Post, in association with WNS, held a roundtable with London market leaders, to discuss whether Lloyd’s modernisation is gaining momentum, and what the state of play is for the technology drive
Last year, previous Lloyd’s CEO Inga Beale warned that modernisation of the London market was essential for it to continue to survive and prosper.
Beale added that she believed that a corner had been “turned” and where there had previously been scepticism, there was now optimism.
For all her positivity though, there are still some who remained unconvinced that Target Operating Model will deliver the necessary results to justify the expense.
With this in mind, Post held a roundtable, in association with WNS, to examine how TOM is progressing.
Attendees were generally positive about the extent to which the market is embracing technology, though acknowledged there is more to be done.
“It feels different. Because we’re embracing technology properly for the first time and we’re seeing results from it. There’s a long way to go to make Lloyd’s a leader. I really do think that. But, if the question is, do we feel positive about it, I certainly do, on the basis that it hasn’t happened before,” one attendee said.
“We all know that Placing Platform Limited isn’t the perfect system, but what system is first time around? Let’s not get too despondent about that and the bad press. Let’s think about the big step that has happened and where we take it forward from here,” they added.
Another said: “We all perceived it as being a unique selling point for London if we got it through and, therefore, we did work hard together to achieve that. That is one thing that stands out for me as being really different from the last times we’ve done it.”
The market is becoming increasingly involved in the process of modernisation, according to another attendee that had recently signed up for the platform.
“Certainly, in some of our underwriting lines, the underwriters are now actually looking for opportunities to grow and to use the thing. As opposed to them feeling, ‘I’ve got to do this thing.’ Most of the IT initiatives that have come along in the past, they’ve reluctantly agreed to change their process, but really wanted to carry on like they’ve always carried on. Now, we’ve got people thinking, “How could I use this to my advantage?” and that has been an interesting shift that we’ve not seen before.”
Attitudes may be changing, even among smaller Lloyd’s brokers, but delegates agreed that it was the mandate that a certain percentage of business must be placed through the platform that has driven this.
“For a small Lloyd’s wholesale broker, yes, it’s the mandate,” said one. “Plain and simple, it’s the mandate. For two reasons. One, it’s a mandate, you’ve got to do it. Two, it means it’s real. It absolutely means it’s real. Until it’s mandated, it’s just the big boys playing.”
An attendee who had been involved in the project from its early stages said: “It was interesting, the background conversations about how we got to the mandate. Really, the whole market was working together, saying, ‘We need to do this. So, that’s got to get paid for.’ I remember I was looking at it and going, ‘In two years’ time, you’re going to be back into the conversation. If we don’t have mandate, everyone has got to stump up lots of money.’
“You’ve got to get it over a tipping point, so that you can see the unit cost. PPL and the transaction cost. You can stomach that. It’s not brilliant.’ But, equally, everyone can say they know what they are paying for. It’s coming through.’
However, while the mandate may have positively influenced take up of PPL, it has pushed some early adopters to reconsider working on a collaborative project until it is put in place the next time around. The task was “thankless”, according to one.
They said: “As somebody who started in 2016, we’ve already made policy decisions. But we’re going to wait next time for the mandate. Let’s wait for the mandate. Because it’s painful going through all this lead work. Money is not the thing. This all comes from behaviour. It’s nothing to do with money. It’s painful.
“Next time anybody asks us to do any voluntary type of market modernisation thing, our view would be let’s wait for the mandate. Wait for it to get serious. Because, otherwise, it’s just a few people who are doing all the heavy lifting and it’s a thankless task.”
Others disagreed that it made sense for larger firms to opt out until after the early stages, or that putting a mandate in place earlier would have been effective.
An attendee said: “By the time we mandated PPL, for financial and professional lines, 60% of the market’s business was being transacted on PPL. So, we had a proof point that the market could look at and say it works. In 2016, if we had just mandated it, we would’ve got a lot of people saying it doesn’t work. You couldn’t say that when it was mandated because we could prove to one line of business that it did work. DA audit, no mandate, 100% adoption. DA SATS, no mandate so far, but look at the adoption that we’ve got on that.””
Another added: “That’s absolutely right. We could’ve mandated it six months earlier maybe, but certainly not at the beginning. We had to rebuild the whole endorsement module on the platform, if you remember. It wasn’t fit for purpose right at the beginning. One of our senior marine underwriters said to Shirine [Khoury-Haq, outgoing Lloyds chief operating officer], ‘You’ve taken away my matches and given me a flint and a steel. It’s just not good enough.’ That was real business that was being impacted. We’ve had to let it bed-in. It was the right thing.”
“With the leverage that we could go back to our businesses and say, ‘Look, they’ve made all these changes. A lot of the things that you’ve been complaining about in terms of it being clunky, has now been released and has been changed. There’s no real reason now for you to start moaning.’ But that was a big release and a real turning-point. The mandate came soon after,” echoed one attendee.
While it was originally C-suite individuals that drove TOM forward, the dynamics have now changed and enthusiasm has trickled down to other levels in the industry, attendees believed.
“A lot of this started from the [Boston] Consulting paper, the London Matters paper. That was 2014, and then obviously it refreshed it in 2017 as well, which obviously showed the fact that while we were still growing, we were actually not growing at the same rate as the competitor markets. That very much was the catalyst for a lot of this stuff,” one attendee said.
Another added: “That BCG report really was CEO, top level, looking after the future of the market and the standard, it resonated with them. Then you have to get into the PPL brokers and underwriter practitioners. You’ve got to build it bottom-up in DA. That’s why, at all the levels of what we do, we have to be clear about what is the reason for change.”
Pushing for accessible change at all levels is not unique to insurance, another said: “You know what? That is true in any industry. You’ve got to be able to ask, ‘What’s in it for me?’ How do we answer that question, and how do we do the change in a way that more or less does that?”
Diversity and inclusion
The projects may be geared towards modernising the market, but they are having further good consequences in areas such as diversity and inclusion.
“There is actually a D&I angle to this as well. It’s not everybody’s bag to come into the city, EC3, 9am to 5pm, five days a week. You don’t need to anymore. We can underwrite, we can do an awful lot of those jobs from anywhere and from any time. We’ve got underwriting teams now with flexible working and job-sharing. That is a really important step forward for this market,” one underwriter explained.
Another attendee added: “On the D&I point, I do a lot of that work in the market and at Lloyd’s as well. The number of men who have come to me and said, ‘Goodness, it’s really nice to be able to work from home, or just spend time with my kids, or drop the kids off.’ I didn’t know that men said that a lot. But to be able to give them the opportunity to do that, as well as the people you automatically think of, women and mothers, it really does so much for our market and attracts talent.”
TOM is also expected to bring benefits to customers, but it is not yet paying dividends in this regard.
One attendee said: “I don’t think any economics have flown back to the customer yet. That needs a few more years to work through.”
However, customers are starting to take notice of the changes and what they could mean for them.
“It’s an anecdotal story, but I was at a conference and there was a coverholder. We were talking about what we doing, and they just said, ‘I’ve been reducing the number of relationships I’ve got with the London Market, because you’re too difficult to deal with. Now there’s all this new stuff coming in.’
“Literally in front of you the person’s light turns on and says, ‘Okay, great. Now I can rethink about what I could start to do and order compliance, bordereau, you’re just making it easier.’ Especially when you can start again through some of the straight through processes, which is down the line. That’s why it not only makes it easier, but it really brings business into the market.”
Insurance Silicon Valley
The Lloyd’s Lab is also driving positive change, delegates said, and there is ample opportunity to build the London market into a pillar for innovation.
One said: “We probably have the best region in the world to do this. Because you’ve got the Silicon Roundabout up the road, the best fintech scene in the world, one of the largest global capital markets, the best insurance market in the world. So, if all those pieces are combined, you’re right, this could be the Silicon Valley of insurance.”
“In terms of developing the product and feeling in a collaborative environment, where you can actually create something and not have to write it 100% but share, that is quite a unique selling point for the London Market,” another added.
However, some were not convinced that there is not more to tackle before this could be a concrete reality and there is an “elephant in the room”.
One commented: “But the problem is actually in large part the bureau. The bureau is woefully out of date. It’s woefully under-invested in. I don’t know what the thinking is. The bureau is the back office of all the subscribing insurers, the Lloyd’s Market Association and the International Underwriting Authority. It’s their back office and it’s treated so badly.
“If we treated our back office the way the market treats its back office, we wouldn’t have a back office. I do think that the bureau is the elephant in the room for modernisation.”