Everyone accepts the need for the London insurance market to modernise but there is still no definitive consensus about how we get there. Modernisation has been slow for various reasons: a culture of doing business face-to-face; a pride in a centuries-old market; previous well-documented failures; and required consensus of market participants, to name a few.
There’s been plenty of talk in the market about the need for modernisation. We at CSC thought we’d put the question to those that live and breathe the London market.
In November 2016, we conducted a digital survey at the Xchanging London Market Conference, hosted by Xchanging, a CSC company, which gathered the views of 70 delegates on the risks and challenges facing the Lloyd’s and London markets, including their perception of London’s future position as a global insurance centre.
The survey revealed that the cost of placing business in London is still the number one reason for London being less competitive than other insurance hubs, with 39.6% of the respondents choosing that factor.
However, more surprisingly, 55.7% of respondents felt that the industry was not capable of “disrupting itself”, and that any change needed to be triggered by factors from outside the industry. Only 38% said that the London Market was capable of disrupting itself.
Another possible reason for the delays in modernisation is the suggestion that not enough executives have the experience to drive this through, with only 43.8% of respondents saying they “definitely” thought they had the right management to achieve this. Almost the same number, 44.9%, said they “partially” had the right leadership, with the rest not knowing or answering no.
While the need for change is widely acknowledged, it seems there is still a great deal of trepidation in how to achieve this. Perhaps the concerns come from failures in the past which haunt the market still and put pressure on any new initiatives. When ‘failure is not an option’, there is necessarily a lengthy governance process to be established before operational progress can be seen.
From CSC’s point of view, technology is in much better shape today, but now more than ever there are real business reasons to change. Rates are flat in many lines; investment returns are down and with so much new capital flooding in, there is little sense the pressures will abate any time soon.
Overall, the market has not always been very good at coming up with options that give a huge financial benefit and often the back-office costs have not been the biggest drivers of focus. Instead, the attention has been on broker commissions, underwriting rules and claims. However, interestingly that focus has been shifting and people are starting to talk more about their back office costs, driven by the soft market and because it is one of the few places where cost savings can be achieved through greater efficiency.
For the first time, we are seeing real traction from people to improve optimisation and lower the costs of their back office. That could in itself be a compelling reason why people are starting to increase their adoption of technology.
However, it still appears that companies need help taking that first step to modernise. This was highlighted by questions asked by delegates at CSC’s recent ‘Art of Transformation’ event, which looked into how our newly merged company can tackle modernisation. Questions included “How do I persuade my tradition-entrenched CEO that digital is important?”, and “Are we already too late to digitise the London Market?”
Another question was “How do you fix the inertia, given that change is seen as expensive and risky with multiple unaligned players?” All these questions point to an enduring uncertainty in the market. London knows that it needs to embrace the many technologies available in the market, but the question is how.
Following the acquisition of Xchanging by CSC, we are in a position to really influence some change in the market, and every investment pound we spend will be directed towards a vision of a global digital insurance marketplace.
The way we will implement that vision will be through specific strands:
- Product launches, including integrated products that work together and with legacy systems
- Transforming the bureau and central services by bringing CSC’s transformation capability to central services
- Responding to the Target Operating Model (TOM) with compelling solutions
- Understanding where carriers’ and brokers’ own innovation initiatives are going because although there are common themes in the London Market, each organisation has their modernisation agenda
- Supporting cultural change
Ultimately CSC Xchanging would like to see the same levels of automation in the UK personal lines sector applied to the commercial and specialty insurance market. It’s possible. Let’s make it happen.
Caroline Bedford is London Market Modernisation Lead for CSC.