'Lloyd's mandating of electronic placing must not ignore the London brokers' - Insurance Day, 28th March 2018

After decades of dysfunctional solutions for ‘e’ placing in the London/Lloyd’s market the day has now come when the use of the word ‘compulsory’ has hit the streets of EC3 and from the highest level.

Lloyd's CEO, Inga Beale, and her market reform team have said that if firms (carriers) do not meet targets for the use of electronic placement, including Placing Platform Limited (PPL), they will be subject to additional Lloyd's subscription fees and failure to comply will then result in capital loading increases. Conversely, if managing agents meet their target, Lloyd's will reward them with subscription fee reductions. This is all backed up by The Council of Lloyd's and the Franchise Board. By the end of the second quarter of 2018 Lloyd's expect managing agents to be placing 10 percent of business through an electronic system. By the end of Q3, a fifth of Lloyd's business is expected to be placed using PPL and similar systems. This results in a target of placing 30 percent of Lloyd's slips digitally by the end of this year. From little acorns to an oak tree in twelve months.

Unfortunately the edict came in the week that Lloyd’s, under its current management, saw a massive downgrading of profit which has received global publicity. It is also at a time when the market is still looking over its shoulder to see what will happen when the UK leaves the EU and thirdly via the Facebook and Cambridge Analytics interference with private social media data, electronic data has got itself a bad name, if uncontrolled.

There was always an expression used by the electronic 'dismissers' in EC3 in the past that there was never a good time for technology change. If the market had made a loss then they couldn’t afford it, if they had made a profit then ‘prove that a new system will do any better’. And, incidentally, do it by the next renewal season.

This time the disregarded Ri3K system from 2000, upon which the PPL system is based, has been changed to satisfy the market. In fact that it has been changed so much that what was a Picasso is now a Rembrandt! Whatever, it is a de facto system which we are always told is not doing away with face-to-face, but just requires some basic fields entered centrally to give the policy an electronic footprint from which the underwriter can add their own value thus updating a traditional business arrangement and making ‘e’ endorsements and renewals easier in the future. The opportunity for some home and ‘on the go’ working is also a positive issue.

To me, though, there is a misunderstanding, or maybe I don’t ‘get it’! Just as an example when Alexander Graham Bell invented the telephone he had to have somebody else to ‘ring’. Just so with PPL, surely it is the London brokers who have to get their act together. If the global client continues to refuse to provide electronic information about their risk it is left to the London broker to start the information gathering process.  Aon and the bigger brokers are onside with PPL as they have thousands of policies and endorsements, many of which are relatively small premiums, however many London brokers have small volume but large premium cases where an ‘e’ bind is not top of their business plan. If underwriters don’t receive PPL placings then they cannot be held to account for their lack of interest. If, however, they are receiving ‘e’ offers to bind and are ignoring them then they should be ‘guilty as charged’. The CEO of Lloyd’s is able to control her own domain of underwriters and the London Market Association, but she needs both a stick and a carrot to get all of the London brokers playing the ‘e’ game or should she find a way to fine them for non-compliance with her plans?.  

There is another essential item which needs attention and that is the ability of software packages in the market to embrace downloading the PPL information, otherwise there will be more re-entering of information than there is now and market will be costlier rather than what is Inga Beale’s objective of the market reducing back office costs.

The cost to a client of doing business in London cannot just sit at the door of technology, as there are other factors of excessive salaries and London offices for back office staff, which with technology, could be positioned outside of the EC3 commercial property costs.    

Like it or not , whether the market practitioner is young or old, male or female, transgender or whatever diversity the market wants itself to be, it cannot be a global laughing stock at its massive losses, even in the short term. There are too many people who want the opportunity to snatch Lloyd’s lunch, even if it is alcohol free!