A Lloyd’s survey has said underwriters are committed to reforming business processes but does it measure up to what is happening on the ground? And, here Michael Faulkner lists the top nine issues in the market
Over 80% of Lloyd’s underwriters say there is a high level of commitment to Lloyd’s business process reform, according to a survey published this week.
While the figure is an encouraging one for Lloyd’s, which, along with the rest of the London market, is trying to reform outdated business practices, it shows there are still challenges ahead.
At the very least there are still around a fifth of the underwriters who think commitment to market reform is lacking.
There also appears to be a disparity between what underwriters are saying and what is actually happening on the ground, in terms of the market’s uptake of some key reform initiatives.
Last year, the Lloyd’s market missed its year-end target for two key electronic reform projects.
In its 2007 year-end progress report, Lloyd’s said the use of electronic claims files would not hit target, with usage standing at 59% at the end of November. The year-end target was 100%.
Meanwhile, use of the accounting and settlement repository (A&S) was 49% against a target of 80%.
The threat of forcing companies to use the A&S repository and electronic claims files still hangs over Lloyd’s companies, although Lloyd’s appears to have cooled in its rhetoric. Nonetheless, the option to mandate the use of the initiatives remains on the cards.
The test will be whether the commitment voiced in the survey follows through into actions, and whether those that have yet to be convinced of the need for reform can be persuaded of its merits.
Meanwhile, the survey also revealed that Lloyd’s underwriters believe that managing the insurance cycle was the most important issue for 2008,
“The global economy and managing the cycle are foremost in underwritersâ€™ minds as we start 2008, and we are currently seeing a number of them pulling back on their underwriting in the face of current market conditions
Rolfe Tolle, Lloydâ€™s
Two thirds of underwriters said that more needed to be done to manage the underwriting cycle.
Lloyd’s has been urging underwriters to remain disciplined to avoid rates being driven down affecting the profitability of the market.
According to the survey, 93% of underwriters said the market was currently softening, up from 78% last year.
Lloyd’s recently unveiled a price-monitoring tool that will use syndicate transactional data to monitor
market performance. It is believed to be an effort by Lloyd’s to oversee cycle management.
Rolf Tolle, franchise performance director at Lloyd’s has warned underwriters that they need to be robust in the cycle management. He said recently: “It’s fair to say that there are some syndicates in the market that make a very good effort to manage the cycle robustly, while others are more feeble in their attempts.
“We want those [managing] agents which may not be as committed as others to proper cycle management, to get up to speed with their efforts.”
The stern words from Tolle could be having an effect on underwriters’ attitudes. This week he gave a more positive assessment of the market’s performance. “The global economy and managing the cycle are foremost in underwriters’ minds as we start 2008, and we are currently seeing a number of them pulling back on their underwriting in the face of current market conditions.
“Encouragingly, at a time when Lloyd’s is focusing on market reform, the vast majority of underwriters remain completely committed to this process. Priorities for the industry in 2008 must be to continue to closely manage the cycle and push through reform in the market.”
Managing the insurance cycle
The most important issue for the insurance industry in 2008, underwriters said. Its importance has increased as the soft market continues to bite. 67% said more needs to be done in this area.