The Intelligent Quarterly from the publishers of The Insurance Insider

Summer 2018

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Innovation at a snailís pace

Malcolm Snow

When I started work in the insurance industry in the 1980s, laptops, email, mobile phones and even facsimiles were all future technology. When you needed to use a computer, you had to go to a dedicated room; if all were busy you had to wait until someone finished.

Oh, how things have changed! But are they moving fast enough? Faster and new technology seems to be out there, but is it being embraced?

We all know - in fact, I shudder to realise we are still being told - that the market process for submitting risk information on binding authorities is littered with inefficiencies, including significant manual effort and multiple hand-offs between several parties that generate a lot of duplication and rework.

New processes that allow a coverholder to submit risk information electronically, via a common data standard, straight into third party providers' systems and that immediately identify any issues with the bordereaux are indeed available. For anyone working in operations, this kind of straight-through process is the optimal way of working. But it is also not something that is implemented overnight.

Standardisation and automation of market data delivers confidence that the market is meeting its regulatory requirements. Regulation has certainly contributed to the requirement of risk level data for carriers; increased regulation is inevitable, and there will be further pressure on carriers to prove that they are aware of the risks facing them and that they are adequately capitalised. Who knows what Brexit will bring?

The message for change has been echoing its way around the London market for many years, and once again at the quarterly gathering for Acord members the same message was repeated by Tom Hamill of the Lloyd's Market Association (LMA).

It's a message that is being reinforced time and time again and, although the London market Target Operating Model (Tom) is making progress, it still feels like there is significant resistance to engagement. Workshop attendances do not equate to being "engaged".

The approach feels too carrier-driven. If you look to other providers of successful products and services - e.g. Amazon, Apple etc - they are consumer-orientated.

It could be the issue is the cost of implementing new processes, or that people are simply too busy doing their day jobs to realise what can be achieved. Cost will always be a factor and some vendors will not make system changes they do not have to make unless they are paid.

I personally sat in on several conversations with US vendors when attending a meeting of the American Association of Managing General Agents a couple of years ago, and the question they all asked was "Who is paying for the changes?"

Surely, where the client, coverholder or MGA is sophisticated enough to already deliver data efficiently, we should embrace these and look to adopt a similar model with likeminded organisations, while retaining the less sophisticated organisations, virtually at least, at the table.

My point, therefore, is: "Are we looking to solve the solution in the right area?"

The focus has always been on protecting the London market, but who keeps the London market going?

Is it not, in fact, the many clients who are looking for an insurance product? If we were to concentrate on these clients and not place so much emphasis on looking at solutions for the carrier market, then we may actually achieve something.

This may seem a very blunt statement, but without the client we do not exist. Yes, there are initiatives out there looking at how to make it easier for the client's business to be placed into London, but should we try to understand what the clients currently can and cannot provide before planning, developing and implementing solutions that may in fact make it more difficult and expensive for them.

My involvement with "Project Tomorrow" gave me first-hand experience and insight into some of the challenges the market is trying to solve.

During this initiative the client, and in particular their system provider, played a pivotal role in achieving straight-through processing to the carrier market. Implementing an Acord standard and levels of data validation culminated in data transfer to the carrier market, where little or no further validation was required. The client was already capturing much of the data to be submitted, it was simply the mechanism of transfer that changed. But these initiatives are not cheap, and the market must remember there are other players - the much more numerous organisations churning away in their particular niche.

Should we understand what data our clients are holding? Many have sophisticated and complex data capture systems and others simply rely on old technology that serves their purpose, but should we know what they capture and hold prior to making decisions on what we wish to receive and how and when we receive it?

I remember a conversation had during Project Tomorrow, where we were looking to change the delivery process from monthly Excel files and looking to receive weekly XML. I questioned why weekly - why should we not receive the data daily or even in real time?

Effectively, I was looking at replacing the current bordereaux cycle with an alternative method of receiving the data.

The validation of the data is critical and it can be carried out prior to any outbound bordereaux being created - thus the carriers and even brokers would receive pre-validated data that should be easily consumed into their systems.

The validation should be rigorous and fit for purpose, based on individual contract specifics. Data quality can slow the process down tremendously after all, and we really do not want query loops.

Educating clients into keying data that is both accurate and correct for the London market is therefore critical.

Working at Morning Data has made me realise that the brokers in the London market really do know their clients and have their part to play in obtaining and transmitting risk level data in a more efficient and effective way.

In some cases, however, they haven't seen a practical method to accomplish this without disrupting the processes of their clients - nor indeed have they the time to implement a solution - so they wait for someone else to provide the answer.

The assumption across the niche smaller broker is that the solution will just arrive. There is invariably no budget to have an in house retained IT team to even look after their own devices, let alone focus on process improvement. The lack of substantive IT knowledge - which in these brokers means the high-level promises of "platforms" and "automation" - is the differentiator between them and the larger broker.

In many cases, the smaller broker handles a disproportionately large amount of risk level data through economies of scale in multiple binder contracts. But should third party binders really still be processed as post boxes in this day and age?

There are Lloyd's brokers that have already taken the necessary steps to automate processes with their clients, receiving electronic data weekly, daily and even in real time. But they are then having to convert this into a monthly Excel spreadsheet for distribution to the carrier market, slowing down the distribution.

At Morning Data, we are already looking at solutions to receive or extract client data and create the necessary outward bordereaux for the carrier market.

The work has already been done to voice the concerns of the SME broker and MGA - to sell the story that more is better when it comes to data, and that aggregating up is easier than splitting down.

One example is the use of B2B portals to capture the data at source and drop clean validated data down to Novus, the brokers' back office system.

For the MGA, the use of Novus means data is stored and sent out at the most granular level as required, with checks and balances that mean sanctions checks, policy periods, states, counties, countries and currencies are all captured at the start.

The Tom promises some big changes, but the progress is barely at a snail's pace. As I engage in Novus presentations and demonstrations to interested companies, I can see the market is not going to be willing to wait while deliberations move slower than Brexit!

Malcolm Snow is subject matter specialist at Morning Data.

This article was published as part of issue Winter 2017

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