Lloyd's is set to invite rival bids for claims services contracts following complaints from managing agents about the performance of Xchanging Claims Services (XCS).

Lloyd's has launched a review of its claims handling processes, in conjunction with consultancy McKinsey, which will examine the possibility of putting contracts out to tender.

Lloyd's said the review had been triggered by "franchisee concern over the current XCS claims services".

Lloyd's added that the market's brand was at risk because of the "perceived low claims service levels to brokers and end customers".

The review could lead to the "opening of competition" for current XCS services, Lloyd's confirmed.

Lloyd's head of reinsurance and claims Jeremy Pinchin wrote to managing agents earlier this month providing details of the review process.

Pinchin has been joined by Duncan Williamson, formerly of St Paul International, to help with the review. The first phase of the review, expected to be completed by the end of March 2004, will "assess the claims opportunity for Lloyd's, establish the business case for change and propose new ways of working", Lloyd's said.

Pinchin will chair a market steering group to handle the review. The group will include: Stuart Degg (head of strategy, franchise performance directorate); Iain Saville (head of business process reform); Gary Bass (claims director, Faraday); Dane Douetil (chief executive, Brit); and Paul Jardine (chief executive, Catlin).

It was argued that Xchanging Ins-sure Services (XIS) had an unfair advantage because its contracts with Lloyd's were not rated by managing agents. XIS denied it had an unfair advantage and said it had "contractual obligations with managing agents to hold a service review panel".