For several years now, Lloyd’s of London has been grappling with the challenges of modernisation. The market understands that in order to survive, it needs to adapt to technological change, meet new regulatory requirements and compete with more efficient international rivals. However, progress towards this goal has been slow – it demands that a diverse set of insurers, reinsurers, brokers and managing agents all work to the same standards and roll out new systems without disrupting current claims.
However, gargantuan though the effort might be, the firms at the vanguard of this transformation are starting to see real competitive advantages. This is because crucially, modernisation isn’t just a way for insurers to meet the requirements outlined above – it’s also something that can save them substantial sums of money, not to mention help them deliver a better quality of service to the insured.
Here are five compelling reasons that the London insurance market mustn’t see modernisation as a necessary evil, but as a major opportunity to reimagine the characteristics that make it an attractive place to do business.
Improvements to claim lifecycle times
The claims handling process represents an insurer’s single biggest opportunity to either make or lose money, so the importance of efficiency – in the sense of ensuring that claim lifecycles are always fast and accurate – is impossible to overstate.
Modern end-to-end claims handling solutions like Guidewire ClaimCenter and IBA IBSuite have done much to further the art of claim lifecycle efficiency, automating vast chunks of the process from first notice of loss through advanced adjudication and claim closure. Compare this with some of the legacy systems still in use on the London insurance market, which typically cover only parts of the process and therefore require information to be intermittently rekeyed, and it shouldn’t be hard to see the potential for cost-saving.
Lower chance of human error
Of course, the benefits of automation extend far beyond efficiency. By culling low-level, repetitive administrative tasks from the underwriter’s job description, an insurer also lowers the chances of human error seeping into the policy management and claims handling processes. A minuscule inaccuracy can cause a firm to spend more than it ought to have on a particular claim, for example, which adds up in the long run.
Faster, less expensive staff training
Though perhaps a less immediate benefit, one of the other advantages of modernisation is that better software typically makes staff training faster and less expensive. A market like Lloyd’s can seem impenetrable to the outsider, particularly as it’s still common to see brokers do business with bulging bundles of paper documents rather than standardised electronic messaging protocols.
Replace these byzantine practices with more modern systems that are consistent with those used on other insurance markets, and the process of getting new employees up to speed is likely to be much snappier.
Ability to compete with other markets
A major driver of the London modernisation agenda is ensuring that the market remains a profitable environment for insurers and brokers to operate in. As other financial centres thrive on technological change, Lloyd’s is under pressure to do the same; ergo, firms that have adopted modernised practices such as standardised messaging are much more likely to retain partners in future than those that haven’t.
A better quality of service for clients
Finally, another key reason that modernisation is so important to Lloyd’s is that today’s clients have far more options than they used to. London firms need to prove that they can offer as good – if not better – a service as their counterparts in other insurance markets, and this means faster quotation and claims processing, more transparent processes, and potentially better value for money.
The first two of these points are explicit targets of the London modernisation agenda; the third becomes possible when reduced operating costs translate into smaller charges for clients.