We have been talking about technology in the London market for a very long time. For most of that time, we didn’t make much progress.
That was then.
Today the London market’s conversation about technology has changed. It is a subtle difference, but an important one. We have achieved a new consensus on the need to digitise.
In this market, underwriters and brokers have always (rightly) been protective of their relationships. The challenge to technology has been to compliment and enhance those relationships, not to threaten, diminish or replace them. These challenges are not insignificant, and have no doubt influenced conversations about digitising the way we do things. Think about Air BnB or Uber or how we use our credit cards today.
However, we are making progress, and today the conversations are about which specific technology is best for individual businesses, for reinventing processes, or for making the market as a whole a more efficient and attractive choice for our customers.
We’ve switched from “should we” to “how do we…”
The market’s ongoing conversation about technology is now framed by the assumption that a digital reinvention of London’s entire approach is essential. I appreciate that this distinction may not be apparent externally, but that is exactly what is happening.
Naturally some are more enthusiastic to embrace change than others. The majority are somewhere in the middle. But awareness of the necessity for change has permeated the market’s psyche. We have at last reached consensus to make the journey. Now we are talking about which road to take.
The destination is a place where the London insurance market remains relevant in a changed world. That’s code for creating a more efficient marketplace that is more attractive because it supplies useful, innovative, economical products and premium levels of service to insurance buyers around the world. That can only be a digital marketplace.
Agreeing that’s where we need to go is a big step forward, but we still have many barriers to overcome. One is the challenge thrown up by London’s embedded business culture. It permeates our market from the post room to the board room.
Here’s a quotation from a data expert about the challenges involved in making effective use of technology: “Success in the digital world requires m ore than rethinking technology. It requires reshaping culture, processes, and organisational structures around customer experience.”
Here’s another: “The road to success lies with digitisation, but it can be hard to bring a traditional industry into the digital age. The industry is still heavily reliant on tried and tested, partially manual processes throughout the front and back offices.”
The people who wrote these words were not talking about our industry. The first quotation is about the challenges of digitalising the banking industry. The second is about the investment market. But the sentiments have great resonance for everyone in Lloyd’s and the London insurance market.
We need to extract ourselves from the weeds of Lloyd’s introspection. We need to change the cultures that have become entrenched throughout our market and the individual organisations it comprises.
Culture change that’s limited to the board room or the executive suite will be insufficient. Digital epiphanies confined to the COO’s office or technology teams will not be enough. A culture of digitisation among brokers won’t benefit anyone unless it is accompanied by a digital revelation for risk carriers, MGAs, and claims administrators.
I know it’s a huge challenge and that meeting it will involve some sacrifices. To do so we will need to adopt a broader vision.
The desire to look outwards from the weeds must infuse all of our traditional organisations. When we accomplish that, we will see that we are not alone in our need to adapt to the changing, tech-fired world of business. We can then reflect on and learn from what others are going through, because it isn’t much different.
When we have done so, we will be better able to understand our clients and their business needs, since they too are experiencing the same dramatic changes and challenges brought about by digitisation. That will allow us to deliver an even better service, one that is more responsive to their needs. As Alan Greenspan said “Manufactured goods can often be evaluated before the transaction. Service providers on the other hand can usually only offer their reputations.”
Our goal in all this must be to build completely connected individual organisations that link seamlessly into a digital marketplace where everything works together in the best interest of the end client. Every system will need to interface with all the others. On this front, we have a lengthy road to traverse.
Anyone waiting for a digital ‘big bang’ will be disappointed. Change will take time, and comprise multiple discrete accomplishments. The market’s journey to a completely digital ecosystem will involve many incremental steps. Some will be taken jointly, and others are for each market participant to decide upon themselves.
It’s hard to believe we’re still re-keying data. Still, in 2019, when ten carriers are on the same risk they typically each re-enter the same data, manually, multiple times. They key it into policy underwriting platforms, administration systems, aggregation tools, and yes, into PPL.
This process can bring secondary costs, since so much re-keying often introduces errors. But we don’t really know the total burden. A detailed analysis is the first step in understanding what we can do to reduce specific component costs, and therefore where our immediate emphasis should be focussed.
Within specific functions, we need to achieve end-to-end to digitisation. Consider claims. We need to break down the process, isolate the inefficiencies, figure out how technology can overcome them, then implement the most appropriate technological solutions. The solutions are already there – we need to focus on implementation and adoption.
Ultimately, we need to digitise the entire process, all the functions, from end to end. By saving costs though early wins, we will yield the resources – by which I mean cash – to fund the rest of our digital journey.
Because of the need for relatively quick, cost-saving wins, even our recent approach has been necessarily piecemeal. We have worked very hard to digitise specific parts of the process. As much as that work has been extremely successful so far, we have left other critical business processes in the digital long grass.
If the entire process from quotation to claims settlement has ten steps, we may have digitised steps three, five, and eight. That’s a big achievement, but it’s not much use until we have done the same for the remaining seven steps. Without that, we must print everything out and rekey it when we get to the end of step eight.
Getting past those obstacles requires us to have a helicopter view. We need to look at the entire process, the forest not the trees, from the moment a risk is presented until a claim payment reaches a customer. We need to find every sticking point, and drench it in technological solvent.
It isn’t something we have achieved so far, but the vision is there. I have no doubt that, by all parties working together in unison, we can improve at several points along the way by deploying technology, and reduce our own costs at the same time.
Ultimately, we need to make the entire process digital, easy to use, and intuitive for all participants in the chain. This, I should emphasise, should not be our over-arching goal. It is instead a means to an end.
When our end-to-end process is fully digitised, we will be able to deliver products to our customers that are even more responsive and cost-effective. That is the objective of London’s digitisation journey.
We are getting there, a step at a time. Take the Lloyd’s Coverholder Workbench. This new technology has been designed from the ground up to work seamlessly with the market. It satisfies reporting requirements, and interfaces smoothly with DA SATS, Lloyd’s new bordereaux management system. Workbench is a solid step forward, but an incremental one.
I have no doubt that, when all parties are working together in unison, we will achieve true digitisation success. It will only come about as the product of multiple efforts, some market-wide, some individual, and some through joint ventures.
One example of the latter is InsurWave. It’s a blockchain platform that supports marine hull insurance buyers, brokers, and underwriters by preventing fraud. It’s the result of a joint effort by the tech company Guardtime, and others including two Lloyd’s insurers, a major broker, and – perhaps most importantly – the shipping giant A.P. Møller-Mærsk.
Maersk’s head of risk management is explaining that system right now to the people who chose Stream Three. Previously he said InsurWave will help his company to “automate manual processes and alleviate a range of inefficiencies and frictional costs arising from the usual way we have traded marine insurance”. That set of outcomes is one we would all like to achieve.
Another example is the placement platform developed by the software house Whitespace. It has been recognised by Lloyd’s as an alternative to PPL, which means certain contracts placed using the system are eligible to count towards the market’s mandated electronic placement requirement. Some managing agencies and brokers have also developed “recognised” platforms.
The LMA has been heavily involved in the market initiatives that I have mentioned, and more. Not all of them involve the underwriting process. For example, with the support of Lloyd’s and others the LMA has backed the McKenzie Intelligence Service – a company set up by former UK government special forces personnel – to provide data feeds and satellite images that help insurers to assess the damage caused by natural catastrophic events.
The MIS system was particularly useful in the aftermath of recent the US hurricanes. It gave underwriters instant ground-truth about what had actually happened.
One claim that came in was for windstorm damage to a hotel. The syndicate underwriter was able to check the structure, which initial aerial photography suggested was relatively unscathed. However, before-and-after satellite images showed that the building had actually moved several feet from its original location. No need to hire an adjuster to get that case moving, then!
I could cite many more examples. All of them contribute to the enormous joint effort to digitalise the Lloyd’s market. Each inserts another piece into the jigsaw, solves another problem, or identifies a new challenge to be addressed.
In that respect, the journey is as important as the destination – and we are not travelling alone. Such co-operation is typical of developments within the London market ecosystem. We have always been in a market that achieves much more by working together, even in the days of the coffee house.
Today our joint effort to digitise is reinventing the London market piece by piece, but the co-operative ecosystem remains, updated for the twenty-first century. All Lloyd’s participants, from managing agencies and brokers to MGAs, third party administrators, claims experts, and software developers, remain dependent upon one another.
Symbiotic relationships exist across our unique marketplace. They sustain it. We have grown up together over hundreds of years. Our evolution means we are able to deliver enormous value to customers, and innovations in risk transfer to the world.
To sustain our hard-won leadership, we must harness even more technology, then stitch the digital processes together. If we do not, we risk falling back into our old, inefficient ways. We need to think differently. We must foster innovation, nurture it, and create the opportunities that allow it to grow.
I am confident we will. Lloyd’s has proven itself to possess incredible adaptability, flexibility, and an ability to bounce back. But how we work is just as important as what we do. We have always been innovative when it comes to what we do – we’re famous for it. Now we need to embrace new ways to do it, and apply our innate innovative sprit to the process.
Each of us needs to take the initiative. There’s a perfectly understandable tendency in some quarters to wait until the market sorts out solutions, then climb aboard those that suit us. But that way lies obsolescence, and its cousin irrelevance. It is not the road we wish to travel.
As I have said, digitisation won’t happen over night. The process won’t be “finished” by this time next year. The shift to a digital marketplace is a long-term challenge, one that has been engulfed in noise for many years.
The more that market bodies, managing agencies, broking houses, insurTechs, and our clients too work together to explore new ways of working, the better the end result will be.
So, let’s keep the conversation going. Our journey is a long one, but we’ve set out, and we know where we’re going. Let’s all enjoy the trip!