How do you bring a slow and complex 300-year-old insurance market up-to-date for the 21st century?
It's time London traded in tradition for technology,
says Yvette Essen.

When it comes to experience versus youth, age often has the upper hand.

But in a 300-year-old market - where brokers still visit underwriters at their boxes and risks are accepted with a signature and a stamp - surely anything new that improves operation should be welcomed with open arms?

Lloyd's and the Company Market are facing a battle to sustain themselves in the 21st century. The London Market Principles (LMP2001) have recognised the need to speed up placing and claims processes and generally make London a more attractive centre in which to do business. Embracing technology is the key to implementing the reforms.

Lloyd's spokesman Adrian Beeby says: "There has been considerable criticism about the London Market's complexity and its relatively slow processing terms compared with other major markets around the world.

"While we benefit from probably the single greatest concentration of underwriting and broking skills throughout the globe, many say our technological systems are letting us down.

"We have to keep up with new technology and be at the finishing line with everyone else, preferably leading it. There is no alternative."

Paul Saffer, managing director of Enterprise Internet Services, which develops e-commerce systems for the insurance industry, agrees. "Efficient use of information technology is the key to success. It creates the ability for someone to easily access another person's system and share information and processes," he says.

"A broker can place business online and can complete a transaction from anywhere."

Marie-Louise Rossi, chief executive of the International Underwriting Association (IUA) adds: "E-trading will not replace all face-to-face negotiation for the more complex and sophisticated risks, particularly at the point of sale.

"It will, however, reduce the need for meetings and simplify administration, giving the underwriter time to concentrate on where he or she can add most value.

"The exploitation of the internet and other forms of e-trading will benefit London, as the skills located here will be even more accessible to the rest of the world."

Although up-to-date systems will never become the sole way to trade in such a traditional environment, there are three main areas of interface which are being examined:

  • communication between the market (brokers and syndicates) and its customers. For example, the ability to let a client log onto a company's website and ask questions directly
  • market to market, enabling brokers to work together with underwriters
  • market to other market interaction, which covers the relationship between brokers in London and the rest of the world, mainly through the use of the internet and portals.

    Beeby adds: "At the moment, the main areas concentrated on are claims payments, account-ing systems and policy processing, because the speed at which the market can function is based on how they work. If you can improve processing capabilities, you can speed up the market."

    There is an increasing number of products available that promise to shake up the way the market conducts transactions. But Saffer says several areas need to be addressed.

    "The market needs to invest in infrastructure," he says. "The first project is to ensure that all companies can deal in this technological world.

    "It needs a simple structure that anyone can connect to, but the reality is that many firms do not have both the internal technology to support that or the secure connectivity to the outside world."

    A system would also need to be put in place to back up shared programmes.

    "The easiest way is through repositories - the ability to drop a document into a store and to make it available to your chosen partners. The opportunity to do this has existed for some years but now there's the business drive behind it.

    "LMP2001 will only succeed on the back of the successful take-up of repository technology."

    Getting on the info highway
    Existing systems will also need to be made much more efficient by opening up the way information is transferred.

    In April, Lloyd's began using the Claims Loss Advice and Settlement System (CLASS) to enable claims advice, reports, reserves and settlements to be processed electronically to underwriters. Other programmes, such as Direct Account XML, will make it easy to transfer data and to process that information quickly.

    Although the need to use technology to shape up an ageing market has been repeatedly touted in the industry, its acceptance has been greeted by a variety of responses.

    Jerry Adley, systems project manager for LMP2001, says: "The reactions have been mixed. People realise something has to change, but there is still debate over how and when it needs to happen and the right way to approach it."

    He explains there are a number of options being considered to enhance CLASS. Currently, there are three versions of the platform: for marine and aviation in the Company Market, non-marine in the Company Market and a separate package for Lloyd's. One goal would be to create a sole abridged software package to process claims under the LMP2001.

    Other aspirations include creating a system to allow an insurer to deal directly with a client and developing a framework to ensure the secure transmission of emails across the industry.

    The potential for using technology to revolutionise the market is phenomenal. But Adley believes the most important changes have already begun.

    "The ball is rolling," he says. "We shouldn't be surprised that it takes time to get the momentum going but, once it's there, we hope it will prove unstoppable."