Electronic placing in the London market was a long time coming, with many obstacles to overcome – It took the pandemic to prove electronic placement is a benefit not a threat and, now it’s here to stay, we’re heading full steam towards a truly digital marketplace.
The ability to place risks quickly and accurately using electronic placing is essential for an efficient marketplace. The move to electronic placing has also removed the need for paper contracts, keying-in time and duplication of effort.
So why was it a long time coming? Well, compared with other sectors such as banking or even personal lines insurance, the process of going digital for large, complex commercial risks was complicated. This is due to a few factors, the first being the art of face-to-face negotiation. This remains vital in the London market and is unlikely to change.
The fear that “going digital” would remove the face-to-face element of negotiation held the market back. Indeed, practitioners felt that digital processes would compromise their jobs. And while this would never ring true, such a mindset would prevail until the market was forced to do business virtually during the pandemic. Fast forward just a few years, and there are now around 20,000 users conducting over 200,000 risk placements a year.
Another reason for previous resistance was the lack of data placed on record. Traditionally, underwriters would record minimal data from brokers and then translate the data onto their systems. However, in the new age of data, this no longer suffices. It is worth repeating that the complexity of data that exists within the insurance market did create challenges for electronic placing, compared with other markets, such as banking.
So what are best practices to ensure that electronic placing systems can be implemented effectively? Put simply, insurers must adopt data-first and API-first strategies. Brokers and underwriters need to be able to easily and efficiently exchange data between their systems and electronic placing platform to reduce potential errors and manual keying.
The problem, though, is that insurers have traditionally had different data sources, making onboarding a time-consuming and expensive business. This is where APIs (application programming interfaces) come in. APIs allow multiple systems to integrate, meaning different programs can speak to one another intuitively. Such strategies must be adopted for the London market and those that trade with the London market.
Raising the Standards
Helping to raise standards is the London market’s Data Council, which was born out of the Future at Lloyd’s program. One of its main focuses is embracing the transition to digital, with electronic trading being key to this. Competition is also helping to raise standards. Where once PPL (London’s electronic trading platform) was a virtual monopoly, there are now several platforms and bespoke broker and carrier solutions vying for a share of the market’s placing volume. These platforms are rapidly gearing up for data-first by offering API connectivity to participants and some very clever on-screen negotiation of the contracts that will, in time, be entirely constructed from the data.
Trading platforms which don’t offer such tools are likely to fall behind in the market today.
As for implementing electronic placing platforms, speed must be a priority. This includes getting up to speed with easy-to-learn functionality that is intuitive and not complicated. Training programs must also be short. Online tutorial videos, split into modules, is the way to go, rather than day-long training sessions in the boardroom that teaches theory rather than practicality. Chunky manuals are also a no-go.
It has taken a long time for the London market to get here, though its complex nature was not to be underestimated. Major ground has been made, but there’s still a way to go in the ever-evolving world of data. The greater the competition, the greater the standards that will rise, as one platform offers something that others don’t. And so the wheels will keep spinning.
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