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Shirine Khoury-Haq on creating impetus for change in the London Market

Shirine told the London Market Group forum that the TOM is making great strides in its drive to modernisation.

I am delighted to be here to give you an update on the work we are doing to modernise the London Market.

The good news is that the Target Operating Model has made great strides since we first started talking about it in 2016 and we now have a genuine impetus for change. We can see our way through to the real prize for the whole market – reducing the cost of doing business by removing idiosyncratic processes and realising the economies of shared services.

I want to start by talking about PPL and the adoption of electronic placement, and then give you an update on where we are on other solutions.

I am going to start with the most important message – PPL is about paper not people. It does not, nor was it ever intended, to remove the need for brokers to talk to underwriters in the Room or in their offices. Face-to-face negotiation is the very essence of the London Market, and if you speak to people from other markets, they will tell you it is more efficient and yields better results for clients. We have to keep what makes us the best market in the world.

On the other hand, it’s a fact that the amount of paper and administration that precedes and follows the face to face negotiation, makes our operating costs completely uncompetitive compared to other markets. This is not something we want to hang on to.

We want to replace manually intensive paper tasks with electronic processes. Just the other week I watched an underwriter writing supplementary information on a proposal form which the broker had retyped after the original discussion and then reprinted. This was then given to someone else to scan and then type into a system. The broker also took the piece of paper back to the office for yet more scanning, typing, emailing and processing via the Bureau. Goodness. All this for an endorsement?

Is this what makes us special and provides better service to our clients? Surely the quality of that conversation would not be degraded if they had just both looked at a screen together and if the relevant information was transmitted automatically to where it needed to go?

The benefit of PPL and electronic placement is that it removes the admin and the paperwork. No one is suggesting that the vital face to face conversation does not happen. But simply that all the details are loaded in one place – removing writing, photocopying and scanning. Over time, data will be entered only once and then re-used, removing the need for continual rekeying.  The service also improves client service by providing greater transparency of information throughout the entire placing process.

29 brokers and 92 carriers have signed up so far and over 5,000 users have been set up on the platform. 15,000 risks have been bound and over half of all financial and professional lines risks are being placed on PPL.

The system was reviewed by the managing editor of Insurance Insider - not a publication known for pulling its punches - and I would like to quote his opinion “There is no excuse not to use this. It works, will make everyone’s life easier and improve client service beyond recognition.”

But we are not complacent, there is a long way to go and adoption is not moving fast enough.

Unless the market moves together it will not reap the benefits and reduce administration costs. Without higher levels of adoption throughout the market we put our investment to date at risk and we are in danger of seeing administration costs rise further.

It is for this reason, and at the request of the Lloyds managing agents, company market and brokers, that Lloyd’s is proposing to mandate the use of electronic placement on a phased basis over time. That mandate is still work in progress and the rest of the market is working with the LMA and Lloyd’s to ensure that it will drive the behaviours we want.

So, to move on to the other TOM Solutions

We are also making strong progress in improving our central services so that brokers can use the same data and process standards as they do in other markets. This radically reduces the administration burden on brokers and makes it much easier for them to place business in London.

Since the successful delivery of the last release of CSRP, over 30 brokers and service companies have confirmed their desire to go live in 2018. Many other carrier service companies have also expressed interest.

Again, I feel like I need to be very clear here. Adoption of CSRP is not about tinkering around the edges of a manual process. It is the absolute elimination of a tremendous amount of administration that goes with the accounting and settlement process. Those who move first will gain the cost and time savings first, which they can deploy to their competitive advantage.

Coverholders are a hugely significant part of the market’s business. The vision is that they will have a single audit, that compliance processes are consistent and done once only, and that data is collected once and shared with the relevant stakeholders. And I am delighted that we have made real progress across all three of these areas.

1,500 fewer audits have taken place in 2017 because of the automated co-ordination of audits. 98% of managing agents have adopted this initiative.

Our second project focusses on centralising the collection, collation and analysis of compliance information – doing it just once on behalf of the market. Thanks to the fantastic work done by our group of market representatives, we have been able to define a list of the necessary compliance information for all coverholders and this process has gone live as planned in January 2018. From now on, it will be managed centrally by Lloyd’s, which saves time and effort for both carriers and coverholders.

And finally, we are making great progress in achieving standardisation of data requests for those coverholders doing business across the London Market. We have now selected a system provider with which to launch these new processes. Release 1 is planned for mid-2018, focussing on Brexit. This is ahead of the original plan.

And last, but very much not least, I want to talk about data.

Our aim is to get it flowing through the market in a uniform and consistent manner so that everyone can benefit from better quality information, delivered faster.

We have now, for the first time, developed a global data standard for risk information that can be used not just in London but across the entire global insurance market. We have also developed a data glossary.  It has been delivered on time and to budget, with 100 firms and more than 400 individuals using the service. Getting this right underpins all the other initiatives in the TOM programme.

In August 2017 we launched a service that converts information held in a variety of formats into structured data.  This extracts data from the insurance contract and puts it into a form where it can be moved between systems and organisations, eliminating the need for manual data entry and reconciliation. Structured Data Capture or SDC is live for all classes of business and has processed 10,000 risks, within service levels and with accuracy exceeding 99%.

There are 24 firms actively using the service, with another 29 in the pipeline. Two brokers are also interested in adopting the service and the interface with PPL is live. Further enhancements will be delivered in the first half of this year.

So, there is lots of good news on delivery. I hope that we have proved some of the naysayers and cynics wrong – those who said that the TOM would fail as other initiatives had failed before it.

And now to 2018 and what lies ahead.

Obviously we spend a lot of time thinking, and talking about, the underwriting part of the equation.

But it does not matter how good the front end is if, when disaster strikes, we are not getting help and funds to the places and people that need it most. And there was tremendous evidence after the recent hurricanes that demonstrated that we did deliver on our promises.

But of course, we can do better. There is a real desire to improve the claims experience, a factor that ultimately drives customer satisfaction.

And that is why the focus for the coming year will be on claims.

There is a set of generally agreed claims requirements, partially documented in the original TOM Blueprint which have been discussed and socialised in the London Market over the last two or three years.

There is an increased desire to improve the end customer claims experience and improve the speed of settlement. This includes adding automation to the single claims agreement process, portals to improve data availability, updates to claims settlement process and robotics and AI.

We will also be investigating how distributed ledger technology could resolve issues around all aspects of insurance transaction accounting and reporting – eliminating the need for endless reconciliations through the use of a single, distributed, ledger while introducing flexibility and reducing response times to deliver better customer outcomes.

I hope that I have given you a thorough – albeit quite fast, overview of where we are today – so I would like to close with two thoughts.

The first is that the vision for a modernised London Market is yours. The absolute backbone of the TOM is “by the market, for the market”. Every solution is led by a senior market practitioner, each one enjoys extensive support from market associations and subject matter experts – these solutions are genuinely yours.

They are designed to retain the best of London, offering a choice of channels – face-to-face negotiation or full electronic placement – whichever works best depending on urgency, complexity and need.

We want clients to be able to do business with London as easily as their local market, whilst finding the specialist solutions to complex risks.

The second is a call to arms around PPL.

The system is fit for purpose – the last release delivered a lot of changes requested by the market, and some lines are embracing it.

It is now that we need everyone at every level of every organisation in this market to make sure they really understand what PPL can do for them and their customers.

Tell your colleagues not to believe the rumours or listen to the cynics – but see for themselves. In the last month, over 500 people have gone to a PPL Open House to do just that. You can also sign up for a demo on the TOM website.

Finally, take back the message that businesses in London cannot afford to fail again at modernisation – the business environment is against us, our cost base is against us – and unless we get it right, our clients will be against us.

Thank you for your time.