Lloyd’s – 7 Steps to Heaven?
In an interview recently with The Insurance Insider recently, John Neal stressed the need to increase Lloyd’s flexibility, openness and speed. His vision counters charges that Lloyd’s is too far from its customer, that its operating expenses are too high, that it is too slow at paying its claims and that it is not sufficiently differentiated.
Four areas, which the report focused on, particularly interested me: distribution, data, service and growth.
Lloyd’s aims to open up Lloyd’s distribution to the full range of brokers globally using technology and shorten the distribution chain, while placing an emphasis on securing a larger share of the big three’s vast book. Having a better understanding of the insurance value and distribution chain is in my view the most important element of improved capacity management. The insurance, reinsurance, retro, wholesale broker, retail broker, Managing Agent, MGA value chain is bloated and needs to be slimmed down.
I don’t know if this is a good analogy (or perhaps one to be used in the current climate!) but if one only looks at duty and VAT – sales tax more than 50% of the money spent on a £5 bottle of wine goes straight to the government’s coffers. That falls to around 45% for a £7.50 bottle of wine, 38% for a £10 bottle of wine and just over 27% for a £20 wine. Now we all know that nothing is more certain in life than death and taxes, but the wine example is getting somewhat ridiculous. While taxes on wine are to some extent an imposition, however, we do retain a certain amount of choice as to how we organise our insurance distribution chains.
I think most people reading this blog would agree that Lloyd’s is a most agreeable vintage, however, it needs to get even better at providing value to its customers. That means stripping out inefficiencies in the distribution chain as well as working to have a better understanding of Delegated Authority agreements with Coverholders.
Mr. Neal also focused on data. How, he asked, can we maximise the benefit of the market’s mutuality by leveraging its huge aggregated data to deliver services to improve decision-making and create new revenue streams. To ‘activate’ that data and turn it into that most precious of commodities; meaningful Management Information! (MI) Informed decisions are of course the best and if acted upon could invaluable to a market still facing growth challenges. I’d suggest that obtaining meaningful and accurate data that can be turned into meaningful Management Information is probably the single most important operational process, a market or a company operating in that market can have. Ask yourself? Could your busines/s extract it in a coherent demonstrable format across all entities within a company at the touch of a button?
Managing Agents are telling me that they need dashboard operational metrics in real time and the delivery of quality information to board and management groups. Well, this may not be ground-breaking or in fact unreasonable requests to make of a business but unfortunately, with such a fragmented and disjointed picture being drawn of the data, it just doesn’t provide the level of confidence to businesses that is required to move forward and to take the steps forward that are required to progress.
Throughout the market there is this ‘Data Pool’ that just keeps getting bigger and bigger so Mr. Neal is right in that the value in it should be protected and commercialised to the market’s benefit in the future. It could go to fund the future portals, platforms and processes required to empower the market to provide the service that is expected when you are a ‘Policyholder at Lloyd’s’ and trust in the brand to deliver when it matters.
In EC3 there are many different operator models now, with different territories cutting across different underwriter platforms, which always adds complexity to business reporting and processes. MOTOSI works with (re)insurers to better understand how to rationalise operational processes and eradicate or remove unnecessary duplications across the many duplicitous points in the thousands of processes monitored in support of a market the size of ours, which must grow as Mr Neal’s list states. Lloyd’s is and should always be focused on growth in a consistent and regulated manner but ‘with the brakes off’ business to be commercial and strike deals, confident it is being done in a professional way and in the spirit by which this market has always operated over hundreds of years. We do also apparently need to drop the fiction that Lloyd’s is a specialist market only and directly address the bigger pool of risk this offers, while increasing attractiveness to clients and brokers through an enhanced value chain, which includes ease of access, a criticism levelled at Lloyd’s for a long time.
It is time for some bold thought on the vision for this market, things we can all get behind and support, so I’ll be looking forward to John’s document to the market in May outlining this.