The insurance industry would be a much better financial proposition if its clients spent more on the maintenance of their insured goods. As we all know, the longer the delay in renewal expenditure, the bigger the eventual bill.
Ironically, this is the situation that the London Market finds itself in at the moment. It has failed to keep its maintenance up to date and now has to cure four or five different problems at the same time, particularly with regard to its overall procedures and its technology. That's not to say that it hasn't tried to change its ways in the past but it has found the solutions presented as unworkable and therefore unsellable to brokers and underwriters.
The two fears of the market appear to be that the market procedures are too costly and time-consuming for the client, and that other technologies will come along and cause the demise of London and Lloyd's.
Like many institutions, much of the problem comes about because of the committee structures and people's desire to protect their “own corner”. The definition of a committee as “a group of people who individually can do nothing but as a group decide that nothing can be done” probably fits well.
Suddenly, however, London is confronted with a plethora of ideas and initiatives.
Remember that, historically, even with one ball in the air, it has been difficult to make it land in the right place and at the right time. There are at least four “balls” floating above Lime Street at the present time – but will they land in London or New York?
The first ball is the London Market Principles (LMP2001). These aim to modernise the way the market carries out some of its fundamental business. The implementation of the proposals will change some of the time-honoured practices originally accepted by brokers and underwriters.
Claims processing appears to be the main issue in terms of service complaints from clients, with leader-only agreements as a focal point. Historically, “follow” claims managers have been inherently sure that their abilities to agree a claim were better than the “lead's” own claims manager.
At the same time, there are also plans to speed up payment of premiums and the production of policies. If the figures to be achieved by these three areas can be maintained, then the LMP2001 proposals are looking for improvements in the region of 600% to 700% – that is, claims paid in 30 days, rather than the current average of 170 days.
The statistics of acceptance for the LMP2001 from brokers seems to be good, although this could be because 70% of broker business comes from the top five global brokers. Smaller brokers with small volume high premiums might not have as much enthusiasm if they feel that they can give a good personal service without changing the current modus operandi and probably do not think that their business is about to slip away from London.
Another burning issue is the fact that the market urgently needs to manage the plethora of emails that is flooding its underwriters and brokers without the correct security and without, in many cases, any thought to ensure that they are filed in conjunction with the paper policy files.
This, if it is not resolved, will cause problems in the future, although it is understood that the problem is being managed at the highest levels in the market. Unlike other issues, however, it is not contentious and the technology exists to resolve it quickly, easily and relatively inexpensively.
Finally, while all this is happening and the LMP2001 team and their supporters are doing a good job expounding its virtues around the market, the introduction of a one-bureau scenario for the London and Lloyd's Markets has also taken off.
The new Ins-sure Services body expects to provide a cost-effective system for the back offices previously supplied by the two London bureaux, the London Processing Centre for the Company Market and Lloyd's Policy Signing Office for Lloyd's.
Apart from the obvious question as to where Ins-sure Services and LMP2001 have common ground, there is a big problem on the horizon. This is the Marsh Brokers global exchange, which has created a small stream of brokers travelling to the US to see what this initiative can offer.
If Ins-sure Services is to make London a profit centre, it has to be able to sell a global service and not rely upon a sudden upturn in lines on Lloyd's slips. At the same time, there is a need to repay the venture capitalists who are 50% bank-rolling the project.
Confused? Well, probably so is everybody, unless there is someone out there who has the master plan under control.
While all of this is taking place, an area to reduce London's costs could be solved by creating a one-stop shop for brokers – one London building with all underwriters, whether belonging to Lloyd's or the Company Market, under one roof.
Lloyd's is sadly becoming a bigger open space with more of the gallery space being occupied by enclosed new offices for administrators, rather than the open plan boxes for the business practitioners. The London Underwriting Centre appears to have the same problem.
Combining these could really save some costs, particularly as the face-to-face life of London still seems to be acceptable for new business.
If London Market practices and claims managers have to change their procedures and the two bureaux have to accept amalgamation, then another major cost saving could help towards ensuring London survives – a one bourse, one-stop shop for brokers for all London business.
The real question is: how many committee meetings would this take to resolve and would it be one bridge too far for the real power base of the Lloyd's Market?