Speaking the language of disruption

Leading the Blueprint 2 programme and unlocking greater potential to innovate for the challenges ahead

Bob James, former Chief Operations Officer at Lloyd's

The London Insurance market is nothing if not specialist. Built on centuries of collaboration, expert knowledge, and trusted relationships, it’s a close knit community at the heart of the global insurance industry. In such an established market, digitisation has been historically slow to infiltrate; while other financial services sectors with more volatile customer bases such as banking, equities and retail insurance pushed hard for digitalisation, the London market’s strong and well-established trading relationships partially insulated it from the need to change. The market slipped behind the digital investment curve at a time when customers were demanding the greater choice, speed and flexibility they had come to expect from other financial partners being impacted by disruption.

Today is a new world, as the market undergoes significant change and upheaval, technology is fast becoming the differentiator. Solving the increasingly complex risks of customers, and staying ahead of the game in lowering cost and increasing productivity, now relies on technology. London insurers are investing heavily, in order to better equip underwriters, build smoother insurance journeys, and offer more value and lower costs to brokers and their customers.

But how do you achieve full digitalisation of the Lloyd’s insurance market in such a complex, co-dependent ecosystem? It means working with hundreds of independent underwriting business, brokers and service providers to connect them while ensuring that all parties share common data standards and have harmonised the manner in which they process risks and claims. In addition, all these businesses have their own internal technology systems and many trade in multiple markets internationally. This has been the thrust of Blueprint 2, Lloyd’s modernisation programme set to deliver profound change through digitalisation, which will see participants in the Lloyd’s insurance market radically overhaul their long-established trading protocols in favour of centralised electronic trading and claims management – and, importantly, adopting market-wide standards for data to create that shared digital language.

Bob James, former Lloyd’s chief operating officer, is a man well versed in bringing transformation to complex ecosystems. He has a handy metaphor to illustrate his point. Imagine a scene in a busy restaurant. Two guests, one of whom speaks English and the other who speaks Mandarin, are being served by a waiter who speaks German. “Taking their order is going to be a painful process,” James explains. “If that restaurant wants to turn over a table every 45 minutes, it’s going to be much easier if everyone speaks the same language.”

That shared digital vocabulary is the key to breaking down the boundaries between data silos. In a trading hub as old as London’s insurance market, it’s no surprise that its constituent businesses have their fair share of legacy IT systems. Valuable data is confined to these systems, which are expensive to maintain and problematic to integrate. On top of this, the market is further hindered by inefficient APIs, poor visibility and lots of duplicated functions such as rekeying of data.

“Our role is to help the market thrive, we need to make Lloyd’s more agile and nimble; we need to create services that help the market gain better insights into the risks being written and enable market businesses to innovate in a fact-based manner.”

One might think this ‘rewiring’ of the Lloyd’s market may seem rather inward-looking and a world away from policyholders and their challenges, but not so, according to James. “Lloyd’s has tended to trade in commercial specialty insurance so most of our customers are businesses and corporations, but I think of them as individual owners. They’re dealing with a world that’s far less predictable.”

While improved costs and efficiencies are undoubtedly important wins for Blueprint 2, it’s in the market’s ability to address what’s known as the protection gap that the biggest potential positive lies. The protection gap is a concept that’s been gaining attention in recent years: the risks to which policyholders are vulnerable are not only multiplying but are evolving faster than the range of available insurance products. Lloyd’s ability to fully address this gap is currently hampered by fragmented data and systems that cannot seamlessly integrate . Thus, the resultant lack of any suitable risk transfer method compels businesses to retain these risks on their balance sheet, thus exposing their capital. However, Blueprint 2 points towards a solution.

Artificial intelligence (AI) can analyse terabytes of data with immense speed and make decisions or predictions based on the results. Imagine the possibilities when, post-Blueprint 2, the Lloyd’s market’s data is pooled and made accessible to an AI’s algorithms. Yes, policies could be priced and bound in real time; and yes, claims could be managed more cheaply and in a fraction of today’s average times, but these are efficiency gains. What’s really exciting market practitioners is the ability to train AIs on Lloyd’s global risk data to the point at which new product ideas and risk transfer mechanisms can be developed. As leading management consultancy McKinsey noted, the insurance sector will shift from its current state of ‘detect and repair’ to ‘predict and prevent’ – which is precisely how to address the protection gap.

“Wayne Gretsky, the great Canadian ice hockey player, used to say that he’d skate to where the puck was going to be, not where it had been. And that’s what we’re doing with Blueprint 2,” James summarises. “If you can get different people in the insurance value chain to speak the same language, you can improve the speed of your service, make it less expensive and you can use that common data set to innovate.

For James, the past two years driving Blueprint 2 have aroused his intellectual curiosity and satisfied him like no other role. “Part of that is that Lloyd’s has such an interesting dynamic,” he explains. “It’s a marketplace of entrepreneurial people coming together of their own free will. It’s a marketplace of ideas.” Those ideas are about to be empowered by a new electronic architecture. The Future at Lloyd’s programme had been challenging to say the least, but James believes its benefits are within the market’s grasp. The oldest insurance market in the world is preparing to reappraise its experience and its data with an entirely new digital mindset.

Find out more about Blueprint Two