Blog

Winners and losers as technology revolutionises the London Market

on 28 July 2016

A round table discussion with some London market knights, by John Racher, Head of Product Strategy, Xuber, part of CSC.

Having never knowingly turned down a free breakfast it was with anticipation that I accepted Intelligent Insurer magazine’s invitation to a round table discussion at the Lloyd’s Club earlier this month. The subject matter was the weighty topic of technology revolutionising the London Market and, coming from an insurance technology background, this is a subject close to my heart and that of my company, Xchanging, a CSC Company.

Not that this is the first such discussion, and it’s certainly far from the last. As one of my round table panel colleagues and I recalled over a bacon roll, the London Market history books are littered with failed technology initiatives (remember EPS and Kinnect?) and in fact, we both recalled a meeting in Lloyd’s to discuss electronic placing over 25 years ago!

So technology revolutionising the London Market is not exactly a new concept but it was interesting to hear why the attendees thought a new revolution would be any more successful than the previous attempts and why perhaps the London luddites are more likely to adopt this time rather than ignore it once again. With a panel of brokers, underwriters and vendors including some strong, opinionated London Market veterans this looked set to be a fascinating discussion.

The answer to that last question about adoption actually came pretty quickly as we all agreed that this time circumstances were very different, and the case to change was far more compelling than it had ever been in the past. The critically acclaimed London Market Group (LMG) paper ‘London Matters’ published in December 2014 noted, amongst other warnings, that London’s competitive position could be impacted by “technology shortening the supply chain and challenging an antiquated insurance infrastructure.” The panel agreed that the London Market was way behind the curve in technology adoption and that the LMG report was the catalyst for change that was needed. We equally agreed that London needs to be more efficient and easier to do business with if we are to retain market share and attract new business especially in the light of the digital disruptors actively and successfully entering the global marketplace.

The difference today seems to be that the first steps on our technology revolution have actually been taken including the electronic submissions processed as part of the Central Services Refresh Programme (CSRP) on 11th April. The London Market Target Operating Model (TOM), CSRP and Premium Payments Ltd (PPL) projects are definitely steps in the right direction, but it was agreed there’s a long way to go. Furthermore, they didn’t really address the uniquely challenging market infrastructure including the Bureau model. Maybe this latter challenge is one for some real cutting edge technology like Block Chain as one round table knight pointed out.

In many industries, innovation through technology can provide a real first mover advantage for anyone with the vision and anyone brave enough to take the plunge. Look at Airbnb, from zero to $25Bn in eight years or Nintendo with their new augmented reality technology used in ‘Pokémon Go’ adding $20Bn to their stock value in under a month (if you haven’t seen Pokémon Go ask anyone under 20 to show you it, they’ll almost certainly have it on their phones!). We know the same revolutionary advantage is being seen in the insurance sector with companies like Cuvva, Lemonade and Friendsurance - so why is London so slow on the uptake? Perhaps, as the panel suggested, it was symptomatic of a collective subscription marketplace in which no one member wants to go first and considers that if things are generally ‘ok’ there’s no real incentive to push for change. It was

pointed out that that would no doubt change if market share started to decline or if it got to the stage where brokers no longer saw an advantage in bringing business into the London market at all.

Well that all sounds a little bit gloomy, but we in London should not forget why this is such a strong market or that London is still regarded globally as the gold standard for complex Commercial P&C and Specialty (re)insurance business, as one panellist reminded us. The London Market ecosystem has always encouraged innovation, specialisation and expertise and provides the 200 or so broking firm’s access to over 150 carriers in the square mile, which is totally unique. The trick is going to be perpetuating that strength as technology advances break down the access barriers for competition and water down that marketplace advantage. The TOM has definitely started that with initiatives like electronic placing promoting straight through processing but technology should be put to better use.

So, two bacon rolls, a handful of Danish pastries and half a gallon of coffee later we draw a lively and passionate conversation to a close. We all seemed to be in violent agreement that technology will absolutely revolutionise the global commercial insurance market and that the London Market needs to progress and preferably accelerate the current initiatives to avoid missing the boat. The problem may be that we tend to go at the speed of the slowest and as one panellist warned, if we carry on giving paper, the market will carry on using paper.

If you want to read more about the discussion, Intelligent Insurer is publishing an in-depth overview on the roundtable available in late summer.

BLOGGER BIOGRAPHY

Name
John Racher
Title
Head of Product Strategy
Bio
John joined the insurance software business in 1999, bringing with him over 12 years’ market experience with a Lloyd’s Syndicate, latterly managing the run off of a number of Syndicates.