Drive change among the rank and file.
During the last decade there has been more fundamental change to the London insurance market than we saw during the preceding one hundred years. Yet this change is, in relative terms, the tip of the iceberg. More complex and farther-reaching change is imminent.
In order to maintain its position as a world-class market, London needs to continue to evolve in both products and practice. The LMP2001 initiative is focused on improvement of market practices and processes. These improvements, coupled with the implementation of supporting technology, will underpin an electronic trading environment every bit as dynamic and successful as those in other sectors, for example the petrochemical, pharmaceutical, and automotive industries.
The market is currently facing the need to improve its service in order to satisfy the requirements of increasingly more sophisticated and demanding customers. At the same time, it must look to reduce the mountains of paper, streamline the unwieldy processes, and minimise the costs that burden the brokers and underwriters. In order to meet these challenges technology must be employed to support the entire trading process and the administrative life cycle that follows.
The realities of internet business and its implications for the insurance markets are only now really being understood. The correct responses to the resulting opportunities, through the use of appropriate processes, practices and systems will do much to ensure the market retains its global pre-eminence. For example, single input processing of the complete policy life cycle from placing slip, through treaty wording, to loss settlement is about to arrive. The use of repository technology, facilitating the sharing of insurance coverage and claims information with clients and trading partners, will bring huge benefits in terms of reduced process times and realised cost savings.
Traditionalists have long argued that the market is successful because of its human interactions, with the complexity of these interactions making virtual trading difficult, if not impossible. This attitude resides not in the boardrooms, where executives are concerned with the needs of both customers and shareholders, but in the rank and file workforce. It is here, where technology is viewed as a threat rather than an opportunity, that change needs to be driven through and managed.
The culture of the market drives its innovation, and advances London's ability to cater to the constant demand for sophisticated risk mitigation. Technology cannot – and will not – replace the formal and social interactions that continually occur in the market. These personal exchanges are vital to continuity and innovation, and the free and swift movements of labour, intellectual capital, and investment. Technology will not hamper entrepreneurial efforts. On the contrary, it will empower key individuals to spend more time on productive working, and less time managing mountains of paper.
Internally, within market organisations, economies of scale and trading synergies need to be realised in meaningful amounts. For example, many broker organisations are a conglomeration of firms that have been merged together or acquired, often with the sole objective of capturing market share. The original identities of these subsidiary companies remain important in the production process, projecting a valuable brand image to clients. Yet the full profit potential has not been unlocked due to the lack of a technology infrastructure that allows different systems and organisations to communicate effectively.
Externally, the two most crucial client contacts are when coverage is effected and when a loss occurs. Yet all too often a corporate risk manager might wait months for policy documents to arrive and define the cover requested. That same risk manager can also wait months to receive payment on a straightforward, uncontested loss.
The internet and a virtual market could address these challenges. Seamless end-to-end processing, real time access to data, and secure electronic communications on a marketwide basis are long overdue. When put into place these technologies will do much to meet the requirements of customers and investors. Service will improve; costs will decrease. Innovation and intellect will flourish when they have been freed from struggling with process, and allowed to concentrate on strategy. Value will be created for all stakeholders in the market.
If the LMP2001 initiative and the virtual market are not delivered and quickly, the future could be bleak. Other electronic initiatives are under way in a number of places around the globe and speed of delivery will be vital if the London market is to prosper.