Computer-savvy graduates and fewer technophobes are helping the corporation to go digital
While Lloyd’s of London’s reputation with complex and unusual risks is second to none, its record with technology is not so good.
Few will forget Kinnect, the £70m electronic trading platform on which Lloyd’s Franchise Board pulled the plug in January 2006. That was just one of a long line of failed initiatives.
Nowadays, Lloyd’s is pushing ahead with a range of modernisation projects. These include the Electronic Claims File (ECF) initiative, which aims for paperless claims handling in the market and, more recently, Lloyd’s Exchange, under which underwriters, brokers and IT suppliers can share information using ACORD messaging standards.
Those who remember the corporation’s electronic failures may be sceptical. But the Lloyd’s Market Association’s new chairman, Barnabas Hurst-Bannister, believes the market is more ready than ever to embrace new technology.
“The London market is littered with the corpses of attempts to bring process change. But the mood today is very different to 10 years ago,” Hurst-Bannister says.
Most talked about
The implementation of the EC’s Solvency II directive, due to come into force in January 2013, is one of the largest and most talked about challenges facing managing agents. Hurst-Bannister says modernisation is a close second on syndicates’ to-do lists, and the effort being put in is about equal – “whether that be on the claims side or more broadly on the systems side”.
There are several reasons for the changes in attitude at Lloyd’s: technology is infiltrating the personal lives of even the most technophobic underwriters while, at the same time, new graduate recruits have been using computers all their lives.
Hurst-Bannister says: “We are always being told that among our members are people who are resistant to change, but how many of them still send hand-written letters to the bank manager to transfer funds, or book their holidays through a high-street travel agent?
“I’m not suggesting some people aren’t resistant to change, but I don’t think it is as deep-seated as in the past.”
Supporting face-to-face negotiation
It is easy to see why underwriters and brokers may have resisted change in the past. Those people used to chatting with their peers in queues at underwriters’ boxes, for example, may see technology as a threat to their way of life.
But Hurst-Bannister says it is important that modernisation is seen to be streamlining existing processes rather than replacing them. “We need to be clear that neither the Lloyd’s building nor the underwriting room is likely to become redundant,” he says. “All that we’re doing is making sure we take full advantage of technology to support the world of face-to-face negotiation.”
Because of the nature of the business written at Lloyd’s, face-to-face communication between brokers and underwriters is unlikely to disappear. Hurst-Bannister says: “Our members on the whole tend to deal with risk that is new, difficult or large.” He does, however, point out that a lot of face-to-face work would be better done digitally.
“Whatever the broker or underwriter may say, a change of name of a vessel does not require a broker to queue for two hours for a 45-minute discussion.”
A further impetus for change is that Lloyd’s is facing increasing competition from other centres. It needs to make sure that the placing of risk and payment of claims is as efficient as possible.
This is particularly important for Lloyd’s, where each risk can be shared among several syndicates. Hurst-Bannister says: “This isn’t just far-sighted people pursuing technology for the sake of technology, it is doing it to make sure that the subscription market here remains vibrant.”
Claims in half the time
One area in which Hurst-Bannister believes Lloyd’s has made particular progress is the ECF initiative. In March, the ECF Best Practice Group reported that ECF claims were taking less than half the time of paper claims.
“We have materially diminished the processing time when a claim goes through the market,” Hurst-Bannister says. “In a subscription market, it is very important that we make this slick.”
But he recognises that the market should not use this small victory as an excuse to rest on its laurels. “We have made a lot of progress on a number of fronts but I don’t think anyone is smug or complacent,” he says. “There is clearly plenty more that lies ahead.” IT