Insurance Day -
The Spitzer probe forced brokers to re-evaluate their business models and
change their attitudes towards process reform. This window of opportunity
spurred six
FIFTEEN months ago, Hiscox’s chief operating officer Sue Langley was lunching
with a colleague and discussing Eliot Spitzer’s aggressive reforms of the
industry.
Worried by the potential repercussions
of the
And with the added
frustrations surrounding market reform in
“Post-Spitzer, I was having lunch
with someone else who is now a G6 member. We were frustrated by the inability
of the market to find a solution to process reform. And in this post- Spitzer
world would this business model change brokers’ attitudes to processing and
cause them to push more of that function onto insurers?” Ms Langley says.
“So, we decided on getting a group
in the market to work together. We cherry-picked individuals but obviously all
competitors continue to compete in the underwriting arena.”
Although Ms Langley is keen to give
credit to all the G6 members - Amlin, Beazley,
Catlin, Hiscox, Kiln and
She is also the chairman of the G6
and, whether by default or design, has become its spokesman.
“My background is not in insurance,”
she says, “I used to work in travel. I was a management consultant and before
joining Hiscox I worked in change management which
has been a very useful skill for this project.”
Outside the industry
The recent success of the G6
venture, with the announcement last week that Marsh, Aon and Willis have joined
Benfield in agreeing to pilot the G6’s new Acord data
standards, might have something to do with Ms Langley coming from outside the
industry.
And after the failed $70m Kinnect platform, Lloyd’s will be hoping that its outsider
and new chief executive, Richard Ward, will treat market reform with the same
out-of-the-box perspective.
However, there the comparison
between G6’s solution and Lloyd’s Kinnect platform
ends. The G6 has been quick to defend itself from accusations by some in the
market that it is trying to take the place of the failed market platform.
“There’s still a few in the market
who think that we have a hidden agenda but hopefully because we now have Acord standards people will see we are committed to the
market,” says Ms Langley who, with the rest of the group, is seeking to
encourage further partners into the scheme.
The G6’s plans centre on two phases.
Phase one, which has now been completed, has seen the development of data
transfer on a “peer-to-peer” basis between brokers and managing agents, not
only bringing into line information required for slips but also providing a platform
where, unlike in an e-mail, this data can be fed straight into back-office
systems.
Phase two, which has a deadline
pencilled in for the end of this year will see the
standardisation of claims management systems.
Although the group’s phase one plan
has been remarkably successful, its completion wasn’t without processing
hiccups which Ms Langley and her peers had to negotiate.
“The project looks like a big task
but we looked at things on a smaller scale which has made it easier for us to
hit our deadlines. We found problems with the data standards. The other thing
was actually testing this. The issues found in the tests will hopefully be
resolved.
Gateway new to us
“The gateway is something which is
all new to us. In fact it has only been peer -to- peer since December and we
wanted to get everyone on board by June but Benfield was months ahead of
schedule.”
And G6 believes that its efforts at
market reform will give
Ms Langley, who has recently helped
set up Hiscox Bermuda, is keen to attribute G6’s
success to the group’s perseverance as well as the support she has received
from work and the industry.
“Hiscox
likes to lead change. At work we had a strong management team in place and they
were very supportive. We all wanted it to work out.
“All the G6 partners have been
dynamic and quick to get things going. We have generated a level of trust. I
know I felt particularly strongly about the market being well overdue for
change.”
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Insurance Day - Where next for Lloyd’s post-Kinnect?
GORDON EJSMOND-FREY, industry manager for insurance at Microsoft EMEA, says a
“one-size-fits-all” approach is no longer workable, 12 April 2006
KINNECT was meant to usher in a new
way for brokers, Lloyd’s syndicates and
With so many diverse working
practices between and within brokers and underwriters, and every contract
potentially creating a unique transaction, trying to centralise over 300 years
of working practices was always going to present a major challenge.
Related to this, the changing nature
of the technological landscape also played a role. The project took a long time
to get to market and in the intervening period technology had moved on. In
recent years, great progress has been made in electronic data transfer, trading
platforms and peer-topeer (P2P) systems. Even Kinnect’s interim chairman, Michael Dawson, admitted more
viable technology alternatives had emerged since Kinnect
was established.
It was also a victim of confused
agendas and the competing interests of participants in the Lloyd’s market. Brokers
working in multiple markets were reluctant to use a separate procedure just to
transact business in
Roadmap
Some argue that Lloyd’s did not need
a centralised platform for instant decisions when the majority of brokers still
prefer face-to-face discussions. While breaking traditions that have become
embedded into the psyche of the market for over 300 years is certainly a
challenge, if electronic trading and collaboration is done well, it can bring
real efficiencies.
The FSA may have delayed plans over
contract certainty, but the industry cannot afford to stand still. Kinnect was created out of a need to modernise the market,
and that need has not changed. The reputation of the
What it doesn’t suggest is
continuing to use manuallyintensive, paper-based
processes. If Lloyd’s is to remain a leader in today’s risk-averse market it
must continue to evolve and embrace technology. Research by Brit indicates that
Lloyd’s is lagging behind its global rivals in operational efficiency.
According to the research, processing and administration costs account for 26%
of premiums written, against 19% across the
The efforts started with Kinnect must not go to waste, and Lloyd’s should continue
its efforts to improve efficiency and reduce costs.
If
Today’s technology
The challenge is to find market- led
solutions for the “deal now, detail later” paradigm that has resulted in a lack
of contract certainty for generations. The market must take the opportunity
presented by Kinnect’s failure to examine how it can
move to lower the cost of doing business, improve efficiency and reduce
operational risk.
Kinnect’s failure shouldn’t be viewed in too
negative a light. An electronic platform that offers workflow processes and
reduces the need for rekeying of information - and
the associated risks of errors - can improve efficiency. Kinnect
was unable to offer an acceptable solution at an acceptable price.
If Lloyd’s is to truly take
advantage of modern technology’s benefits, it is critical to find the right
paths in today’s environment. However, there is a need to balance the market’s
requirements with what is necessary in order to remain competitive.
To streamline processes, tailored
P2P collaboration can be used between smaller groups of specialists, when risks
are being assessed and structured. Sharing unstructured data has traditionally
been difficult, but there are solutions available today that can achieve this
to speed up the negotiation stage.
Reducing the reliance on paper is
paramount to increased efficiency. Much of the data already exists in
unstructured form in word processing and spreadsheet programmes used by Lloyd’s
members.
This has to move to the next level
where data can be automatically processed electronically and transferred into a
more structured form. This is an area where technology has moved on, allowing
for unstructured data to be extracted into more conventional accounting and
underwriting systems already used by market players.
By using technology in this way,
brokers, particularly those transacting multiple deals at any one time, can
ensure they’re in control of their business. It also provides the basis for
greater use of business intelligence applications, with the opportunity to feed
information into a data warehouse for analysis at a later date.
Key considerations in any solution
include the ability to gather and exchange data in a secure, reliable,
consistent and auditable manner. This effectively brings together all
participants in the process into an efficiently managed and cohesive community.
The market has made moves towards this with agreed stages in the core business
processes and documents, but this must now be more widely adopted as the market
standard and considered best practice.
This could create a situation where
there are a number of different trading platforms being used in the market that
support a common set of agreed standards in terms of the information they
provide back to Lloyd’s.
This would also leave the market
free to set overall standards and ensure the integrity and orderliness of the
market. The global financial services market has already shown this is possible
with Nasdaq, which has
several different trading platforms that link into the market via common
standards.
Future growth
Lloyd’s and the
Now is a time to reflect on lessons
to be learnt from the failing of Kinnect, because it
is becoming clear that a one-size-fits-all solution is not the answer. It is
also a time to be positive because there is a range of technologies that can be
used at different stages in the process.
Technology is no longer the hurdle
it once was. But it is critical that if technology is to help Lloyd’s and the