What Next for Modernisation of London’s Insurance Market?
England has long been an international capital for insurance and finance, with bespoke policies, expert brokers and competitive prices drawing consumers from around the world. The year 2014 saw Britain exporting almost 100% more insurance and long-term savings than their closest competitor, the USA.[i] Much of this thriving industry is thanks to the London insurance market.
The world-renowned insurance market place, Lloyd’s of London, has been in operation since 1686. Even 330 years ago, Lloyd’s was ahead of its time, monopolising sectors of the market. Over the centuries, Lloyd’s has continued to develop in line with a changing market place, in order to stay at the forefront of the insurance industry.
In spite of this worldwide success, it is no time for the London insurance sector to become complacent. In recent years, London’s global export of insurance has begun to slow down, with competition from innovative start-up companies, benefiting from lower overheads and ground-breaking technological advances.
Some time ago, Lloyd’s came to the realisation that modernisation was critical if they wanted to retain their leading edge, and began to plan new changes. Seeking transformation for such a huge market place has not been an easy task.
A Target Operating Model (TOM)
A Target Operating Model was initiated several years ago to completely overhaul the current system. The TOM involved 48,000 professionals from the London Insurance Industry at a cost of £250 million. It aimed to boost efficiency and make London an easier place to trade for insurance professionals.
Unlike older attempts to reform the industry, this TOM was expected to be more successful, due to the wide range of input. This overhaul was financed by insurance brokers as well as insurers, meaning that a wider range of the industry was on board with the modernisation. Some experts believed that the fact brokers had not fully engaged with previous attempts at modernisation had held back the efforts.
A Digital Overhaul
While 78% of London’s insurance market’s syndicates and brokers have a vision for the future of digital technology within their companies, 43% feel that they are being left behind in terms of implementing these changes.
It’s clear that digital modernisation will be vital in the overall modernisation of the market. The TOM looked at a number of ways in which efficiency could be increased, using modern technology, including Artificial Intelligence.
While this TOM resulted in a number of positive changes, there was some disappointment that it did not achieve everything that it set out to do.
An Unknown Answer?
One participant in the TOM initiative suggested that it was not going far enough and that in order to continue to hold the market share that they currently do, a completely new model that allows them to “dominate” the market had to be developed. The individual suggested that this new perspective would result in success such as the way that Airbnb and Uber have dominated the bed and breakfast and taxi industries respectively with their innovative solutions. The indication was that the actual solution may be something currently unimagined.
The Future at Lloyd’s
This unknown answer may be closer than we think. Last year Lloyd’s chief executive launched an initiative known as the Future at Lloyd’s, later producing a “Blueprint One” to explain the plans for these changes. Changes include the use of technology to speed up and lower the cost of processing less complex risks; a way to efficiently place complex risks; quicker claims payments and a better service.
[vi] In recent months, Lloyd’s has taken advantage of low interest rates to secure £300 million to invest in the digital technology to realise these objectives.
It is hoped that this financial injection into implementing these changes will allow a successful delivery. It will all have the stringent oversight of Lloyds’ board and council. The program delivery of the technology and transformation committee will be led by Lloyd’s chief operations officer, Jennifer Rigby.
Waiting for the Future?
This month, Lloyd’s is planning to publish details of the strategies and objectives of the first stage (phase 1) in the Blueprint 1a document. While Lloyd’s chief executive, John Neal states that he has “every confidence” in these new modernisation plans securing the Future at Lloyds,
[ix] no doubt thousands of brokers and insurance employees will be holding their breath, as they wait to see what the Future holds.
A bright Future
This month, Lloyd’s is planning to publish details of the strategies and objectives of the first stage (phase 1) in the Blueprint 1a document. Lloyd’s chief executive, John Neal is extremely positive, stating that he has “every confidence” in these new modernisation plans. It’s not an easy road, but with so much investment and the drive to change, it is clear that the Future is looking bright for London’s Insurance Industry.
[i] Actuarial Post. Thriving insurance sector benefits the whole UK economy. [ONLINE] Available at: http://www.actuarialpost.co.uk/article/thriving-insurance-sector-benefits-the-whole-uk-economy-12273.htm. [Accessed 1 February 2020].
[ii]WNS. Modernizing the London Market. [ONLINE] Available at: https://www.wns.com/insights/articles/articledetail/532/modernizing-the-london-market. [Accessed 1 February 2020].
[iv]FSTech. 2019. Lloyds of London Raises £300m for Future Tech Plans. [ONLINE] Available at: https://www.fstech.co.uk/fst/Lloyds_of_London_Raises_300m_For_Future_Tech_Plans.php. [Accessed 1 February 2020].
[v]WNS. Modernizing the London Market. [ONLINE] Available at: https://www.wns.com/insights/articles/articledetail/532/modernizing-the-london-market. [Accessed 1 February 2020].
[vi] Insurance Times. 2019. Lloyd's secures £300m loan to fund Future at Lloyds Blueprint. [ONLINE] Available at: https://www.insurancetimes.co.uk/news/lloyds-secures-300m-loan-to-fund-future-at-lloyds-blueprint/1432140.article. [Accessed 1 February 2020].
[viii] FSTech. 2019. Lloyds of London Raises £300m for Future Tech Plans. [ONLINE] Available at: https://www.fstech.co.uk/fst/Lloyds_of_London_Raises_300m_For_Future_Tech_Plans.php. [Accessed 1 February 2020].