A Marriage of Modernity and Tradition

By Tim Carroll | April 16, 2012

A milestone in the modernization of the London insurance market was reached on March 5, when the electronic processing of endorsements using ACORD data messages was extended to all classes of business.

The endorsements initiative is part of a market-wide program aimed at modernizing the way business is processed — from placing, through accounting and settlement, into claims — to ensure that London remains the market of choice for global customers. The value offered by London in terms of coverage, security and price is unrivalled. This has to be reinforced by continuing to improve customer service.

In recent years, we have improved the way we work. Electronic processing has more than halved the time to process the average claim. The way money moves between counterparties to settle premiums has been streamlined. “Contract certainty” has enhanced the quality and timeliness of policy documentation received by the end insured.

We want to create similar improvements in the way insurance is agreed to augment customer service with increased transparency and speed, and reduced cost. It will eradicate paper-based processes, duplicative data entry and manual hand-offs between trading partners and service-providers.

Contract Changes

Our starting point has been to introduce smarter technology support for the agreement of contract changes — endorsements. A marine business pilot commenced in October 2010; property, professional indemnity and specie was added in July 2011. The stages allowed us to build consensus around the use of process improvements, which is challenging in a market of more than 250 independent organizations and where the subscription placement still dominates.

Despite the challenges, all Lloyd’s managing agents are signed up with 16 of the top 20 brokers and 24 members of the company market — a critical mass of London market businesses.

We also are turning to the bigger prize of the original placement. Our intention is to use processes, compliant with ACORD international data standards, for the submission of risk details, the agreement of terms, and contract formation for all risk placements and amendments in the London market.

Two things are important. First, although the message standards and process are agreed at market level, the technology by which brokers and insurers generate, receive and process data is up to them. Secondly, the process enhances the value of the negotiation between the broker and underwriter, it does not replace it. They can be more selective about when to negotiate face-to-face, thus using their time more productively. Trading becomes less time-consuming and location-dependent, allowing more efficient operating models to develop. London remains a relationship-based market, but we hope to enhance those relationships by removing time-consuming administrative tasks.

Another value of starting with endorsements has been that it has allowed firms to evaluate the possible benefits, such as the delivery of better data more swiftly during the placement process, without large investment. Firms are starting to see the possibility of further competitive advantage, and as confidence develops and the process is adopted more widely for endorsements and then for placing, this will drive investment in workflow and the integration of data into back office systems.

Future Market

London deals with complex risks that will always need face-to-face broking. Yet for catastrophe business, much of the modelling will take place before the broker visits the underwriter to discuss the risk. The meeting will hammer out a deal, and the underwriter will electronically agree to accept a line, triggering the exchange of structured data and documents to confirm the contract. The data and documents will flow into back-office systems, be enhanced as needed by the broker or insurer, then support the movement of premium and future handling of claims.

So many of us undertake personal business online — shopping, banking, personal insurance — but we don’t embrace modern technologies at work. Our electronic endorsements initiative is taking 21st century technology allied with ACORD data messages and using them to support London’s established face-to-face method of trading. The perfect marriage of modernity and tradition to service our customers.

About Tim Carroll

Carroll is a non-executive director of Chaucer Syndicates, Samsung F&M Europe and Tawa plc.

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Insurance Journal West April 16, 2012
April 16, 2012
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