Lloyd’s Blueprint Two – On the right track?
On the 5th November, Lloyd’s released it’s much awaited ‘Blueprint Two’ document. This document was seen by many as Lloyd’s conveying what the delivery phase of the modernisation initiatives under the ‘Future at Lloyd’s looks like in the coming months and years, or as the Lloyd’s CEO, John Neal put it, ‘where the rubber hits the road.’
You couldn’t fault Lloyd’s for the expression of ambition through the document and certainly think that the ambition and dedication to commit to a data driven, digitally enabled market are clear but as always ‘the proof of the pudding will be in the eating’ and given that Lloyd’s doesn’t have the best track record of delivery in the past, some may question if this is in fact overly ambitious, certainly within the timeline given of two years.
A key question in all of this, is to ask whether the London Market directly and the global network it serves will remain engaged and give them time to deliver on the aspirations of the work underway. The London Market is after all, in many ways playing catch up with other global centres who offer an increasing range of options to an ever more aware and savvy insurance buyer, who must be finding it increasingly hard to justify to their own clients, partners and other stakeholders, the inflated costs associated with engaging with the Lloyd’s / London Market ecosystem.
It has been widely commented on that there is a change in the way in which delivery is expressed in Blueprint Two over its predecessor, with what might be called a more holistic approach now being taken, which is understandable given the ‘evolution not revolution’ approach; with no more talk of ‘pillars’ but more focus on the creation of an eco-system, driven by data, underpinned by standards through digital process mechanisms and systems. There is also reference throughout as to the iterative nature of the approach being taken, building out the micro elements of the eco system they are looking to create in the future, taking the test, learn, iterate, and scale approach, stopping and re-focussing where approaches aren’t fit for purpose. Representative of an agile approach for sure which is commendable but it could be argued that this will in itself prove hard to manage and to keep up engagement with a market, hungry to change and position themselves to take advantage of the hardening rate environment and the opportunities this will bring to balance underwriting portfolios decimated by years of under – pricing and under – performance. Anecdotally, there is a growing sense that many companies are ‘working their own story’ and just keeping the Blueprint work in their eyeline to ensure they can engage with it as appropriate and when the time is right.
Mention is of course made to the new syndicates formed, with the market showing particular interest in algorithmically driven underwriting syndicates, with a few now created, most noticeably Brit’s Ki but with others having been created and others in the pipeline. This technologically driven approach is seen as a significant opportunity to deliver value to a market built on the subscription-based model, often cited as a market strength over decades but increasingly seen as the Achille’s Heel to a model seen as friction heavy and duplicitous. Modernisation of the syndicated business model employed in the London Market under the Lead / Follow workstream is well underway, with new Minimum Standards guidance published by Lloyd’s to reflect a newer and more efficient way of doing things when executing business in this way. Carriers in particular are looking at this as an opportunity to take a more focused portfolio driven approach to underwriting, utilising technology to best effect and maximising the operational efficiencies alongside.
Another hugely important area of focus is Delegated Authority, accounting for significant volumes of premium into the London Market but again it is known to be weighed down by overly inefficient processes and what is seen by many as burdensome oversight. Lloyd’s knows this and realises that this is an area in which much can be gained by digitisation and a drive to a more efficient model. There are updated / new market systems and portals being developed for delivery through 2021 and beyond in which much of the legacy challenges around delivery of this model are being updated and modernised, meaning a more meaningful and customer centric proposition for all of those who are engaged in it.
Claims also continues to feature heavily as this really is seen as the ‘shop window’ for carriers, brokers, and the wider market, which prides itself in being there when it matters most in times of need. By shortening claims lifecycles, better administering the different aspects of stakeholder engagement, and making faster settlements this will mean more satisfied customers and companies being able operate in much more responsive ways. For example there is mention of a new claims orchestration platform will form part of the plan, facilitating claims triage and routing, automation of claims decisions for the simplest claims and better orchestrating complex claims handling, so this is definitely an area to keep a close eye on.
Underpinning everything and ultimately what will prove as to whether the work is deemed a success or failure, will be the market’s adoption of data standards, as without them the whole thing basically falls down and the digital journey effectively stops. Under the Blueprint, creation of a Core Data Record (CDR) is key to this, essentially meaning that a CDR is only created when all parties agree that core data captured during placement is the absolute version of truth that everyone will work from ‘downstream’ from the point of bind. If a CDR is produced, then the expectation is that this will form the basis of the digital journey that follows throughout the underwriting and claims lifecycle that follows. Adoption of market standards will be key but not perhaps a given, especially when again you consider that the issue around data and the adoption of common standards and agreements has been something the market has grappled with for many years now.
There is lots to be hopeful for as you read and re-read the Blueprint Two document, always mindful of the significant challenge that lays ahead to see it successfully delivered and it will be interesting to see how much progress can be made in the two year timeframe referenced in it. Lloyd’s have been careful to use language that might be considered vague and a little ‘non- specific’ as they give themselves the space in which to deliver something so ambitious and potentially game changing but you can’t really blame them for doing so, this is hugely ambitious. Expectation is high so managing this and ensuring effective communication to the market will be especially important as they bring everyone along on the journey with them. They need to make the case clearly and succinctly to everyone that the required progress is being made and at a pace that is manageable and consumable by everyone, wherever they sit in the value chain. Blueprint Two does give the market some tangible assets to pin their own delivery aspirations to, almost a ‘handrail’ upon which to roadmap their own digital journey, enabling alignment to the future model proposed by Lloyd’s, so from that perspective there is much to be hopeful for.