Speech to the Insurance Day Summit, London, 21st May 2007 – It is time that we in the London market accept that the drive for efficiency is not something that is being done to us � it is something that has to be done by us. It is extraordinary how industry leaders who spend their day spotting and taking advantage of business opportunities and developing innovative insurance solutions seem to be unable to grasp the importance of improving the level of service to their customers. In my mind it�s simple. Businesses which don�t recognise this will be left behind.
You will probably have heard people compare Lloyd�s infrastructure to Victorian pipe work. Sadly we don�t have Thames Water to help us replace our pipe work we have to do it ourselves. The message on this sign could easily be applied to the insurance industry. It says �We will only be here for a short while but the benefits of this work will last a life time.�
Why do we need to modernise? There are three key reasons why we must change:
Firstly, as an industry we lag behind the rest of the financial services sector in terms of efficiency. When a bank comes to the market with a complex structured financing trade, the offering circular is agreed before the roadshow starts, let alone before building and closing the book. Why is it that a bank won�t contemplate doing a deal without the documentation being in place but we in the insurance industry are perfectly happy to do the opposite?
The second reason is an increase in customer expectations. Over the past two decades, customer loyalty has become erratic with customers expecting more. Loyalty is no longer simply a question of the quality or price of a product � brand name and customer experience are just as important. Lloyd�s overall satisfaction rating is a reasonably healthy 7.6 out of 10 but with increased globalisation and competition, we ignore our customer�s needs at our peril.
Thirdly there is the small issue of competition. I am a huge advocate of competition � it encourages efficiencies and innovation, leads to a better level of service to our customers and as a result keeps markets vibrant and dynamic. But what has been the impact of this competition? Over recent years, the multi-platform operating model, where insurers no longer operate just inside Lloyd�s, has become the norm. Now almost 70% of Lloyd’s capital is controlled by organisations with at least one underwriting platform outside of Lloyd’s. There is also a clear trend of increasingly �less complex� specialist insurance business staying in local markets. For insurers to succeed, they now have to localise as well as globalise. They cannot sit in London any more and expect the world to come to them.
So, to summarise: we�re not efficient; our customers are expecting more; and we are faced with more competition. We cannot ignore these facts. If London is to remain the premier centre for specialist insurance we have to work together. We�ve already seen what can be achieved if we do so. Contract Certainty is a great example. By working together we didn�t just meet, we exceeded the 85% target.
We�ve also seen some early rewards of these efforts � not just on the work we have done on Contract Certainty but also on Electronic Claims Files and Accounting & Settlement. It was pleasing to see Standard & Poor�s recognising this progress and citing the �unstoppable momentum� behind improving London market business processes when they announced our upgrade to A+.
What needs to be done and what will be different?
In order to reap these benefits there are a number of things that need to change in the London market:
- contract documentation needs to be received earlier by customers. At least within 30 days;
- claims need to be turned around more quickly. Some users of the Electronic Claims Files are already reporting a 40% reduction in the time it takes to process a claim;
- we need to speed up the flow of cash through use of the Accounting & Settlement repository;
- we need to be able to place business electronically � in a parallel rather than a serial fashion; and
- we have to remove paper from the process so that there is no longer the necessity for a fixed location.
So what has been achieved so far?
There are three pillars to our strategy for achieving a modern and efficient marketplace:
- Electronic claims handling
- Improved Accounting and Settlement
- Pre-bind Quality Assurance
So in conclusion, if change isn�t radical, if it doesn�t represent a root and branch overhaul of existing, antiquated practices and if it is not delivered by all of us, then this wonderful marketplace in which we are privileged to work will stumble along to an uncertain future. If however, we grasp the opportunity which is staring us in the face then the future will be certain. Certainly clearer, certainly brighter and certainly better for us and our customers.
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1. Target Ratings Project (2003) and IBNR Weekly.