Market Digitisation, Future @ Lloyd’s and Blueprint 2

Lloyd’s CEO, John Neal revisited the theme of market reform and transformation this month with a renewed Blueprint Two roadmap that outlines the steps that will be undertaken. Neal said the digitalisation of the back office will deliver cost savings above the 40 percent reduction in process costs already projected and promised the project could be completed by 2024.

We’ll summarise the main points as they relate to DOCOsoft and our claims partners here. Blueprint Two published in November 2020 set a vision for end-to-end modernisation of business models, practices, process, and systems: from risk submission, to claim settlement and risk renewal and everything in between.

From a Lloyd’s operations perspective, what has been outlined to date is that it must be a business-led endeavour from the start. The operations team at Lloyd’s have said that their primary focus will be ‘what’s in it for the customer?’ with a central theme of delivering positive business outcomes across the (re)insurance value-chain. The question the market needs to be asking itself is which business can afford not to do this?

To recap, data will be the foundation on which all the models, standards, APIs will be built. A Core Data Record has been placed at the heart of the risk placement process with a Digital Spine data store running through. This will be key to unlocking operational efficiencies across the (re)insurance value chain. Previous attempts at London market modernisation have faltered for several reasons but probably the main reason was over ambition.

There is nothing wrong with being ambitious, but the current approach is taking a more realistic approach that factors in the realities on the ground. One participant responsible for delivering operational improvement says that achieving 80% would be a remarkable step towards a fully automated, end-to-end solution for all business. That is even before the market can even begin to think about delivering smart machine learning, AI complex solutions or, indeed, a ‘Next Gen’ PPL.

In the meantime, realistic, and fast paced efforts at achieving digitalisation are being achieved through efforts to achieve consolidated savings of GBP800 million by adopting digital technologies that enable automation, virtual collaboration, digital contract management, automated data ingestion, electronic First Notice of Loss (eFNOL), intelligent workflow management, and third-party integration.

There is a real sense of optimism in Q1 2022 as the market makes positive strides to intelligent automation while being able to announce a return to an underwriting profit after four years of losses. Analysis in The Insurer reveals that Lime Street heavyweights Beazley and Brits are among the key players that have posted a strong bounce for 2021 versus 2020.

Aegis London acted as the “bellwether” for the market’s renewed results optimism when it announced positive results in January 2022. The Managing Agency posted a syndicate profit of £87mn in 2021 on the back of a combined ratio of 83.9 percent – an improvement of 7.7 percentage points from 2020’s 91.6 percent.

Other strong performers that have revealed positive trading in 2021 include Ark and MAP. According to The Insurer report, fellow top-quartile Lloyd’s carrier MAP also performed well, with its Syndicate 2791 posting a combined ratio of 93 percent, a 1-point improvement on the figure from the prior year.

The results suggest Lloyd’s will return to market-wide profitability in 2021. This is a major boost to the Lloyd’s management team and suggests that all the hard work behind the scenes during the COVID-19 period is paying off. Operational efficiency renewed underwriting discipline and the implementation of future Lloyd’s Blueprints suggest a new positive digital era of insurance products built on data and analytics, as we discuss in our next February blog.