Lloyd’s of London – how does the famous insurance market stay relevant in this new world?

Last Friday saw the news break that after nearly 5 years at the helm of the infamous 332-year-old insurance market, Inga Beale, CEO of Lloyd’s was to step down. 

So how will people look back at her tenure? I suspect with mixed feelings. When Inga Beale took over at Lloyd’s at the end of 2013 amidst much fanfare as the first female CEO of the insurance marketplace in its history, the first who was openly bisexual and willing to challenge a white-male dominated industry and with big plans to modernise the market and finally bring it into the 21st century, there was naturally a feeling of optimism that positive change was coming.

In the nearly 5 years since, there's no doubt that she has done wonders for bringing diversity and inclusion to the top of boardroom agendas. But during this time, Lloyd's has also lost ground against competitive markets such as Bermuda, the modernisation agenda continues to limp on and Lloyd's is suffering an identity crisis as it tries to stay relevant in this fast-moving dynamic world.

No matter what Ms Beale says in public and to the press, I'm sure when she turns off her computer and goes home at night, there will be a sense of disappointment that she wasn’t able achieve as much to push Lloyd’s forward as she'd have liked.

Lloyd’s position in the global insurance market is clearly under threat and it risks becoming ever more irrelevant and bypassed as the place to go for specialty re/insurance.

As the hunt for the next CEO of Lloyd's begins, what challenges will be waiting for them in their inbox that they need to address and address quickly?

Cost Problems

It’s been well documented that the cost of doing business at Lloyd’s is just far too high. 40%, or 40 cents on each dollar earned, is spent on operating costs (staff, offices, IT etc) and commissions to brokers, before a cent is spent on claims, the value proposition that insurance offers. It’s madness, and the next CEO of Lloyd’s will need to fix this quickly in collaboration with the market or risk losing ever more business to the competition.

Market promoter or market regulator?

Ever since Lloyd’s has had the role of market regulator, it’s been a confused message sent to the outside world. Is Lloyd’s a market promoter? – and able and willing to market the brand globally with its offer of a great plug-and-play service to participants with an enviable collection of international licences and the backing of a resource-rich central fund?

Or is Lloyd’s a market regulator? – rigorously overseeing the conduct of its participants to ensure business brought to Lloyd’s is sustainably profitable and meets regulatory standards.

It’s time for the next CEO to make a big call and pick one.

Unique selling point?

What is Lloyd’s unique selling point? Why would insureds/clients and brokers bring their risks to Lloyd’s to be offered cover?

It’s no longer capital – capital is in plentiful supply and you can get it anywhere at a relatively low cost.

Is it the combined brainpower and ingenuity of EC3 in London, with bright and able underwriters, lawyers, accountants, brokers, claims specialists, actuaries etc able to innovate and support the writing of complex business, all within a stones throw of each other in the City of London?

I think this is the USP, but Lloyd’s needs to become much slicker in its use of its marketing machine. Bring the costs of doing business down at Lloyd’s also and you are left with a very powerful proposition.

Lloyd’s as a franchise has lost some of its power

Lloyd’s operates as a franchise. It is a franchisor, with syndicates operating as franchisees.

I use the McDonald's analogy as a comparison. McDonald’s Corporation is the franchisor. It sets the rules of how the brand is to be used, the product is to be served and supports its participants with marketing, operations and distribution.

Unfortunately Lloyd’s finds itself in a position where its franchisees and brokers who bring it business are enormous multinational groups. These multinationals use the Lloyd’s platform as one of many offerings to its clients. If a client or broker doesn’t like the Lloyd’s offering (incl. prices of quoting and binding on Lloyd’s paper), the multinational can use another, and they have big enough balance sheets to pay claims.

Lloyd’s position with its stakeholders is nowhere near as powerful as McDonald’s is. If I was a McDonald’s franchisee and wanted to offer something different to my customers, I’d have to leave and either set up as another franchisee (e.g. Burger King) or under my own brand. McDonald’s is the biggest and baddest franchisor in its space and dominates – Lloyd’s no longer has that position.

How does the next CEO make Lloyd’s a powerful proposition? – making Lloyd’s competitive is a start as well as offering all of its intellectual capital to help insure some of the most challenging of risks, and then marketing that to the world so it understands the offering. But it needs to be done quickly or I fear it won't last another 332 years.

I love the Lloyd’s market. It’s fascinated me ever since I stepped into EC3, but its losing its relevance in this fast moving dynamic world. I wish the next CEO all the very best of luck, but I fear that luck is going to have nothing to do with it.