The London market’s prospects over the next two years will depend on its ability to speed up the transfer of risk and transaction data between counterparties in a format understood by all.

Every aspect of 2020 has been defined by Covid-19, and the market’s efforts in relation to technology and process change are no different. However, while it has presented significant challenges for both re/insurers, brokers, and their clients globally, it has also driven the need for technology to play a larger part and, dare I say, begun to change the mindset as to how the industry uses it.

As we end the year we can look back and see that large steps have been taken towards streamlining the digital front and middle office. Version two of the Blueprint for the Future at Lloyd’s may also be a catalyst for change in a year that has been defined by the unprecedented. It is a call to action to consider how technology can play its part in taking the next step in the market’s operational reform. The aim to create a standard data set fits into what I believe has to be the core theme for 2021  and, indeed, 2022 – the use and integration of data across every aspect of the market’s operations. The move towards true digitalisation is vital and, without a solid platform to build, on it will threaten the success of the entire programme.

The Blueprint plans to change the way the market operates, and companies will have to evolve and adapt if they are to reap the benefits of the costs savings that the initiatives it outlines can deliver. Our clients are clearly aware of the need for change and those discussions have taken on a greater degree of urgency given that Lloyd’s, and with it the London market, have set a clear timetable for implementation. 

But to deliver digital change, the market will need to integrate data in a way that will enable increased automation and data synchronicity. It will need to build on the technology that has been developed in recent years. There are sure to be challenges but the rewards will come with systems that enable firms to tap into the benefits that technology will deliver in all parts of their operations.

The move to the truly digital front and middle office has already begun and Blueprint Two will require greater integration of data systems that can better automate a range of tasks not only in the underwriting process but also in areas such as claims and processing. We have seen a lot of talk about the benefits and how they can be achieved, but real progress has been limited.

The year ahead is likely to centre upon the creation of the digital business model to capture these themes. Artificial intelligence, machine learning and automated processes are not new. But they are now being shaped to be more relevant and accessible to insurers, brokers and their technology partners so they can run in parallel and speed the transfer of data between businesses in a format that can be understood by all.

Regulatory scrutiny

With the growing implementation and use of technology will come a greater focus from regulators who will be keen to ensure the data and its outcomes continue to treat the customer fairly. However, technology will also play a role in the ability of firms to deliver the tasks to ensure compliance.

For an industry that deals with risk on a daily basis it has always been wary of change. The move towards greater use of data and digitalisation comes with the danger of hesitancy, which might delay some aspects of implementation. However, there was no time to hesitate when the Covid-19 pandemic required fundamental changes in working practices. 

There could also be a reluctance to move too quickly. We know how it works and how it will meet compliance needs, but it might be that the level of confidence needed by firms to take some of the necessary steps that in the next 12 months will be a challenge in itself.

The market is also migrating towards the provision of services and products alongside the assumption of the risk itself. A prime example is the market’s response to the demand for cyber cover. Insurers not only offer a level of indemnity but also a range of other services that assist clients and help to mitigate and reduce the exposure should it happen. Areas such as proactive risk management and claims also require technology to supply support to these services and this trend is set to continue.

We would expect to see data-driven innovations in the coming year given data levels will continue to grow. We are now at the point where the market is looking seriously at what data is available and how it can be managed and presented not only across the firm but also the market. The potential is clearly significant.

The costs and expertise needed to harness and standardise data has in the past been off putting for many in the market, especially the smaller players. It is encouraging to see that the conversations we are having with clients are increasingly related to how data can be integrated across all areas of their business. After all, without consistent  and real-time data we will all struggle to get the insight that is vital to making the strategic decisions that will help us navigate these challenging times. 

Author: Tony Russell
Published in Insurance Day 25 January 2021