Lloyd’s – A Very Digital Future

Lloyd’s vision for the immediate future is contained in its 145 page blueprint, released last week. It’s as much a futurist’s guide to where insurance is heading in the next 5 years as it is about Lloyd’s itself. To that extent, it doesn’t contain anything startling or that hasn’t been mentioned in despatches on the disruption threat to the industry. What is a little startling is the ambitions manifested in the timelines, which are super aggressive, particularly given they are coming from an industry that, when it comes to tech, is a fair way back. Lloyd’s wants to implement this program over 3 phases over 3 to 5 years…there is a lot in these initiatives and one can only assume things will have to move much faster in future than they have in the past to get these things done.

From an overall perspective, the ambition is impressive. The push is on to compete in the digital economy, so it is no surprise that the key to the future is becoming data driven, adopting new technology and automation, creating a platform for information, and creating a shared services hub, to name just a few of the key initiatives. Clearly the objective is to compete in the future, and to compete requires significant technology and efficiency improvements and big cuts to costs of doing business. Many of the efficiency improvements can drive some incremental cost reductions, but clearly the cost of distribution is where cuts have to come if the ambition is to be realised. One doesn’t get an exact sense of how that will be achieved from the blueprint, although a risk exchange does sound like a low cost processing platform. No doubt  the Lloyd’s and wider insurance market will address this as a competitive issue and they will need to go deep to achieve their ambition of reducing costs of doing business from 40%  to 25-30%. How they do that effectively – and deal with legacy claims and other issues under the old system – will be a challenge.       

From the claims perspective it is great to see the strong focus on the claims promise as a key differentiator and the driver of the purpose of the market. Too often claims is the last thing thought about, not being considered a priority. In this blueprint there is a real emphasis on meaningful change in the short term to improve the customer claim experience. This is really about more rapid claims responses, with easily accessible information portals, triage, and fast track automation where appropriate, and the ability to push the button on a payment when the claim is ready to be paid.  

We participated in the feedback on the vision for the Future at Lloyd’s. We did this not only because Lloyd’s collectively is a key partner of our business, but also because we thought many of the little things that occur infrequently that cause us frustration are fixable, and need to be fixed as part of the vision for the future so the Lloyd’s brand reflects its purpose to help people and companies when they need it. Lloyd’s, in our experience, has a great approach in being fair on finding coverage for claims, but the customer experience can be occasionally let down by simple things like time to get funds to pay the claim, or delays due to inefficient processes.    

So will our current thoughts on where claims processes can be improved be addressed through the blueprint?

Our most common frustrations are things that happen in minority of claims but have the potential to slow down the claim process or increase the administrative complexity of managing claims. These include:

  1. Delays in loss funding, making it difficult to issue swift claim payments 
  2. Bottlenecks and inefficiency in administration, often due to extra steps in the   intermediated process
  3. Difficulties in quickly obtaining  insurance policy details for a claimant  
  4. Compliance overlay – a necessary evil, we understand, but information demands remain highly variable across the market even though there is a centralised portal of shared information
  5. Reporting standards that aren’t standard across Lloyd’s
  6. Insatiable appetite for information, but uncertainty around insights from data provided

So does the blueprint address these issues?   The answer is a comprehensive yes, and while legacy issues may make the ride a little bumpy, we can see a clear solution in this blueprint which should enable claims managers like us to provide an exceptional claim experience.    

The big win will be having a central shared platform with policy information at our fingertips, which is a great leap forward from today’s cumbersome exchange of emails with schedules attached. Much of the issues around variability of data standards should also be resolved by a common platform. Underwriters will also be able to access data and information at will, thereby eliminating the need for bordereaux submissions.   

With rapid claims resolution being an objective, there needs to be a balance between the extent of data collection required and rapid claims response. Rationalising mandatory data collection will be a challenge given the appetite for data. We do applaud the approach to be data driven – we share the same ambition – however there needs to be some boundaries around data collection, and there needs to be a balance between speed of resolution and need for data. There may need to be more relaxed standards for fast track claims so they are resolved quickly.

In the same way, compliance we understand is necessary in financial services, but we hope the approach to shared services means there is also a shared review of the key compliance issues facing TPAs who work with Lloyds. Ideally this will mean enhancing the current approach so it has more consistency across the market and eliminating the non-standard elements from individual syndicates that are not only time consuming to complete but confusing as to whether they are a standard.

It will be a significant advance to eliminate monthly reporting requirements although legacy reporting will remain an issue.  Under the new process all data will be collected and assimilated into the platform and so all reporting should be automatically created. Likewise payments will be facilitated by the platform – this part is short on detail and will need some thought, but we are assuming we will be hooked in to technology that permits payment as soon as the claim is ready to be paid. This will need some kind of central bank or shared payment facility. The new system sounds very much like a version of blockchain with all parties sharing access to a centralised system. With all the information in one spot – one source of truth so to speak – it will lead to the eventual elimination of issues created by bordereaux production, loss funding and ECF. Hence much of the current claims administration by brokers becomes redundant. They will still have a key role as placing brokers and claims advocates, but their role shifts to higher value activities.     

One rather large issue this raises is legacy claims that will remain on current platforms and not be assimilated into the new platforms. It seems that for some time TPAs will be running parallel systems. One on the inefficient old platform and one on the new streamlined and efficient platform. If Lloyd’s can’t find the solution to merge these processes we could all be using the current systems, bordereaux and loss funds for another 10 years or so. This does pose a number of questions, not the least of which will be the challenge for TPAs to maintain antiquated systems when the purpose of moving to new systems is to increase efficiency and reduce costs. 

We all know projects involving technology take time and need to be project managed expertly to be delivered on time and working. A project of this scale and ambition is a monster, so we will watch with interest to see if the key components can be delivered and how, ultimately, it improves the claim experience for Lloyd’s customers…which after all is at the heart of all this.

We certainly applaud the vision and initiative in the blueprint and will ensure we understand the ramifications and, if appropriate, participate in pilots and testing as the new systems unfold. Should be an exciting and challenging time ahead.

Written by Jon Broome, Managing Director – Proclaim