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Now a long way on from its beginnings and first mention in The London Gazette in 1688 as a marine intelligence and insurance centre in a coffee shop by the River Thames[1]<\/a>, Lloyd\u2019s is today in the midst of a comprehensive shake-up unprecedented in its 350-year history. This comes in the form of the Future at Lloyd\u2019s strategy, a modernisation programme driving a \u00a3 300 million investment[2]<\/a> in a five-phase digital transformation in an attempt, according to its chief executive, to remain \u201crelevant, reliable and competitive in a digital world\u201d, and to introduce far-reaching cost-saving efficiencies by making the market better, faster and cheaper.<\/p>\n\n\n\n We\u2019re currently in the second phase, or Sequence 2 as Lloyd\u2019s calls it, covering global premiums and claims.\u00a0 So, what does it involve, how are things going, and what\u2019s already been achieved?\u00a0 More importantly, can we expect delivery of its entire new digital gateway by Q4 2024, as promised?<\/p>\n\n\n\n Transitioning the entire Lloyd\u2019s market to a digital ecosystem was never going to happen overnight, given the complexities of the large underwritten commercial, corporate and speciality risks traditionally placed in the market. Despite the scale of this ambitious project, Lloyd\u2019s promises that digitalisation \u201cwill profoundly transform the way in which customers get covered, right through to recovering from loss; this will be achieved by the redesign of the entire insurance lifecycle process \u2013 from placement through to accounting, payment, endorsements, claims, renewals and reporting \u2013 offering a seamless digital service for all Lloyd\u2019s customers and stakeholders globally\u201d. Lloyd\u2019s CEO John Neal hopes that full adoption will see a 40% reduction in processing costs.<\/p>\n\n\n\n Broadly speaking, the Future at Lloyd\u2019s strategy for a digital gateway is designed to introduce revolutionary changes that will make the insurance market entirely digital from start to finish, with data at its core. It aims to improve Lloyd\u2019s by re-engineering market transactions, covering all aspects of placement and processing of premiums and claims. It hopes to make doing business at Lloyd\u2019s faster by completing processing transactions within placement and claims in minutes and hours rather than weeks, and market participants stand to gain from the cost savings available through digitalisation of the whole marketplace, thereby designing out errors and rework.<\/p>\n\n\n\n Sequence 2 of this 5-sequence digitalisation concentrates on the global premium and claims service, covering premium movement and claims orchestration for singleton non-complex business. It supports peer-to-peer premium and claim submissions and agreements, delivering fast, accurate premium and claims payments in various currencies. Faster claims payments rely on new automated claims recognition, routing and orchestration, whilst high-speed processing means cover can be evidenced and issued within minutes, simultaneously generating technical accounting records. This moves the Lloyd\u2019s claim orchestration platform from one that historically did not allow for electronic notice of loss, claim triage and routing, or electronic settlement, to a digitalised system that can electronically place loss notices, triage claims, route them to the correct adjuster, and settle payments in hours and days. Customer systems can be integrated with the Lloyd\u2019s platform using ACORD standard messaging.<\/p>\n\n\n\n Features such as these help to progress the overall aim of the Future at Lloyd\u2019s strategy: to make major operational savings that will allow participants to trade more efficiently. Lloyd\u2019s estimates an aggregate reduction of \u00a3 800 million in operating costs for brokers, underwriters and partners. It is hoped that, in turn, operating efficiencies will drive product development, innovation and risk mitigation, and build on Lloyd\u2019s existing insurtech accelerator, the Lloyd\u2019s Lab<\/a>.<\/p>\n\n\n\n At a technical level, this will all be driven by data and technology, but to understand the background so far, it is worth taking a quick look at Sequence 1, its aims and its achievements to date. As mentioned earlier, the Future at Lloyd\u2019s digitalisation programme relies on data and technology at its core, with an important alignment of data with global data standards (ACORD[i]<\/a>). Traditional ways of conducting business at Lloyd\u2019s \u2013 where incomplete data with high error rates was part of the course, was never going to be adequate for any kind of digitalisation.<\/p>\n\n\n\n This is what Sequence 1 was designed to address, with what Lloyd\u2019s calls its \u2018foundational capabilities.\u2019 These feature all the essential components that will be used across all services \u2013 and at every stage of the five sequences involved in the eventual delivery of the complete digital gateway \u2013 and include core platforms such as open market placement and delegated authority platforms. <\/p>\n\n\n\n One of the major features underpinning the entire move to a seamless digital service is the Core Data Record (CDR) which, according to Lloyd\u2019s, forms the \u201ccritical transactional data which needs to be collected by the point of bind to drive downstream processes: premium validation and settlement; claims matching at first notification of loss; tax validation and reporting; and regulatory validation and core reporting.\u201d <\/p>\n\n\n\n The CDR comprises 45 fields consisting of mandatory pieces of information to be collected without fail \u201cat the point of bind\u201d \u2013 a legal agreement issued by an insurer to provide temporary evidence of cover until a policy is issued \u2013 and 80 conditional mandatory fields.\u00a0 The intention is that the CDR will constitute an \u201cirrefutable record\u201d to drive forward automation of all downstream processes described above, with a focus on CDR accuracy with a \u201cget it right first time\u201d approach.\u00a0 This was an essential part of establishing global data standards that meet the automation requirements for direct insurance and facultative reinsurance for a variety of processes across company and Lloyd\u2019s markets.<\/p>\n\n\n\n So, what has Sequence 1 achieved, and how is Sequence 2 going? The necessary foundational data components that formed the basis of Sequence 1 are more or less on track. These include the CDR, Lloyd\u2019s new delegated authority (DA) system, DCOM, and a new market reform contract (MRC v3) that will enable digital processing. We have also seen some delays: MRC v3 was rescheduled from last year to Q1 2023, and the application programming interface (API) that will allow participants to connect to the digital gateway has experienced a setback due to a delay in the release of the API specs. <\/p>\n\n\n\n As part of the Blueprint Two roadmap, the release of enhanced delegated authority data reporting and Faster Claims Payment (FCP) was delivered on track, but the Digital Gateway sandbox test environment has been postponed because, among other reasons, Lloyd\u2019s did not initially factor in the complexities inherent in turning CDR standards into international data standards set by the Association for Cooperative Operations Research and Development (ACORD<\/a>).<\/p>\n\n\n\n Overall, delivery of the entire digital gateway looks set to be postponed from its original live date of Q2 2024 to the end of that year, with some predicting delays extending into 2025. As a result, it looks increasingly unlikely that Lloyd\u2019s CEO\u2019s statement last year that the \u201cend of 2023 is when you should start to see a fundamental difference in the way in which the market acts and transacts\u201d will still stand.<\/p>\n\n\n\n The delay in the launch of the Lloyd\u2019s digital gateway is just that \u2013 a mere delay, not a failure or a change of track. Tech-based insurance is a paradigm shift that all areas of the insurance industry will follow as the challenges of the modern world continue to call for innovation.<\/p>\n\n\n\n For example, businesses\u2019 increasing reliance on technology and the corresponding risk of cyber-attacks and data breaches has in turn resulted in a cyber insurance bubble. Although this bubble is predicted to burst,[3]<\/a> according to a recent survey 63%[4]<\/a> of MEA companies purchased cyber insurance in 2022, and 73% of those had experienced some kind of cyber attack.<\/p>\n\n\n\n Climate change is continuing to disrupt the Middle East market, too, with the recent uprise in parametric and weather insurance packages reflecting the demand for weather protection and natural-disaster products. Parametric insurance has embraced machine learning models and real-time weather data to predict the likelihood of such claims, as far as possible.<\/p>\n\n\n\n This rise of parametric insurance is aligned with a general upsurge in insurtech, a term that covers technological innovations created to improve the insurance industry\u2019s efficiency and forecasting powers. Insurtech increasingly underpins the insurance industry, and the rise in insurtech startups reflects a general shift towards preventive insurance using weather, health or behavioural data to predict the likelihood of particular events (such as floods) and behaviours (such as fraud).<\/p>\n\n\n\n Another relatively new area for insurance is FemTech, a general term encompassing the health and well-being of women. The FemTech industry in the MENA region is predicted to be worth around US$ 3.8 billion by 2031. Allied to the emergence of female-led startups in the UAE and the push for the further financial and business education and advancement of women, female-focused insurance is set to grow.<\/p>\n\n\n\n The dominance of tech and data analysis in the insurance industry is something that the rapidly modernising Middle East region is taking in its stride. The pending changes at Lloyd\u2019s will speed up and streamline the processing of premiums and claims and act as a flagship for digital change across the industry.<\/p>\n\n\n\n Lloyd\u2019s is not only a broad market, but also a complex one.\u00a0 It comprises both simple and complex risks, has different distribution technologies, and has to function with various channel segments in the form of brokers, carriers and market.\u00a0 It is therefore not surprising that a comprehensive digitalisation of a highly complex market such as Lloyd\u2019s will throw up a few surprises along the way.\u00a0 That said, despite possible delays to the final delivery of the Future at Lloyd\u2019s digitalisation, many predict that by 2026, around three-quarters of risks placed in the market will be digitally enabled with seamless straight-through processing (STP), beyond the rubber stamp of digital binds alone.<\/p>\n\n\n\n The speed, cost and ease of doing business at Lloyd\u2019s will vastly improve with digitalisation, and while there is little doubt that progress through sequences 3-5 will present yet further challenges, modernisation is a crucial step in ensuring Lloyd\u2019s\u2019 future competitiveness and relevance.<\/p>\n\n\n\n <\/p>\n","protected":false},"excerpt":{"rendered":" Transitioning the entire Lloyd\u2019s market to a digital ecosystem was never going to happen overnight, given the complexities of the large underwritten commercial, corporate and speciality risks traditionally placed in the market. Despite the scale of this ambitious project, Lloyd\u2019s promises that digitalisation \u201cwill profoundly transform the way in which customers get covered, right through to recovering from loss; this will be achieved by the redesign of the entire insurance lifecycle process \u2013 from placement through to accounting, payment, endorsements, claims, renewals and reporting \u2013 offering a seamless digital service for all Lloyd\u2019s customers and stakeholders globally\u201d. <\/p>\n","protected":false},"featured_media":1596,"template":"","class_list":["post-1592","insights","type-insights","status-publish","has-post-thumbnail","hentry"],"acf":[],"yoast_head":"\n![\"\"](\"https:\/\/jenoa.com\/wp-content\/uploads\/2023\/05\/JENOA-Insights-22-Lloyds-Market-Digitisation-v2.1PS-GRAPH-ONE-1024x711.jpg\")
<\/figure>\n\n\n\nFuture at Lloyd\u2019s<\/h2>\n\n\n\n
What is Sequence 2, and how does it build on Sequence 1?<\/h2>\n\n\n\n
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<\/figure>\n\n\n\nProgress so far<\/h2>\n\n\n\n
The Middle East perspective<\/h2>\n\n\n\n
Lloyd\u2019s \u2013 fit for another 350 years?<\/h2>\n\n\n\n
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