Ian Summers is leading Aon’s drive to bring electronic trading to the insurance market. He tells David Banks what has been achieved so far.
Aon has been at the forefront of electronic reform and Ian Summers, recently named Aon UK’s e-business and market reform managing director, is keen to keep up the pace.
Summers has won seven Acord awards for playing a leading role in improving the benchmark of electronic business. Acord, a nonprofit organisation, provides a common framework for communication, between insurers, reinsurers and brokers.
Summers believes brokers and insurers in the London market need to trade electronically if they are to remain competitive. He says that the upper quartile of the London market could be handling the full risk cycle electronically within 12 months.
As reported previously in Insurance Times, the London market has made its own steps to implement modern electronic systems, but the question has been whether the move to such systems can keep up with the amount of new business.
Concerns have also been raised about whether non-Lloyd’s brokers will have the necessary systems in place to trade electronically with Lloyd’s underwriters.
The Market Reform Group (MRG), the body responsible for process reform and modernisation in the London market, has a number of aims. Among them is the need to include the placement of all original premiums through the accounting and settlement repository (A&S), and use the electronic claims files (ECF) system for processing all in-scope claims.
The next step is electronic trading, which is something the MRG is pushing brokers to do. It also wants firms to adopt the Acord messaging standard.
Q. What does electronic trading mean to you?
We are at a point of evolution of the market where this is on the tip of everyone’s tongue. In accounting and settling of claims, a lot of the major reinsurers are working with the Swift system as seen in banking, and there will be a number of pilots early next year.
Many major players have been pursuing their own trading platforms and we have seen initiatives such as Swiss Re’s Centre for Global Dialogue, which is part of this picture.
Elsewhere in the world, the Qatar Financial Centre and Dubai are both investigating electronic trading platforms with a view to creating their own. These initiatives are coming very quickly, which is partly driven off the back of some real successes in Acord messaging. We’ve got some major players moving into messaging and making a lot of progress.
Q. Can electronic trading and messaging integrate brokers, insurers and reinsurers?
It works now, but we have a limited number of players. We have 15 but we need 500. To establish a system that involves 500-plus participants is going to take a long time and will be very expensive. For example, it’s going to be difficult to maintain the connection for each one. The connectivity issue is not as simple as once thought.
One of the complications with regard to electronic trading is that it’s not an especially competitive area, but it’s a necessary part of future business and will require investment.
Q. Has there been sufficient investment from the significant market players?
We are at a tipping point where we are just trying to get electronic trading closed off quickly, especially at Lloyd’s. That would raise the profile of London again. I think we are at an exciting time. In the past, we in London have been the most professional for underwriting risk and paying claims. However, the operational support for that has thus far not been comparable to its peers. Because of that we have been forced to look to technology to remedy the situation.
We have had problems in London, so now we are going to jump forward and we’ve invested in that technology as a solution. If you look at claims, the time for a settlement has gone from 42 days to 15 days now, which turns us from one of the poorest to one of the best for speed, which is a dramatic change.
We have a reputation for paying claims, but now with the operational side on track as well, it will allow us to leapfrog other markets. It’s a really exciting time and if you look at the background to big changes like this, there has to be that burning reason for it to happen.
Not only are we trying to improve client service, we are also trying to reduce costs, and technology is the answer to that. To provide a better service to our client base, we need as many as possible to be a part of that platform.
Q. Is it in the interests of every significant insurer and broker to pursue an electronic solution in every way they do business?
Both from a broker’s and an underwriter’s point of view, it would be a difficult place to sit if it doesn’t want to be a part of it. It would be difficult for brokers to justify doing business with people who have not made that investment in electronic business.
If the London market uses e-commerce and email, then it would stay in the same place as its competitors. There is an investment required and it takes some time for all the participants to make the required investment. The upper quartile will be looking to support the risk cycle – from placement through to claims – electronically within the next 12 to 18 months.
I think Lloyd’s is a contributing party to what London is doing. The company market is doing a lot as well. The Lloyd’s solution would be an enabler – however each underwriter and broker needs to play its part.
David Banks is deputy editor of Insurance Times’ sister publication, Global Reinsurance.
Data privacy and security liability protection are garnering more attention due to highly publicised bungles, with the latest being the PA Consulting fiasco that saw the loss of a memory stick containing data on 84,000 criminals, writes Lauren MacGillivray.
PA Consulting had been contracted by the Home Office last year to track offenders from England and Wales through the criminal justice system using its JTrack programme, which enables authorities to compare offenders data. But the Home Office suspended the contract after it was discovered that a memory stick holding data of the criminals including names, birth dates, prison release dates and home detention curfew dates had been lost.
PA said it was collaborating closely with the Home Office and had no further comment.
This happened soon after data involving one million customers from Royal Bank of Scotland, NatWest and American Express was found on a computer that was sold on eBay for 35 pounds. The data included addresses, mobile numbers, bank account and credit card details, mothers maiden names and signatures.
And of course, who could forget the loss of child benefit records on an unencrypted disk last November by HM Revenue and Customs.
Like any other business, insurers also find themselves vulnerable to data breaches particularly since they are privy to sensitive customer details. Hiscox is an example of one insurer guarding against breaches.
The insurer revealed exclusively to Insurance Times, that it had chosen Wyse Technology to supply it with thin computing throughout its business.
A thin computer replaces traditional PCs or laptops. Each thin computer is loaded with the Wyse operating system and very little else, hence the term thin. The operating system connects the thin computer to a server where all application programmes and data are held securely. This means lost laptops or stolen PCs pose no risk of leaked information, and company information is protected from computer hackers.
Wyse believes it has one of the most secure operating systems available, because unlike, say Microsoft Windows, it has no published application programming interfaces.
Hiscox, which has a 1bn pounds turnover and employs over 700 staff in 13 countries, began a review of its IT infrastructure three years ago.
As an insurer specialising in cover for terrorism, kidnap and ransom, as well as underwriting fine art, wealthier homes and even bloodstock, information security was a key consideration for the desktop system design. The company now has over 650 thin client computers, deployed in all of Hiscox 30 locations worldwide.
David Boyce, IT infrastructure services lead at Hiscox, said: The Wyse thin client infrastructure is integral to our business. It is an important consideration that data cannot be stored on desktops, guaranteeing that we are protecting our clients sensitive information everywhere in the business.
The system allows users to set up on a computer within minutes because there is no need for reconfiguration. And once users have an account, they can work at any terminal, which is handy if a computer crashes.
Boyce said: New users need little to no time getting used to using a thin computer. They and everyone else really appreciate how they can log into personal settings and data wherever they are in the business.
Recently, Advisen produced a report highlighting the rise in dangerous liability exposures now that digitised information has transformed the way business is conducted.
For example, it said that Lloyds fends off 60 high-severity penetration attempts on its corporate IT infrastructure every day. Peter Hambling, the markets chief information officer, has been reported as saying that in recent years there have been fewer hackers seeking to break through firewalls for a thrill, but there has been an increase in those looking to steal funds or data.
Advisens report said: Most companies are not as forthcoming with these sorts of statistics, but it is fair to assume that Lloyds is not unusual in the attention it attracts from hackers.
It added that administrative errors, such as a lost or stolen laptop, are also a growing concern.
The report explained that data security has long been the domain of IT departments, but said corporate risk managers are now becoming more involved in handling cyber liability exposures. Due to this shift, the market for cyber liability products is picking up and products are becoming more advanced.
The report said: The insurance industry has been relatively slow to develop products addressing data security risks. The pace of development reflects both caution by underwriters and a general attitude of indifference on the part of insurance buyers.
However, in recent years, the number of products available and the sophistication of the coverages have increased. Demand for coverage has also risen in the wake of large, highly publicised losses.
Meanwhile Darwin Professional Underwriters has taken advantage of the growing security threat by launching a new product. Privacy 403 covers expenses from forensic investigations, data restoration, and reduction in business income for first-party business interruption.
Adam Sills, a lead underwriter and product manager at Darwin, said: Even sophisticated data protection systems can be vulnerable to privacy breach and data loss from a variety of events, including merely the loss or theft of a laptop.