Roger Foord looks at the collapse of Lloyd's Kinnect paperless trading platform
There are some things in life which should not be disturbed. In the small world of London EC3, the life of a broker and underwriter probably come into that category.
The problem for me has been technology for technology's sake. Technology has been a major part of my business life, most of which has been spent in the London insurance market. The market has embraced meaningful technology - every box in Lloyd's is surrounded by screens and computer systems - but they are there to enhance the market practitioners' intellect, not to replace it.
The Lloyd's and London market is unlike the banking market, where instant decisions have to be made, therefore electronic systems are crucial and sensible. Not so the global insurance market as managed by Lloyd's. There are no 'buy, buy, sell, sell' noises on the floor. Apart from the lunchtime stampede out of the building, everything is very sedate and organised.
The clients' disparate market requirements for insurance- directors' and officers', loss of business or professional indemnity - are decided in days and weeks, not at the push of a button. London brokers and underwriters aren't just being 'head in the sand IT Luddites'. Their clients want a properly negotiated deal forged on their behalf by their London broker. Why was nobody in Lloyd's aware of the historic technology failures in this technology/business area, and why did they arrogantly continue down the financial and logical disaster that was Kinnect? The Kinnect electronic trading platform project started in the 'dot.com' era of the late 1990s. Lloyds.com was perceived as a technology gateway to Lloyd's services. It changed its name to Project Blue Mountain and then changed again in 2003 to Kinnect. By this time it had had more names than transactions.
At the same time two brokers, Marsh and Willis, made it seem like it was the only solution to save Lloyd's. The only underwriters using it were from Lloyd's and it was felt some of these were cajoled rather than volunteered. The Lloyd's annual fees were used to pay for the project, but users were then asked to pay an additional contribution.
At the same time, the PR machine was so great that it became a laughing stock. The claims made it sound as if 90% of business in Lloyd's was on the Kinnect platform. Out of the blue, a lifesaver seemed to arrive in the shape of the FSA and contract certainty. Eureka! Kinnect had a reason for living. Only with Kinnect could you be contract certain (CC). Everybody's slides and presentations were scattered with CC and Kinnect - until mid-2005, when suddenly Kinnect became an unmentionable word. The chairman and chief executive of Kinnect departed and Kinnect's main sponsor, the Lloyd's chief executive, packed his bags for the Pru. Kinnect was doomed.
The final nail came on 24 January when the closure announcement was couched in face-saving terms. However, I don't think the whole expensive and unfortunate incident should upset technology in London. It is still well served by package suppliers.
There's Xchanging for central electronic payments, ACORD standards are being gently embraced, the internet provides underwriters with information about clients and global conditions, and electronic repositories are being embraced. The market has a chance for some easy wins which don't confuse the real business of underwriting for global clients.
Will there be an inquiry into where the money all went? Probably not.
I will miss Kinnect, it kept me amused. IT
' Roger Foord is at www.rogerfoord.com