should support vulnerable industries such as airlines, until GDP is within roughly 5% of the level before lockdown. It should also redouble efforts to support the self-employed and small business which comprise such a large part of the UK’s economy. 

On a final note he added that over the past 30-40 years, business efficiency has been king, and prioritised over business resilience and robustness. Before 2008, we failed to build sufficient redundancy into to our financial services sector to withstand economic shocks, and today this is true of many other businesses ….and our public services. The health service in particular. 

Our next speaker was Julian Enoizi is CEO of  Pool Reinsurance Company Limited, also known as Pool Re, which was set up in 1993 by the insurance industry in cooperation with Government after the IRA bombing of the Baltic Exchange. Owned by its members and underpinned by a HM Treasury guarantee it was the first public/private partnership to cover insured losses caused by acts of terrorism. 

Julian introduced us to the challenges facing the insurance industry with respect to perils such as terrorism and pandemics. 

In 1992 the industry was unable to offer insurance for terrorism although at the time attacks had become quite frequent. However, modelling the behaviours that underlie terrorist actions as opposed to risks which conform to the laws of the natural world, posed enormous challenges to insurers. Pool Re’s partnership between insurers and Government, provided a solution. Pool Re pays a premium for the government guarantee, and builds reserves to meet losses, and if these are exhausted the State pays the balance.

But such business is still not without problems. Where the IRA used bombs, today’s terrorists use knives and vehicles. In Salisbury, poison was used by Russians in an attempted assassination. Whether this was an act of war or terrorism had different implications for insurers.  Cyberterrorism is on the increase, and future threats may come from chemical or biological terrorists. As the behaviour and methods employed by terrorists become increasingly unpredictable, they become increasingly hard to underwrite.

Pandemics present insurers with the same fiendish modelling dilemma as terrorism. How can an insurer calculate a premium for an event for which it knows neither the frequency nor the severity of impact, which could be immense? A conservative estimate of lost UK business income due to Covid-19, is £650 billion, which dwarfs the £18 billion of gross written premium received by UK commercial insurers for the whole of 2019. How could the insurance industry make a living out of that?

Ultimately the solution may be a sort of Pool Re, for pandemics. But would the government agree to such a partnership? On the one hand the state does effectively underwrite the entire economy, as we have seen in the current pandemic. On the other, businesses make a living by managing risks that they understand and can manage, and insuring away others. Good businesses are rewarded for managing the manageable risks and this incentivises them to take precautions and learn how to mitigate them. If the Government underwrites the unmanageable risks anyway, would industry simply decline to pay premiums for such cover?

With the insurance industry struggling to provide cover for terrorism and pandemics, and the risks of supply chain disruption and cyber-attack, needing cover, the potential extensions of the private/public insurance partnership is a fascinating opportunity.

Our final speaker was Mark Howarth founder and Managing Director of MCH London – the Responsible Advertising Agency. He has over 12 years experience in strategic marketing partnerships and consultancy, media campaign planning and client services. He has co-created award-winning work for global brands including  The Drum Media Partnership of the Year 2017  for FT Weekend and Google Hidden Cities project. He also sits on the International Advertising Association Professional Development Committee and is dedicated to coaching and mentoring media professionals.

Mark highlighted the importance of responsible advertising.  Across all sectors of the advertising industry, modern technology has advanced so quickly that ethics haven’t been able to keep up. Technology has outpaced ethics in advertising, he said, and although the industry is probably “responsible” overall, he suggested that it has a trust issue. In fact advertising agencies are less trusted than estate agents and politicians, and this he says needs to be remedied. 

To this end MCH is a member of the Conscious Advertising Network (CAN), a voluntary coalition of over 70 organisations formed in 2018  to demand that ethics catch up with the technology of modern advertising, by highlighting the conscious choices that brands and agencies can make to ensure good practice. Mark outlined the six manifestos of CAN, which highlight areas in which advertisers can make a difference:-

Anti Ad-fraud : Ad-fraud should be eliminated

Diversity: The industry and content it produces should be as diverse as we are 

Informed Consent : Consent should be informed and people seen as active participants in their online experience

Hate Speech: Hate speech should not be inadvertently funded by brands

Children’s wellbeing : Advertising to children should be age appropriate , promote positive values and avoid glamorising negative behaviours 

Fake News: Advertisers must take the responsibility to ensure that they don’t fund channels that fund fake news, click-bait and any intentionally misleading content

Mark described how, in line with its values, MCH had sponsored the first ever MCH.London virtual boat race, in which two teams representing Oxford and Cambridge competed from the comfort of their homes. Rowers included Olympic, Paralympic and club rowers. Rowing for Oxford was three-time Olympic champion Pete Reed, who was paralysed from the chest down after a spinal stroke in 2019. He was joined by Paralympic champion Grace Clough.

Five organisations collaborated to stage the event after Mark was introduced to John Willis – Founder of Power2Inspire, the charity that drives inclusion through sport. Initially MCH came on board as marketing and advertising advisers, then took on the role of project managers, and ultimately sponsored the event.  Mark brought on board Give as you Live and Small Films, and GingerMay, the multi-award winning strategic marketing and PR consultancy.…. and the race was won by Cambridge!