Xuber Round Table Report
Mind the Gap
The Changing Landscape of the
London Insurance Market
Contents
Foreword: John Racher, Head of Product Strategy, Xuber Chapter 1: Big Data: The Devil is in the Detail
Chapter 2: Business vs. IT – Who’s in the Driving Seat? Chapter 3: Worlds Apart? – The Challenges of Local vs. Global Appendix 1: List of attendees
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Foreword
By John Racher, Head of Product Strategy, Xuber
There is an extent to which the London insurance market marches to its own tune. It is a market built upon relationships and the ability to do business within a very close proximity, set aside from the rest of the world. In many ways, its idiosyncrasies are essential to its very being; it can tackle complex risks in a way no other market can – giving it an edge over its competitors.
However, the insurance sector as a whole is under pressure to evolve; changing business and technology requirements must be addressed. This rate of change is rapid, and as with anything, inevitably, we have leaders and followers. Where London sits within this is a matter up for debate – and one we wanted to explore further with those closest to it, those working within the heart of the market. We invited figures from across the industry to attend a breakfast roundtable (Spring 2014) in order to get to the crux of the debate; how can technology be harnessed to maintain London’s position as a leader in the global commercial insurance market?
Areas of discussion included:
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Big Data – How can the London market maximise the value of the data at its fingertips?•
Who Drives Change? – Is change driven by the business or IT function?•
Global vs. Local? – How can the local market keep up with global competition? With brokers, insurers and vendors in attendance, we heard a variety of viewpoints on some of the most topical issues facing the London insurance market today, and those of the future. The following chapters highlight key points to emerge from the session.John Racher
Head of Product Strategy, Xuber
Big Data
The Devil is in the Detail
Gartner describes big data as ‘high-volume, high-velocity and high-variety information assets that demand cost-effective, innovative forms of information processing for enhanced insight and decision making’. 1
Based upon this and the generally agreed definition, many people would argue that the insurance industry is one of the leading players when it comes to big data; it is an industry built upon a huge wealth of information, used for predictions, modelling and analysis of trends. However, there seems to be much debate around whether this is being utilised to its fullest potential? While the industry might be sitting upon all of this data, is enough being done within the London market on both an individual and collective basis to mine for nuggets of gold?
An important part of this mining exercise is the need to filter the data; how do you establish what is valuable against what is not? Carl Phillips (Head of Operations, Hardy Limited) said data is rendered meaningless unless you are able to filter through it and find the points of real value.
London competition
With businesses across the world vying to keep ahead of the competition, the way in which they use big data can prove a point of differentiation. Debate looked at whether the London market is a leader when it comes to its use of data, or struggling to keep up with its global counterparts; David Berg (Executive Director of Operations, Faber), admitted the London market is losing out by not being competitive enough against other markets.
Richard Clark (Head of Business Development and Specialist Commercial, Xuber), said the local market has thus far failed to collaborate in its attempts to leverage data, and that this would be a key challenge over the next three years. There was a sense that the question of how to use big data poses an almost Darwinian challenge to the market, with only those willing to rise to it likely to survive. Rod Mearing (Head of Operations, Talbot Underwriting Limited), highlighted the importance of identifying data and the need to actually get at it; “those who find the best way of delivering those services are the ones who will survive”.
Richard Clark argued that while London market players hold a huge amount of data as individuals, they could use this for a greater good by combining their efforts and approaching data collectively. This, combined with the relationships upon which the London market operates on, could provide it with a unique selling point in terms of available data and its proximity and ability to do business.
Who owns data?
In a room filled with both insurers and brokers, there was always going to be differences in opinion. One particular disparity was around the question of who actually owns data? One might argue that big data essentially sits within the public domain and is therefore open to interrogation from anyone. However, several brokers highlighted that there was some question around how they could use client data – even if anonymised – and whether it should in fact remain confidential. Ben Spencer (Chief Information Officer, Beazley), put a different spin on the idea of knowledge equalling power, by discussing data control – whoever has the “best data”, and greatest control over it will survive, and maintain market power.
1 Big data as defined by Gartner http://www.gartner.com/it-glossary/big-data/
John Muir (Head of Claims Operations, Willis Limited), offered a way around this obstacle for brokers; his view was that a client’s data is essentially their own, however that more should be done to look at aggregated, anonymised and collectivised data for the benefit of all; “data is beneficial in the long-term to everybody, it creates healthy competition… clients give data to us in different ways, data will never come perfectly”. Ian Summers (Managing Director, Qualitas London) echoed his view, asking why the industry was not sharing data to ensure London maintains a competitive edge, and reminding the group that big brokers are already all using big data to stay ahead of the pack.
How to get the most from data?
Without the right tools available to analyse and interrogate big data, it is arguably worthless.
Dave Vorbrich (Director at Deloitte Consulting), argued that as the London market wakes up to the need for system consolidation and transferring large swathes of data between platforms, it is vital to have the appropriate tools in place with which to maintain its integrity and to ensure its true value is not lost; this is essential in justifying the cost and potential disruption of upgrading an outdated system. ‘Tools’ is a fairly encompassing term, and refers to both the support offered through technology itself and the way in which people use it; adequate systems are vital, but so is the training required to ensure users understand how to get the most from them.
Social media and big data: There was agreement about the need for a hygiene process to ensure data is used appropriately, and that the source is usable. Social media channels undoubtedly host a significant amount of intelligence; however what is it actually saying, and is it valuable? For example, what should happen if an inaccurate piece of information is being circulated online? Does the fact that it is inaccurate negate its value, or can we learn something from the fact that multiple users find it interesting enough to tweet about?
Business vs. IT
Who’s in the Driving Seat?
To upgrade or not to upgrade?
The question of when to upgrade a legacy system is a universal one, extending beyond the insurance industry. Should this decision be driven by the desire to keep up with technology, or the changing face of business and the requirements of ‘those at the coalface’ of using systems?
Updating legacy systems can place an organisation in a more competitive position – however this must be weighed against issues around the cost of implementation, as well as fears of possible disruption; the worry of potential data loss, unfamiliarity, the need to upskill workers, and whether the decision will provide return on investment in the long-term.
So, who is and should be responsible for the decision to drive change within an organisation? Is it the IT function, arguably the best placed within the business to understand its technology needs, the senior figures or those who hold the purse strings, or those actually using the systems?
This was a central question at the roundtable debate, with the majority agreeing that for successful change to happen it must be led by the business, rather than purely for technology’s sake. Attendees highlighted that change led purely by the IT function will be a primary factor in its failure; without the full backing of the business it will prove difficult to ensure buy-in from different departments. Once the business has
acknowledged the benefits of upgrading, the IT function can bring in its implementation expertise. The business is seen as the driver, the IT function as the enabler.
The importance of business buy-in
Buy-in for technology change and system upgrades from the business is important for several reasons. Firstly, people are as important as process and changing a business’ mindset can be a significant challenge in itself. If teams are left to work in silos how will they ever be able to work towards a solution that benefits the whole business; for example, a claims team must explain the pressures they face on a daily basis to the IT team in order for the latter to recommend the best systems for efficient working. Over recent years, the relationship between the business and IT function has evolved as newer generations of employees champion the need for greater communication and co-operation. Steve Wright (Chief Technology Officer, Liberty Syndicates) referred to witnessing the erosion of departmental barriers with a “swing” towards a more integrated approach; those who are more habitual users of technology in their personal lives
understand the difference it can make to a business environment. There is now an “appetite for technology” to make business more efficient in a way there has not been previously. It is these same generations who are likely to dictate the future of design through their
interaction with technology – with mobile expected to be a significant driver here.
The influence of personal upon commercial
We are all consumers of technology in our personal lives, and this is increasingly changing the way in which we expect to do business – will we soon be swiping left or right to find emails or documents, in the way we do on mobile and tablet devices? This trend has already made its mark on personal lines – where consumers have the ability to buy insurance from their mobile phones should they wish – and is beginning to cross into the commercial arena. The need to adapt to changing distribution models is a key driver of change in itself; the commercial insurance industry will be expected to keep up with rapid developments in mobile technology over the coming years.
Many organisations argue change is about best of breed fit rather than a big shiny new
system. Some businesses have huge legacy systems that are difficult to change, and what they need is components that piece together. Once this has been identified by the overall business, the IT function is brought in to make recommendations and consult on software platforms which best suit the business’ needs and various locations and markets. Carl Phillips (Head of Operations, Hardy Limited): “We don’t want a great big shiny thing that does everything, we want best of breed components - what’s best for claims, messaging, how we capture information, what tools do we use to extract data.”
At what point does a business change?
There are several factors which drive business change. Some factors are internal, such as the need to review operational efficiency, and others can be external, such as changing regulation or the challenge of remaining at the forefront of an increasingly competitive global market.
Is it fair to say that many businesses only change when they absolutely have to? There are exceptions to this rule, with those who seek out opportunities for innovation, but the majority wait until they have no option but to take the plunge. “In London, when across the market we’ve had to change, we have done so – I believe with the relative reduction in global premium coming into London that need for change is here”, Ian Summers (Managing Director, Qualitas London) said.
Important alliances
One of the biggest facilitators of change within a business is communication across different departments. The greater the alignment between different functions and the earlier the IT department is brought into discussions around change, the more likely a business is to land on a solution that answers its need for operational efficiency. Ben Spencer (Chief Information Officer, Beazley) highlighted the depth of relationship needed, saying that a system strategy must reflect a business strategy.
As employees in the wider business become increasingly aware of the ways in which technology could help them to do business, the rate of change is likely to increase. This is promising for the future of the London market for two reasons: firstly, it will drive proactive rather than reactive technology change, and secondly, because one of the main drivers of change has been identified as London’s need to compete in the global arena, and technology is one enabler that can help the local market to achieve this. However, the market must also remember that technology change does not necessarily mean replacing entire legacy systems. Nor as Carl Phillips highlighted should “insurers be seduced by technology, it must be about business benefit and not purely based on functionality.” For many organisations, it is about identifying best of breed components that can be used alongside current systems to better support operations on a local and global scale.
Change pressure point: At present, evidence suggests that change is only actively sought by the business when it is absolutely required. The challenge of keeping up with new regulation is a significant pressure point – for example, the upcoming the Single Euro Payment Area (SEPA) rules that are due to come into effect on the 1st August 2014. Regulation such as this requires businesses to update software systems in order remain compliant; in the case of SEPA, businesses will have to include a standardised bank ID-code during the payments process. Therefore software systems must allow businesses to insert information in the correct format.
Worlds Apart?
The Challenges of Local vs. Global
The London market is often considered the very heart of the world’s insurance and reinsurance industries; its ability to handle the most complex of claims is the jewel in its crown, and largely down to the different way in which it operates and has done over 300 years.
However, does its reliance upon face-to-face business – which allows it to service complex cases – also hinder it? Does it hide behind its legacy? Some might argue that it is not willing to adapt or change, and that includes its adoption of available technology. In an evolving global market, the matter of its quirks might be considered both a help and a barrier. How can it combine its USPs while embracing technology and modern systems; why should brokers continue to send their business to London?
London’s peculiarities – help or hindrance?
The London market remains true to its traditional heritage, with business still conducted face-to-face between brokers and underwriters in Lloyd’s’ Underwriting Room.
Operations here differ to many other finance-based markets where interactions are supported by technology and tailored software platforms. Such technology can assist with business processes to allow much simpler and faster local and cross-border deals and transactions. However, the London insurance market is a difficult one to move, with modernisation best achieved, as John Muir (Head of Claims Operations, Willis Limited) describes, in “bite-sized steps”.
The group was largely in agreement that the London market doesn’t change until it absolutely has to; will it jump of its own accord or does it need a gentle nudge in the right direction? Ian Summers (Managing Director, Qualitas London) said both changing regulation and the competitive marketplace often provide an impetus for change. The group agreed a prime example of the London market’s ability to move forward collectively was ECF; John Muir (Head of Claims Operations, Willis Limited) cited the
“technology, courage and vision” needed to implement such a solution. Carl Phillips (Head of Operations, Hardy Limited) rationalised the decision of how to select projects such as this to support in terms of energy – where is there a discernible benefit and what level of input is required to achieve it?
Why London?
London must make itself easier to do business. General consensus was that the local market needs to do more to make the case for why global players should send their business here. This would qualify as a business change that could be answered with technology; by implementing solutions that enable them to conduct business across different borders, timezones and currencies, London insurers and brokers will carve a unique position for themselves as offering flexibility to global customers, as well as the ability to serve complex risks.
However, anxieties towards such changes in the market exist. There is no doubt that London has the best group of underwriters, offering a collective hub of knowledge. To a certain extent, this is a key driver to business coming in. The fear and perceived pain of having to replace the current, reliable underwriting systems presents itself as a risk, and there is a significant need to show the benefit of doing so before receiving investment in technology. John Muir (Head of Claims Operations, Willis Limited): “It starts in paper, it stays in paper.”
The global view
Reports across multinational insurance businesses suggest that more conflict is seen between large global insurance groups and their London market division than between internal business and IT functions, (a relationship which is discussed elsewhere in this report), when it comes to the debate around technology. This is specifically in regard to the use of global platforms to support cross-border business operations.
Many businesses are finding large group global platforms being forced on their London market branches, as witnessed by Dave Vorbrich (Director at Deloitte Consulting). However, the complexities of the London market shouldn’t be taken lightly, and one size doesn’t necessarily fit all. Instead, the London market, and other markets around the globe, call for tailored packages to suit each, to allow nimble market-specific operations, while enabling connectivity and communication with systems globally. Buy-in is needed from the business on a global level. The business is better placed to understand the global operations and strategy, and the software and systems strategy must reflect this.
London as the centre of insurance business for brokers
Although there are concerns that London’s position as the global insurance hub could diminish if it is unable to evolve to match market progression, there are many reasons for brokers to still choose the City as the centre to send their business.
For brokers, London’s peculiarities also provide many of its strengths. Conducting business face-to-face with the underwriters means transactions can be processed instantly, without time delay or relapse. For businesses based outside of London and the UK, they do not have the same benefit, often having to wait for the market to wake up before business can progress. However, this advantage also poses as a hindrance in the evolving global market; it will be London’s ability to process global transactions in a timely and reliable manner that will secure its position as a competitive global frontrunner. John Muir (Head of Claims Operations, Willis Limited): “Our brokers place risks in the most appropriate markets, wherever those markets are in the world. There is no obligation for brokers to place risks in London or elsewhere.”
The group agreed that for real change to be achieved in London it was vital to have the broker community on board; ECF’s success stemmed from the support it had from both underwriters and brokers. Electronic placing, however, is yet to take off in the same way – with attendees citing the need for more broking advocates.
Final thoughts
Legacy systems might pose a threat, but London’s legacy is one of its strengths - it has a history built upon expertise and first-class service. If it can prove it is able to keep pace with the global market, then it has the opportunity to retain its status. However, in order to do so the local market must accept the changes and challenges ahead, both business and technology-driven, to ensure it moves with the times.
The question throughout the London market remains: is the chatter around change just talk, or can and will it listen, act and deliver?
London leading: Richard Clark (Head of Business Development and Specialist Commercial, Xuber): “In terms of the London market, it’s quite interesting when we look at the adoption of packaged software. The London market was the first in the world to readily accept that several competitors using the same software wasn’t a problem. Elsewhere in the world, however, companies were far more hung up on whether they could talk to one another if using the same software.”
Appendix 1: List of attendees
Douglas Shillito
Managing Director
Shillito Market Intelligence Limited
Dave Vorbrich
Director at Deloitte Consulting Deloitte
Peter Stocker
IT Platform Manager XL Group
Steve Wright
Chief Technology Officer Liberty Syndicates
Brenden Edis
Head of IT XL Group
Ben Spencer
Chief Technology Officer Beazley Ian Summers Managing Director Qualitas London Carl Phillips Head of Operations Hardy Limited Rod Mearing Head of Operations Talbot Underwriting Limited
John Muir
Head of Claims Operations Willis Limited
David Berg
Executive Director of Operations Faber
Richard Clark
Head of Business Development and Specialist Commercial Xuber
John Racher
Head of Product Strategy Xuber
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