Lloyd’s new hurdle principle will ‘set the hairs running’ across the London market

Claims management holds a critical front-line position in regulating the reputation and capability of the industry.

While there have already been significant steps towards improving claims service in recent years, such as Consumer Duty and statutory reforms under the Insurance Act 2015 and Enterprise Act 2016 – there has been nothing quite so concrete for the London market.

However, this January changed that, as Lloyd’s of London elevated claims management to its fifth fundamental – or ‘hurdle’ – to doing business under the principles based oversight (PBO) framework.

This followed a 12 month soft implementation period in 2025, which intended to allow ample opportunity for the market to adapt to the new principle wordings.

Claims management joins the four existing hurdle principles – underwriting, governance, reserving and culture. No syndicate can be rated higher than its lowest rated hurdle principle under the PBO framework.

In Lloyd’s 2024 market message, former market oversight director Peter Montanaro, said that raising the profile of claims was the “first stage” of its claims strategy to deliver superior service, as measured by net promoter scores and broker rankings.

Speaking to Insurance Times, Nick Woodward, chief claims officer at Consilium, said that he believed this change “will set the hairs running” across the Lloyd’s market.

He continued: “As insurers are on the hook for poor service given by those acting on their behalf as agents this is potentially good news.

“It’s not the be-all or end-all, but it’s another attempt by the Lloyds market in particular to treat claims as a centrally important feature of insurance.”

Culture shift

With underwriting and claims management on equal footing, claims management has shedded its label as a simple back‑office function.

For Woodward, this is a welcome promotion as claims has typically been full of “lip service”.

As a broker, Woodward noted that Consilium has had a “real problem” with one insurer that denies claims and “refuses to engage” despite promises to pay on their websites.

With the new regulation, Woodward was enthused that these insurers were “now being forced to walk the walk”.

In turn, he suspects that managing agents “will devolve a lot of responsibility to senior claims leaders, who will have to give them the necessary comfort for the board”.

He continued: “Everyone will feel the heat in a cascading effect and claims leaders will expect more of their team, their staff, the claims practitioners and the handlers. This will eventually affect everyone.”

Joe Shaw, director of claims at the International Underwriting Association (IUA), said that he believes the formal governance introduction represents an ongoing cultural shift for the broader London market.

With boards needing clear assurances that high-quality service levels are being met, it sets a benchmark for firms to prioritise claims and for clients in assessing insurers’ claims service.

As many IUA members operate both in the Lloyd’s and company market, Shaw explained that the regulatory changes “have been closely considered by the IUA’s claims strategy group as well as [its] various sector committees”.

He continued: “Within our own membership, we have seen a move to claims teams forming part of the initial client onboarding process, a continued desire to improve feedback loops on wordings and performance and an acknowledgment that investment in claims service is an investment in the client facing element of the insurance product.”

Echoing this priority, Marie Hill, group head of claims at Brit Insurance, told Insurance Times that a good claims team needs to be “foremost in an organisation’s mind when they’re planning to either build, expand or increase their lead profile in a particular class”.

Hill said she believed that claims being elevated to a hurdle principle now necessitates this approach.

She said: “There’ll be an evolution as to how it’s applied and what ‘good’ looks like.

“That’s still very much undetermined to some extent because it is principles-based oversight, but there’s a commercial regulatory imperative to do it now, as opposed to a service-oriented one.

”I would hope the largest syndicates have always had that, but there’s a louder voice at the table now because we have an ability to impact whether or not business plans are approved.”

She added that the new hurdle principle requires insurers to move beyond “a minimum standards mindset” and be critical of how to resource claims to meet executive‑level expectations, as well as the business they underwrite.

Wider ecosystem impact

While this new principle is specifically a regulation for Lloyd’s syndicates, Woodward noted that the change would “eventually wash through the whole of the claims ecosystem” in insurance.

QuestGates director Ross Macpherson noted that managing agents were already playing a more active role in monitoring and challenging claims performance from third party administrators (TPA).

This included enhanced management information requirements, increased audit activity, a focus on consumer feedback via net promoter scores (NPS), social media and the agility of delegated partners in addressing the specific needs of vulnerable customers.

He added that there was “now a far greater lens” on how firms continually improve service and complaint ratios by acting on root‑cause analysis data, rather than simply reporting performance.

As a representative on the Lloyd’s Market Association Claims Committee, Hill added that the discussion around NPS and the voice of the consumer is increasingly prominent in market conversations.

She noted that measuring NPS and other consumer feedback mechanisms is challenging in the Lloyd’s subscription market – and even more so in a delegated environment.

While syndicates must constantly find ways to improve and capture feedback from vulnerable customers quickly, she noted that complaint metrics disproportionately spotlight small classes with few claims.

She continued: “It’s a work in progress for most areas, but it’s something that, as a claims community, is heightened and the Lloyd’s Market Association is supporting that discussion.”

With the new regulation now in effect, Hill also noted that the demand for evidence to demonstrate delegated claims partners were meeting requirements had become “more challenging than many in the market expected”.

As a result, Macpherson explained that there will be a push to innovate and bring together the best blend of people and technology to ensure the claims service meets consumer demand.

He continued: “Getting the basics right, every time in terms of communication, correct application of cover and speed of service is a given now.

“The infrastructure behind this within the Lloyds market needs to be robust enough to cope with this, notwithstanding who the capacity is with.”

With a whole year left to reap the repercussions of the new regulation, it remains to be seen whether the industry can step up and create greater consistency across the market.

At the very least, Woodward concluded, the legislation coming directly from Lloyd’s will “shine a welcome and timely light on how important claims are”.