5 Reasons Why Data Automation Is Mandatory

As with every other industry, insurance – and to a lesser extent the London Market - is becoming more technologically advanced (and some may say, disrupted) by the day. The fact is, however, that the transformation is far too ponderous.

 Change initiatives that deliver operational efficiencies is the Holy Grail for Lloyd’s, for example. The delivery of digital transformation has been more like something out of a Monty Python sketch than a serious attempt to restore the market to its previous vigour!

 Python fans will recall the legendary scene involving the Black Knight in the Holy Grail. Although supremely skilled in swordplay, he suffers from unchecked overconfidence and a staunch refusal ever to give up.

Slow Motion Execution

He is, of course, cut to pieces by his opponent in the scene (“tis but a scratch!”) but gamely carries on despite the overwhelming evidence that all is lost. The scene reminds me of the various Lloyd’s transformation initiatives over the years. LM TOM, anyone? (“tis but a scratch!”)

 To illustrate, LM TOM started with 16 initiatives, which were scythed down to four (“’tis but a scratch!”) and then another component limb was lopped off (ouch, that stung!) bringing us to three initiatives. ‘Not to worry’ went the rallying cry, just a few minor technical issues, onwards and upwards with a new round of innovation! Then the legs got chopped off. PPL and DA SATS made some decent progress but finally execution came, albeit not the kind of execution the market was hoping for. LM TOM was taken to the gallows and decapitated.

 The market has struggled in the past - from the days of Kinnect to the LM TOM -with delivering big ideas but the key challenge has always been the execution. Big ideas are great but without the execution they are not worth the paper they are written on.

 Transformation has been Elusive and Expensive

 Lloyd’s wishes to simplify the way it works by being more efficient and reducing costs but the quest for the Holy Grail of transformation has been both elusive and expensive. To me, the release of the recent Lloyd’s Blueprint is a great policy manifesto but I’m left wanting more because it’s not a real document that describes a credible narrative of change delivery. I put myself in the shoes of a consultant delivering a digital transformation message and I can’t see that I could, credibly, invoice for a transformation strategy engagement that doesn’t have the ‘how’. Compare that with the model McKinsey transformation deck where it’s very clear that what comprises the ‘Situation/Complication/Resolution’ storyboard will result in real, achievable, and measurable outcomes.

 To quote an old advert from the dim and distant past: “where’s the beef?” Or, more to the point, how can all the Lloyd’s stakeholders carve the meat up into pieces that can be digested in simple, digital ‘bite-sized’ form?

 What Does Data-First Mean?

 Meanwhile, the Future at Lloyd’s will ostensibly build the most advanced insurance marketplace in the world. Business will be underpinned by a data-first approach, evolving over time from a document world to a document-plus-data world to a data-first world.

 I just want to ask the question though, what is this ‘data-first’ approach? It is mentioned dozens of times in the Blueprint but there is a distinct lack of clarity as to what it actually means, as far as I can tell. What is its essence? Everyone will have their own view but when we are talking about data surely it pays to be a bit more precise? Maybe even to quantify what it will entail for all the market’s practitioners.

 Data Automation Will Be Mandatory

 Along with the efficiency of central systems, delivery of future Blueprint iterations and the profitability of the delegated authority channel, the execution of data automation is going to be a key 2020 requirement. It’s no longer going to be merely desirable, however. It’s going to be mandatory.

 There are five reasons for that:

 1.    A new senior executive team at Lloyd’s who are wholly focused on taking the corporation from being in a dire state – a loss making institution - to one that is at least breaking even.

 2.    Of the 16 initiatives that were touted by the LM TOM, three got the go ahead. Of those PPL and DA SATS were the main deliverables… but they have not achieved what had been originally set out for them.

3.    PPL was originally mandated but that has changed to being delivered by an ‘electronic platform,’ which is a very subtle but significant change of emphasis.

 4.    Our clients wanted a mechanism to put data into DA SATS but the Corporation was unequivocal – last year, it said that at no stage will we ever open up DA SATS for an automated transfer of data from individual platforms to Lloyd’s systems because DA SATS was meant to supersede functionality provided by our bordereaux management systems and services, with bordereaux feeding directly into DA SATS. Fast forward to this year and (now, rationally) DA SATS is billed to be ‘open’ in 2020 to receive data automatically from clients’ systems. So, in other words the eco system world of Lloyd’s has changed from one of command and control to survive and thrive, or to put it another way, survival of the fittest. Let Darwinism choose the fittest systems and services to enable a ‘data first’ approach.

 5.    We are moving from a hardware world to an ecosystems world – just look at Google and Apple – so to provide the best of breed, best service application is the new objective and this is where the Lloyd’s of London ecosystem is heading.

 What this will need from the market is new, flexible ways of working; fewer documents, and more data and here I paraphrase the Blueprint.

 Reducing Costs

 Lloyd’s says: “We will reduce significantly the cost of doing business. For the simpler risks, we will make the market more efficient by using standardised data, automated processes and administration, and IT solutions that allow market participants to plug directly into Lloyd’s ecosystem to trade. The costs of processing and settling claims will be reduced by using technology to assess losses and automate payments.”

 Solutions will include application programming interfaces (APIs) and open architecture, and will build on existing technology within the London market and other proprietary systems.

 Improving DA On-boarding

 The Blueprint details inflight delegated authority solutions, including: API connection with DA SATS enabling direct reporting (as mentioned above); continued improvements in delegated authority onboarding and approval; and Lloyd’s coverholders’ operations system, including rating, quote and bind functionality for selected territories.

 DA SATS will be enhanced with validation checks and APIs, so market participants can use it through their own IT systems. It will be used as the basis for consuming bordereaux of bound risks, paid premiums, and claims for risks not bound directly on the risk exchange.

 The Holy Grail is for digitisation, automation and simplification to reduce the cost of doing business from 40% to 30%. Moving to lower-cost channels (such as the risk exchange and straight-through claims processing) could reduce that further to 25%