Baringa Blogs

Will Lloyd’s go gently into that good night?

With unprecedented experience, expertise and commitment, Lloyd’s of London is the world’s leading market for specialist insurance. However, the value accumulated over the past 325 years is at risk of being destroyed within the next decade unless market participants undertake a profound and notable transformation.

As a centre for global underwriting excellence, Lloyd’s insurers rely on their deeply entrenched technical and industry expertise in the development of risk transfer solutions, specialised insurance products, bespoke pricing models and exposure analysis. Were the viability and success of the Lloyd’s market to depend solely on the capabilities of the individuals within the market it would continue to flourish, however, as we can see with almost every other industry and sector, disruption is afoot.

Insurance is, and will continue to be, heavily impacted as a result of cutting-edge technology transforming distribution channels, product development, customer engagement and operating models. The Lloyd’s and London market, however, is an industry segment that is not only struggling to embrace this new digital paradigm but in some cases actively opposing it.

In Baringa’s recent Lloyd’s Underwriting Management Study, senior individuals across the market were asked their opinions on some of the challenges facing the optimisation and control of underwriting activity, responses included:

  • Over 70 per cent of respondents admitted to experiencing significant data retrieval and reporting challenges at a time where the demands on data are increasing exponentially
  • Less than half of respondents utilise business intelligence tools to report or analyse data and instead rely on manual processes
  • Barely a third of respondents are considering the use of robotics to assist with data processing, cleansing, validation or administration
  • Over 80 per cent of respondents stated that there is too little experience with cutting edge technologies in the Lloyd’s market to move towards utilising these capabilities.

Whilst there is a willingness and desire by individual carriers to prepare for necessary technological enhancements, the direction of travel in the short term seems to be to continue to implement more proven, less revolutionary tools to enhance underwriting capability. At a market wide level a similar trend can be observed, especially in light of the scope of solutions within the London Market TOM. Although the proposals to modernise the London Market are going some way to address the data, structural and integration challenges, these are more evolutionary than revolutionary at a time where competitors are already implementing solutions using smart contracts, artificial intelligence and machine learning.

Lloyd’s carriers are still in the privileged position of being subject matter experts and leaders in their field. The tradition and legacy of the market and the ability of underwriters to develop products that serve customers’ needs continue to attract high levels of demand. However, as new technologies such as blockchain and intelligent software emerge with practical insurance applications, the USP of Lloyd’s will start to be eroded… and quickly.

Lloyd’s and London Market firms need to be more alert to the opportunities as well as threats brought about through emerging technologies. Now is the time for firms to be brave and take more of the ‘fail fast’ ethos that other industry sectors are embracing as we enter the fourth industrial revolution. 

Back to February 2017

Comments(2)

  1. Dan Golding

    06/02/2017 11:01:55

    Thanks Gary, an interesting take on the work that is currently being done in this area. I don't think the point of this article was to dispute whether emerging tech was considered, rather what and when firms (and the market) are planning to embrace it. You mention the work carried out as part of the LM TOM which in fact relegated the digitisation of the contract placement process to a "future phase" whilst enhanced operational reporting & analytics and Smart Contracts are out of scope all together.


  2. Gary Nuttall

    06/02/2017 10:42:49

    It was as part of the London Market Target Operating Model work in 2016 that Proof of Concepts and market research was conducted around blockchain, distributed ledger and smart contracts. More details can be found at https://www.linkedin.com/pulse/blockchain-london-commercial-insurance-market-gary-nuttall-mbcs-citp . This shows that, perhaps unusually, the market is ahead of the game in exploring emerging technologies!


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