Going electronic; positioning the London market for the future

Authored by AXA XL

The concerted effort to achieve digitisation in the Lloyd’s of London and London marketplaces continues apace. Fuelled by the necessity to work in different ways because of the global pandemic, the market-wide drive towards digitisation has started to deliver real efficiencies. Chris Read, Chief Operating Officer, UK & Lloyd’s, and Luis Prato, Chief Underwriting Officer, UK & Lloyd’s, discuss the need to seize on this momentum and continue the drive to modernise the way business is done in the world’s longest established insurance marketplace. 

There has been what feels like a seismic shift towards electronic placement in the London market over the course of the past 18 months. The need to modernise and improve efficiency has been talked about for some time now. But two main drivers – a concerted effort by the market and the effects of the COVID-19 pandemic – have served to push this effort forward by leaps and bounds.

As part of this modernisation, CEOs, COOs, CTOs and CIOs across the market have been working hard to drive more electronic placement to improve efficiency, reduce costs and keep the marketplace competitive and relevant. And the acute situation resulting from the global pandemic gave extra impetus to this effort; there’s been a significant move towards online placement because we’ve had to do it – we’ve been unable meet to put a stamp on slips, so we’ve had to do this electronically, to name just one example. 

The time to enact real reform has certainly arrived. 

Towards a digital marketplace

Central to the Lloyd’s and wider London market success is the intellectual property and creativity that thrives in a marketplace built upon the subscription model. 
We need to find a way to retain that – and indeed promote and encourage that – while reforming the processes around the placement of risks.

We, alongside our peers in the marketplace, have been working closely with Lloyd’s to help deliver its Lloyd’s Blueprint 2.0 plan. Blueprint 2.0 is an ambitious two-year programme, which kicked off last autumn, aimed at delivering profound change in the Lloyd’s and wider London insurance market. The programme targets establishing new ways of doing business, underpinned by digital channels, to enable better data collection and management. The programme envisages cost savings of at least £800 million for market participants. 

Lloyd’s wants to create a digital marketplace with a straight-through process for placing and binding risk and better tracking of claims to enable swifter settlements. This will be of huge benefit not just to underwriters and brokers but, ultimately, to our clients. 

A lot of good things will come from having an improved tech platform. Firstly, it will help improve the speed of service and response. If we have more accurate information, coming to us in a very structured way, we will be able to react much more quickly to the needs of our clients and brokers. 

If the market can come together and agree a set of standards on the basic information needed for risks to be placed, then that will avoid the need for duplication and will speed up the process. Currently, too often risk information is entered multiple times; the market needs to create a seamless process where information flows through the system avoiding this time-consuming duplication.

Aside from improving speed of response, another significant benefit to clients of an improved digital placement process will be that it will reduce costs. This will translate into an ability for us, as underwriters in the London market, to be more competitive on price. 

Going further

Most participants in the Lloyd’s and London market have reported record numbers for online placement in recent months. Our own figures show that, at AXA XL, we’ve well exceeded Lloyd’s targets, with more than 80% of our business at Lloyd’s now being placed electronically. 

This is welcome news. But there is still much to be done to both achieve a full-scale shift to electronic placement and to go further to make the way we do business in the London market truly digital.

Lloyd’s has made great efforts to ensure that there is flexibility in the 2.0 plan and recognises that one-size-does-not-fit-all; a single fixed solution will not work for everyone. Lloyd’s also has recognised that the solution needs to go beyond the Lloyd’s market and incorporate the wider London company market too. 

A business like ours, however, is global – we need digitisation to be workable across the entire insurance marketplace. And to enable that the market needs flexibility and systems that can work together. 

In the banking sector, open architecture is being used to move towards a more customer-centric model and better distribution. Simply put, an open-software architecture enables additional modules to be added to a basic framework. We think this is an interesting example that could be used to good effect in the insurance sector too. Moving towards digitisation is about trying to improve the experience for our clients and delivering value, while preserving the unique features that make the London market so special. 

To digitise the London market, we need a set of core data standards to which all market participants can align themselves. As we’ve mentioned before, there’s not a one-size-fits-all solution to this – we need to find a flexible way to make this happen. One way we think the process could be improved is to use Applications Programming Interfaces (APIs), which effectively enable two different applications to ‘talk’ to one another. 

We’ve been working on several proofs of concept to create more bespoke solutions to enable us to work with our brokers and clients on some of the more complex business that comes to us via Lloyd’s and the London market. 

The past year-and-a-half has been a period of immense change and progress has been made. 
There is, however, much more still be to be done to modernise this marketplace to retain its competitiveness and to enable us to continue to serve our clients by underwriting their complex, specialty risks in a cost-effective, efficient way.

We have the momentum. Now we all need to continue the push to make sure that the next 18 months deliver still more change that delivers real value to clients.