Future At Lloyds: Digital Blueprint for a 330 Year Old Exchange

https://dailyfintech.com/2020/11/12/future-at-lloyds-digital-blueprint-for-a-330-year-old-exchange/
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In Sep 2019, Lloyds of London published their vision for the Future at Lloyds (FAL) as Blueprint One. Amid a tumultuous world economy, Lloyds has refined its strategy and game plan to launch Blueprint Two last week, a bold two-year program to establish newer ways of doing business, driven by digital channels with advanced data collection and management. The ensuing solutions will equip market participants to operate at materially lower costs.

As a leading (re)insurance marketplace, Lloyds has throughout its 332 year history, pioneered coverage for different risks, from the first motor and satellite policies to today’s cover for cyber and sharing economy risks. It is most sought after for complex and specialty risks. With 80 syndicates, it reported a GWP of 36 billion pounds last year.

Key drivers necessitating the FAL change program are:

  • A fast-changing risk landscape challenging businesses to find products/services to manage their exposures. A 2019 survey found that of top 20 risks identified by risk managers, only two were fully insurable.
  • High acquisition/admin costs across lines with little improvements due to lagging system modernization. Large corporates prefer to carry risk on their books.

Lloyds is hopeful that FAL will pave its path to be the world’s most customer-obsessed and advanced marketplace with the widest range of products/services.

In BP1, its goals were to:

  • Offer better solutions to risks faced by customers.
  • Deliver better products/services to customers and capital providers.
  • Simplify the way of working by being more efficient and cost-competitive.

The emphasis was on digital trading, claims, capital deployment and a services platform. An implicit assumption was that success would require flawless execution, as differentiation was otherwise incomplete.

Against its goals, progress made by BP1 during the past year were:

  • Offering better solutions to customer risks: New syndicates in a box approved, first fully digital algorithmically driven syndicate, small claims auto settlement pilot launched.
  • Simplifying access of products: API-based frictionless flow of electronic placement data between carriers and brokers, streamlined claims processes.
  • Reduce cost of doing business: Fewer approvals for claims processing, elimination of redundant data inputs via new APIs between participants, new Lead-Follow Standards.

In BP2, Lloyds has dropped its ambitious plans to set up its own electronic exchanges. It will no longer launch its own complex risk exchange but will work with PPL, an existing platform to improve digitalization. For simpler risks, it will develop an “exchange of exchanges”, connecting systems used by insurers and brokers. Fixing disjointed processes in placement and claims and making for seamless end-to-end experiences is a key driver.

In BP2, it plans to deliver:

  • An intuitive, straight through process for placing and binding risk
  • The ability to identify a valid claim on notification
  • Right first-time mentality
  • A first class, digital marketplace that’s data-driven and digitally enabled

There is renewed focus on customer journeys, beginning with two core placement types – open market and delegated authority business, which cover nearly 80% value and 90% contracts at Lloyds. The end goal of BP2 is to include complete and accurate data, a Digital Spine and a set of services that link transaction lifecycle from placement through accounting, payment, endorsements, claims, renewals and reporting.

Few market participants have resisted change, some being unconvinced automation would work for complicated risks insured. Lloyds expects brokers and insurers will collectively reduce costs by 300 million GBP, a 3% reduction in opex via greater efficiency, reduced bureaucracy and automation. They would be able to shift to more value-add activity such as developing broader range of new, innovative products.

The work is being funded by debt that was raised in early 2020.

“We are redesigning the entire insurance life cycle, something which not been attempted at Lloyd’s for a very long time”, John Neal (Lloyds CEO) told an online BP2 launch event.

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https://dailyfintech.com/2020/11/12/future-at-lloyds-digital-blueprint-for-a-330-year-old-exchange/