Tinsights

The Future at Lloyd's

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The Future at Lloyd's

Implications for placement & claims

After a loss of £1 billion in 2018, the new chief executive of Lloyd’s of London, John Neal is promising big things to get the market back in the black. Natural disasters in the US and Japan hit the industry hard. Allegations of an archaic culture and entrenched sexual harassment and hostility to women added to an 'annus horribilis' for the (re) insurance market. So, what exactly is John Neal's masterplan to turn things around and build a brighter future for Lloyd’s?

The focus will be on higher quality risk protection for customers, simplified access to the global insurance market, and reducing costs of doing business at Lloyd's. The reforms will be digitally driven, including a digital platform for complex risks and an enhanced claims service which will improve payment times. Reforming a sector that is notoriously resistant to change appears to be the main challenge to the success of the new strategy. However, the Lloyd's team is confident it can be done, stating work will begin on delivery in October this year, with some parts operational by 2020.

Revitalising the claims process through the increased use of technology and promoting innovation are critical factors in the new strategy. They are of particular interest to us at TIN and will no doubt be focal points for discussion at our London Market Claims 2019 event later this year.

A system split in two

To address efficiency issues and try to reduce costs, Lloyd’s have put forward a proposal to split out complex, bespoke policies from standard risks. Whereas the former would still require significant manual intervention because of the nature of the risks, it is hoped that a digital administrative and analytical framework would speed up the overall process and reduce costs. The Lloyd’s Risk Exchange will deal with less complex risks using an online system which will place them expeditiously for a much smaller cost.

At the recent TINtech conference this initiative was discussed in detail and it was agreed that the opportunity is both desirable to businesses and real. Many risks are relatively simple to rate and process so can be automated within a platform, but there needs to be transparent communications between all stakeholders. There were also concerns around the process of an underwriter signing off the contract based on AI decisions not in their control.

If the technology could be successfully applied to less complex risks, more resource could be applied to complex or non-standard risks, plus there would be more bandwidth for organisations to develop new products to fit the changing nature of risk in an ever more digital business environment.

However, we should not overestimate the sheer size of the task of shifting a paper-based system. The cultural change for an institution which only relaxed its rules on wearing ties in 2018 will be as challenging as building and implementing two separate platforms.

A next generation claims service

The area where technology can realistically make a sizeable impact is in claims. The claims process has long been a source of frustration for the London Market. Manual processes and protracted payment times have had a negative impact on customer experience. The promise of a new service which speeds up claims payments is an exciting prospect.

Using a dynamic database, proactive communication and AI, Lloyd's are hoping to improve response times for straightforward claims drastically. They are not looking to reinvent the wheel technology wise; instead, use existing tech more effectively. For example, data analytics to validate claims and satellite imagery to assess natural disaster damage. Taking a proactive approach when loss events happen and using a digital payments system where the insurer pays the customer directly should have a significant positive impact on the claims process.

Again, this topic was covered at TINtech and one of the ideas that came out of the subsequent discussions was to introduce part payment of claims. It is fairly common that claims payments are delayed because one part of the cover is under question. Therefore by having a system where part payment can be made for the cover that has been agreed would be beneficial to customers.

Delegates also agreed that the existing technology needs to change – “DXC change delivery needs improving as this hasn’t been up to standard”.

Syndicate-in-a-Box

The concept of Lloyd's new 'Syndicate-in-a-Box' is promising. A quick, digital joining process means it should be easier to bring capital to market and match it with risks and syndicates. Syndicates can be set up remotely, meaning they can cut costs by not setting up a London office. Further savings can be made by buying services such as claims or payroll from third-party providers rather than having them in-house. This should allow syndicates to pass the savings on to customers through lower premiums.

Syndicates will also be able to make use of Lloyd’s Centre for Innovation, which opened in September 2018 and contains Lloyd’s market and third-party data and insights. This information, when coupled with internal experience and insights, can help innovative syndicates to produce superior products. It can also assist underwriters to make accurate risk predictions and by using predictive analysis within the claims function will identify fraud more effectively.

Innovation and digital disruption are essential for the modernisation of an institution under increasing pressure from capital rich overseas markets such as Asia and the Middle East. The Future at Lloyd’s strategy appears to offer a way to reshape an outdated structure and way of working…we’re interested to see how it plays out over the next few year and will continue to facilitate discussions we hope will help shape the Lloyd’s and London markets, both now AND in the future.

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