It's time for us to 'do' technology

We all know the argument: to drive efficiencies and lower costs, we are supposed to be embracing technology. Few would argue with this simple logic when phrases like 'streamlining', 'simplification' and 'time-saving' are sprinkled liberally into the debate on this subject. But when technology means changing work practices, these messages risk falling on stony ground.

The conventional view, it seems, is that technology is a good thing - as long as it's other people who are doing it instead of ourselves.

But conventions should be challenged, and on this point I am pleased to see a change in attitudes over the past couple of years. Significantly, discussion is moving away from the perceived benefits of technology to the pitfalls of implementation - a good sign that we are getting down to the nuts-and-bolts issues at last.

Although many factors account for this change - not least the realisation that our banking neighbours seem to be making a success of it - greater regulatory scrutiny is undeniably a key driver in making the case for paper-based transactions untenable. Transparency broadly translates to standardisation of process, if not product, and even with the most basic grasp of computing principles, the link to technology is clear.

But each company independently working at implementing its own standardised systems is not the answer, and the main thrust of recent efforts has been to bring about a broadly based collective agreement on processes and standards.

ACORD implementation via XML coding (eXtensible Markup Language, which is designed to describe data), marks an important advance, drawing together the standardised forms that will underpin standardised processes. While it has been in development since the early 1990s, previous reliance on EDI and various legacy systems posed a barrier to accessibility and thus to appeal. If the zeal of the convert is betraying me, it is because XL Re has firsthand experience of the efficiencies of the standard and is working to migrate more of its broker relationships to ACORD messaging.

Likewise, the adoption of the London Market Principles (LMP) slips in the UK is creating the necessary standardisation for the development of contract certainty in the next few years. With the threat of capital loading hanging over every reinsurer, the case for standardisation has never been stronger.

While it is successful in satisfying the regulators, it is also exposing the need for a more focused look at certain practices - notably, the lead-time for renewals. Starting negotiations in November or even December for a January 1 renewal may always have been wishful thinking, but with the end of "deal now, detail later", it becomes impossible.

While these standards are helping to create efficiencies and enforcing reforms in their own right, commercial drivers are also contributing to changes in the way business is transacted. Trading platforms are positioned to facilitate the mundane tasks involved in a reinsurance contract, again through standardisation and collectivisation of placing and agreeing risks.

Although the systems have had teething problems and can still be considered as works in progress, they are already proving their worth. Again, the XL Re companies have experienced success with one such platform for facultative business in the US, and is fortunately able to commend from experience.

When efficiencies can be achieved, business as a whole benefits. In the case of trading platforms, the role of the broker changes, perhaps explaining a certain reluctance to promote these services. But since it is only through standardisation that technology drives efficiencies, it is not really a threat to the role the broker plays in the value-added services, such as modelling and analysis.

In fact, if brokers can reduce the time spent on low-yield activities, they can arguably improve their standing in the market as added value producers, and in turn improve their own long-term profitability.

While it is fair to say that we have all dragged our feet for too long over implementing technology, the advantages are now clearly gaining critical mass. Even if some are reluctant to adopt full on-line trading, the flow of information between broker, cedant and reinsurer is now typically automated, and the prospect of a paperless industry does not seem as absurd or remote as it once might have.

Are we there yet? Alas no. We still have a long way to go before we can compete with the banking sector on transparency and transactional efficiency, but at least we now have most, if not all, of the right components in place. The biggest challenge now is the psychological adjustment of accepting that we 'do' technology - and that it's good for us.