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02 February 2021 | 10-minute read
Blueprint Two published in November 2020 distinguishes itself from other London Market transformation attempts over the past 20-30 years by setting a clear vision for end-to-end modernisation of business models, practices, process and systems: from risk submission, to claim settlement and risk renewal and everything in between. Other attempts - some successful, some not - addressed parts of this lifecycle, but not holistically and certainly not at the same time. To quote Robbie Williams: ‘She’s the One’.
The ordering of modernisation impacts with systems at the end was deliberate. Let us remind ourselves that technology serves as an enabler of change. This has to be a business-led endeavour from the start, with primary focus on ‘what’s in it for the customer?’ and the positive business outcomes targeted all the way through the value-chain and the beneficiaries of those. Of course, we cannot overlook the reasonableness of costs of getting to this improved state of affairs, both for Lloyd’s centrally and all the organisations who need to adapt to get the benefits. The question is, who can afford not to do this?
One final thought in these opening comments: while all this is going on at the centre, market organisations will continue to innovate and improve by themselves for themselves and their customers. Perhaps some will leap-frog Blueprint Two intentions, and perhaps some have already done this. It is critical that the central programme keeps abreast of what is happening outside it in the market and open to the possibility of smarter solutions coming along that deserve consideration and potential leveraging within the central market solutions.
‘Are We There Yet’?
- The architects of London Market Target Operating Model (LM TOM) promised much with the ‘One Touch’ data processing concept stringing data together seamlessly from risk placement to payments and you have to admire the ambition that goes with taking on the behemoth of delegated authority data. It does however beg the question: ‘did anyone show the builders the blueprint?’ and claims was invited to the party late. If delivery had been a bit more joined-up and Application Programming Interface (API) led integration between software vendor platforms and central services given more attention, would we still be living with the disconnected processes and re-keying of data we have today?
- The Electronic Claim File (ECF) delivered by Xchanging 13 years ago swapped paper for images of paper and some accompanying data flow. Brokers flocked to it, suitcases of claim files disappeared, days were shaved off the end of the claim notification and settlement cycle - all very welcome and rightly celebrated at the time, but not the ‘digital transformation’ now promised with Blueprint Two that aligns with policyholders’ expectations.
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I recall seeing an early version of the RI3K platform (a predecessor to the PPL we have today) over 20 years ago which aimed to transform the placement of reinsurance and had a ‘button’ on the screen named ‘Citibank’, teasing with the potential for reinsurance premiums to move seamlessly and automatically from cedant to reinsurers without the multitude of handoffs we still have today via their brokers and London bureau service. Hats off to Messrs Letts, Merttens and Meadows. A solution ahead of its time? Probably not, but certainly a business model change landing in a market without the appetite to embrace it whole-heartedly at the time. Alas it took another 15 years for the base e-trading platform to gain real traction (in LM TOM times) ....and still without the bridge to payments.
‘It’s All About the Data’
Hasn’t it always been? 2021 is the time to move from the thinking and theorising of last year to detailed design, build and adoption of what’s delivered. Data is the solid foundation on which this is built - models, standards, APIs - let’s get all that right. An irrefutable Core Data Record which starts to be assembled through the risk placement process and is written into the Digital Spine data store at the end of the placing process is the key to unlocking awesome operational efficiencies right across the value chain. Let’s not get preoccupied with achieving this for 100% of risks from the start. Realising this for 80% would be a remarkable step forward and avoid the law of diminishing returns and ‘rabbit hole’ that comes with trying to crack it for the most complex and difficult cases. This might also quieten some of the ‘nay-sayers’ fixated on the difficult and exceptional 20%. The panacea of a fully automated, end-to-end solution for all business has to remain the goal; but surely not the ambition for the early releases. There is still a role for people to play in post-placement administration (until machine learning AI gets its head into exception handling), but that’s going to be higher-up the value-add curve than today and require some re-skilling over the next 5 years.
‘Go Big or Go Home’
And we now have the grandchild (or great-grandchild) of that RI3K platform mentioned earlier powering PPL....until the Next Generation PPL platform is among us. Now this is where it gets exciting as, through the power of data standards, ‘Next Gen’ PPL (snappier name required) and other ‘trusted source’ electronic trading platforms will seamlessly integrate with downstream central Digital Processing driving automated technical accounting and settlement (some nett, some direct) and related tax and regulatory reporting (for Lloyd’s operators) and reach across to do the same for a new claims orchestration capability; all powered by an irrefutable Core Data Record (which I think sounds eerily similar to the ‘Common Core Record’ of the early 90s for those of you who lived through that). Days / weeks / months of delay, queries, to’ing and fro’ing and frictional cost as transactions pass through multiple middle and back office operations are up for grabs if we get this right. That has got to be good for everyone’s customer service and operating expenses, right? Who knows, maybe one day it translates into more competitive pricing for the brokers and carriers who grasp this transformation nettle. Unlike the efforts in the Nineties and early Noughties to snap electronic accounting and settlement into the back-end of stand-alone e-placement system data models designed years earlier; this time it’s all being thought through and the end state in not ‘placing complete, or ‘signed down risk’ but ‘premium paid’ and ‘claim notification received, adjusted and settled’.
‘Hold on Tight for the Ride’
Of course, setting the ambition as ‘end to end transformation’ makes this by far the most complex programme attempted in my London Market working life and not one for the faint-hearted. Helpfully there is an abundance of analysis and learnings from relatively recent LM TOM efforts available to be drawn upon. Some organisations may be distracted by hard-market opportunity for as long as that lasts. Certainly make the most of that, but please don’t ignore this. New digital-experienced minds alongside market experienced SMEs is a powerful combination, but that alone will not be enough. There will need to be a step-up in market engagement in 2021 to ensure market opinion continues to be heard through design and delivery and keep a sense of ‘done with’ not ‘done to’ the market. This has to be a Future at Lloyd’s and London Market programme – born in London but extending to overseas Lloyd’s platforms - and the proliferation of ‘dual platform’ operators in Lloyd’s will surely not welcome or accept different operating models being imposed on the very operations they’ve been trying to align, integrate and standardise for years. Regulators will take a keen interest in the end-to-end resilience of the ‘connected service chain’ like never before. Start-ups should steal-a-march over the competition unencumbered by legacy systems and processes and the brokers, most likely, will be highly influential in how and when the transformation starts to bite and how long the old and new ways have to co-exist. How loudly the brokers’ voice is heard in 2021 will be significant.
Transition planning, adoption thinking and heightened, early engagement with market organisations, in particular the software vendor community, will be just as important as the build and delivery happening in parallel. Organisations wanting to embrace the opportunities will need to be thinking now about how, when and where business practice is impacted; what they need to be doing to get ready to consume the new or revised services and how these new business practices will require capabilities they just don’t have (enough of) today. It will be something of a coup if the “Future at...” programme is able to devise innovative ways of making is easier than ever before for market organisations to adapt, adopt and parallel run old and new for the shortest period possible... just thinking about that as I type is making my head hurt.
So how does Future at Lloyd’s – and I am including the Future of the Underwriting Room / Virtual Room in that – offer something for everyone, embrace and deliver standards for all, but not compromise the Lloyd’s brand and the attractiveness of Lloyd’s to capital providers and existing and potential customers? Lots to keep us all busy in 2021, but my oh my what an exciting, mouth-watering prospect this is.