There are advantages to both approaches
It is clear that neither the Market Reform Group nor Lloyd’s want to force companies to use electronic claims files (ECF) via the issuing of a mandate. But it is also clear that Lloyd’s remains willing to do so if there are stragglers come 2008 – even though MRG chair Dane Douetil this week spoke out against such a move.
There is a good reason for mandating, in that it makes perfectly clear to the market the need to “reform or die”. It is even more valuable in a market that self-admittedly clings on to outdated principles, and one that comprises a few firms who would prefer that computers didn’t even exist.
Mandating may be the only way to force some companies to reform. The threat of a mandate can also be useful to allow companies to pre-empt any action and therefore get systems in place. Of course, any sort of mandate or threat of mandate needs to be backed up by effective sanctions – most likely financial penalties.
However, there is also a good reason for not mandating or threatening to mandate, as expressed by Douetil. He is confident that the market is capable of self-reform, and such calls to mandate evoke a sense of failure rather than a sense that change is needed.
Allayed to this is the fact that, mandate or no mandate, companies that do not implement ECF systems will simply be left behind by competitors that do. His preference for a free market approach to reform is certinaly not a soft touch.
Whether or not Lloyd’s does mandate will depend on the performance of its participant companies over the coming months. But following the news that the MRG’s ECF target for the third quarter was hit just two weeks after deadline, both Douetil and Lloyd’s are confident this won’t need to happen.