Accelerate change or face mandate, Ward tells market
11 July 2007
The pace of process change within the Lloyd’s market is too slow and the Franchise Board will not hesitate to take action to ensure targets are met, Lloyd’s Chief Executive Richard Ward has warned market leaders.
In a letter to managing agents, Ward says that Lloyd’s Franchise Board will take “firm action, where necessary” to ensure that progress is made.
“I have no doubt that there is a shared will in the market to improve our processes and much progress has been made,” he says. “The pace of change, however, is still too slow. Improvements to the market’s processes are fundamental to the ongoing competitiveness of the Lloyd’s market.”
Ward was responding to a letter sent to the market by Market Reform Group (MRG) Chairman Dane Douetil about the slow take-up of electronic processing through the Electronic Claims File (ECF) and the Accounting and Settlement repository (A&S). Both make it possible for the market to process claims, premiums and policies electronically, making the whole system faster and more efficient.
The published MRG targets for A&S take-up are 40% by end of the second quarter of the year, 60% by the end of the third quarter and 80% by the end of 2007. Lloyd’s current use of A&S stands at just 17%.
“This is disappointing,” says Ward. “We will continue to engage with the brokers and [Xchanging Insurance Services] to improve the speed of take-up and I would ask that you use every opportunity to encourage your broker counterparties to do so.”
On ECF the MRG has set targets of 30%, 60% and 100% by end of the second, third and fourth quarters respectively.
“The market level use of ECF over the last two weeks is 28.5%. This is encouraging but we need to ensure that the momentum is maintained,” Ward added.
Ward stresses that, while there is strong support for these initiatives from both the managing agents and leading brokers in London, failure to improve processes is a significant risk to Lloyd’s efficiency, ratings and reputation.
“We cannot miss this opportunity to modernise”, he says. “While progress has been made, the Franchise Board is committed to taking firm action, where necessary, to accelerate change, but recognises that it is important to signal its intentions at an early stage so that the market can properly plan for the future.”
These intentions include:
- A heightened level of engagement with managing agents and Lloyd’s brokers to understand how ECF and A&S usage can be accelerated and what support the Corporation can provide.
- Publication of performance figures for managing agents and Lloyd’s brokers - to be released end of September.
- Mandating the use of ECF and A&S - only necessary if take-up has not accelerated by the end of the third quarter.
To support that mandate, Ward says that the Franchise Board could, among other initiatives, require managing agents to enter into revised terms of business agreements with Lloyd’s brokers to contractually agree appropriate use of ECF and A&S. The Board could also require managing agents whose use of ECF is poor to commission a ‘skilled persons’ report, identifying causes of poor performance and how it can be improved.
“I hope that these steps will not be necessary but there should be no question of the Franchise Board’s commitment to take them if needed,” said Ward.
Last updated on 11 Jul 2007
