Digitalisation and reform of the Lloyd’s market outlined in the recent Blueprint One document constitute an essential and extremely ambitious project. I believe that, correctly executed, the Future at Lloyd’s will secure Lloyd’s place as the global underwriting leader for complex risks, and significantly boost its international presence on the vanilla side. The market has rightly highlighted execution risk, but I am optimistic. Cooperation will be the key to successful implementation of B1.
The B1 reforms are sound. I have propounded many of the proposed claims initiatives for several years, particularly in the area of bordereaux management (or elimination). Advent’s work with the Lloyd’s Market Association (LMA) on the Gemini claims expert management and settlement portal is something of a partnership model for other parts of the B1 plans. Its undeniable success is the result of cooperation between Lloyd’s, the managing agencies (through the LMA), and Advent as a private vendor.
One question that has not yet been asked about B1 illustrates the need to work together: how will Lloyd’s manage the potential conflicts arising from its intended control of the technological solutions that will underpin the B1 systems, while effectively performing its role as the market’s regulator?
Anyone who has read through the first 126 pages of B1 will have reached a section entitled: “Role of the Corporation of Lloyd’s”. Primary among its list of functions is “prudent regulatory and performance oversight”. In addition, the Corporation will have a “stronger role in… building and running the technical solutions in the ecosystem”.
For example, “the Corporation will mandate a set of customer-oriented service standards to ensure best-in-class service” and “control and mandate data standards and the use of data structures to transact in the market. It will also monitor data quality with implications for transactions if errors are detected.” However, it will also “retain control and operational responsibility for the technology platforms.”
But who will supervise the supervisors, to ensure that Lloyd’s own technology infrastructure, and the Lloyd’s people who run it, meet or exceed the performance expectations imposed by Lloyd’s on Lloyd’s? Cooperation – involving the cession of some control – will be the answer. Such responsibility logically ought to fall to an interested third-party body owned by the market, such as the LMA. Without such third-party participation, Lloyd’s will begin marking its own homework. The Corporation would have to walk a very narrow line to balance its responsibilities for imposition of governance, the maintenance of controls, and the acquisition of insights with the maintenance of independence and the minimisation of interference.
This is not Lloyd’s only B1 challenge. Its drive to digitalise will seek to maximise automation, but also must minimise claims leakage, for example due to fraud. It should look to squeeze value out of existing technologies – a proposition which B1 outlines – but do so without frittering resources to upgrade historical investments, or losing sight of the ultimate systems goals. The objective of improving the claims process through simplification and automation is laudable, but Lloyd’s will have to take care to find the correct, possibly highly flexible dividing line between automation of everyday claims and the hands-on approach which complexity demands.
I don’t see any of these challenges as insurmountable. On the contrary: I believe Lloyd’s, under its current leadership, with the participation of the LMA and others active in the market, has the will, the skill, and the wherewithal to overcome them. By working together, we can and will transform B1 into Lloyd’s next reality, for the enduring benefit of all the market’s participants and customers.