Liz Booth examines how Covid-19 has accelerated technological change at Lloyd’s of London
In the summer of 2020, as the Covid-19 pandemic continued, business consultancy McKinsey, claimed the pandemic had jump-started digitalisation by five years in a matter of two months. All the old arguments about it being too time-consuming or costly, it said, were instantly dumped as companies fought to regain continuity of operations.
The insurance sector was no different and, in fact, had previously been seen by many as one of the last bastions of tradition and doing things ‘because they have always been done that way’.
Now, however, a new report reveals that the market is on the cusp of major change, as underwriters and brokers realise they can do work in a new way – and it will take less time and cost less money.
The report, titled Lloyd’s & The London Market: Covid-19 – Jump-Starting A Tech Revolution in The London Market, produced by business management firm WNS, and Insurance Post magazine, has found that it has taken a global shock such as Covid-19 but finally, “a growing number of underwriters and brokers are realising that with technology, there is really no need for them to be sitting in the Lloyd’s building”.
It continues: “Technology means that the business of insurance can be carried out remotely and efficiently. Not only will this cut costs and reduce errors, but it will allow firms to focus on servicing their clients and business growth, while attracting talent into an exciting, diverse and forward-looking business.”
Report author Vince Wooding, corporate senior vice-president, strategic growth and global client relationships, WNS, says: “Back in the late 1980s, business leaders in the London market struggled to implement a system called Electronic Placing Support. Many underwriters wouldn’t even turn on a computer to access it.
“Fast-forward to 2020 and the market is still in the middle of implementing Placing Platform Limited – some 30-plus years later. Everyone said face to face was the only way to trade.”
A growing number of underwriters and brokers are realising that with technology, there is really no need for them to be sitting in the Lloyd’s building
A spokesperson for Lloyd’s states that it is “prioritising the delivery of three areas for the future at Lloyd’s that will deliver the most impact and value to participants in 2020 and into 2021”, adding: “These are: improving electronic placements, enhancing delegated authority services and claims process improvements.”
It adds that it is also building out data and technology requirements to support them and claims the focus would result in improvements for about 80% of the Lloyd’s market’s business.
Changing the mindset
Lloyd’s is also encouraging all those who work in the market to join the research. That could have been a challenge pre-Covid-19 as, according to the WNS report, the key issue with the insurance sector and digital transformation has been culture. Brokers and underwriters have always maintained the importance of getting in the queue and placing business in-person. “It has taken Covid-19 to change that culture,” the report concludes.
A growing number of firms have been embracing new technology and operating models. Some, states the report, are startups, while others are established players going through and embracing business transformation with disruptive thinking. Their vision is to focus on what they do best – pricing risk, underwriting and handling complex claims – and working with transformation partners to drive the required change.
Key issues that the report reveals include:
- There is continuing slow adoption of technology and a lack of preparedness for digital disruption.
- Less than a fifth of respondents were “very confident” that they can meet the Lloyd’s/London market modernisation requirements and adapt to customer needs.
- Only 40% rated their business four or five out of five for agility – in other words, about 60% were struggling to handle change.
- Slightly less, 39%, were on an analytics implementation journey, while only 8%-9% were using robotic process automation (RPA) and artificial intelligence (AI) to drive efficiency. This is staggeringly low when compared to other industries, for example retail, where 60%-70% of businesses are extensively using RPA and AI.
Another significant challenge that the report reveals is the struggle faced by firms around leveraging data effectively. An overwhelming majority of those polled saw potential in using their data to drive business growth and differentiation.
Winners and losers
Mr Wooding suggests: “This is where insurers should focus their efforts, as this will set apart the future winners and losers. Underpinning this opportunity though, is the need for good, clean data. Just follow a policy around the market and count how many times and in how many organisations the same policy data is captured. It is still staggeringly inefficient.
“Not only will this cut costs and reduce errors, but it will allow firms to focus on servicing their clients and business growth, while attracting talent into an exciting, diverse and forward-looking business.”
The report warns that the talent issue needs immediate attention and suggests: “By broadening their skillsets and providing the right training to further develop their careers, the London market could improve prospects for its current workforce and make the market more resilient to the forthcoming challenges it will undoubtedly face.”
- Some 17% of employees at Lloyd’s were more than 50 years old in 2014.
- Today, 26% of employees are aged more than 50-years-old.
- Only 4% of graduates leaving university in 2018 were considering insurance as a career. Source: London Matters 2020 report
Liz Booth is contributing editor of the CII