Dave Matcham

London’s Technology Revolution Showing Results

I have been in many meetings recently to discuss the scope, timetable and cost of finishing existing market reform initiatives. These meetings make you realise how far we have come but also how much there is still to do.

Currently our process changes and increased use of technology / data standards are all well advanced and, given the complexities of our marketplace, ahead of anywhere else in the world – at least this is what I believe.

When one talks to senior executives who also manage non-London operations, this belief of mine seems justified, therefore it would be great to see more commentators refraining from beating London up but being positive about London’s use of technology. Of course, to do so, one needs some facts rather than anecdotal comments. Looking at premiums, the market’s repository utility (which has been operational for nearly a year), now receives 80% of all premium submissions electronically (approx 800,000 transactions). These premiums are now able to be processed quicker and prioritised by value meaning that cash flow has improved, credit risk reduced and working capital released. Last year 12% of premiums by value were processed within three days of receipt, now its 65% of value.

Policies checked by Xchanging are now electronically received and delivered back to brokers. Paper policies are now an exceptional special request.

Perhaps most encouraging is that there are signs that the new processes are enabling underwriters to receive more premium by the agreed payment date. Whilst more improvement is still necessary the statistics seem to be getting better as electronic submissions enable more timely, accurate and quicker processing.

One last set of statistics; the repository is receiving over 45,000 messages a week (premiums and claims) from 5,800 registered users. There were close to 6 million documents stored and over 37 million web page hits in the first quarter of 2009. If anyone can show me comparable statistics for a marketplace of 250 organisations handling every type of insurance or reinsurance, I would love to see them.

We must not get complacent, there is still much to do on claims functionality and adoption of international data standards although recent technological changes in these areas are happening but not mentioned here (ie. ECF). Perhaps an appropriate form of beating for London should be a gentle pat on its back. Mr Grace would have said “you’re all doing very well” and our clients are being served better.

Market Reform - still our top priority

With so much focus on expected new regulation for the industry and continual press coverage on the banking crisis and recriminations, I thought it appropriate to remind everyone how much progress London has made in reforming its processes and the plans ahead. There is much to be positive about, because London is “streets ahead” of other markets in process change and use of technology. Some people dispute this – I disagree – as a market place comprised of at least 100 underwriting entities and the same number of brokers, London is the foremost insurance market, incredibly diverse, highly talented and with a blended culture of intense competition and community spirit. With all this in mind and admittedly after a slow start, we now have a culture which is very accepting of change and marching forward at a pace admired by other markets.

Concepts such as contract certainty, ACORD standards, electronic claims files which are readily accepted in London are all being considered by other markets.

So how does this progress translate into tangible numbers?

 Over 90% of new in-scope claims to the market are handled electronically for Lloyd’s, company market is approaching 60%.  Over 90% of premium accounting entries are delivered electronically over the market repository.  250 market firms have signed the IMR Agreement to use the repository.  Over 50% of all policies are now delivered to the client electronically.

Looking ahead, our targets focus on finishing what we’ve started. This means, for example, increasing the scope of ECF and achieving full usage and moves to full electronic accounting ie the exchange of structured data messages for settlement purposes. Achieving full usage of electronic means for all parts of the insurance process is the goal and we are well on the way to its achievement.

A Better Market Repository

After many months of discussion and negotiation, a new agreement which provides a contractual framework for the provision of an insurers market repository was released to the market for signature. This was a welcome development.

The IMR has been in existence for a couple of years to enable the increased adoption of technology for electronic claim files and better premium processing. Current statistics show that around 75% of all bureau related premium transactions are delivered via the repository and 90% of Lloyd’s in-scope claims are being handled on the repository. These statistics demonstrate the changing attitude by the market to use technology to improve processes and overall service to clients. Please recall that 3 years ago all of these transactions were handled on paper.

Within the company market, our use of electronic claims files started later than Lloyd’s but is now running at 29% of all claims. With the new contract now released, which clearly defines the rights, responsibilities, services and service levels of the repository and contracting parties, we fully expect the company market take-up to grow rapidly from late Summer. There is clearly still too much paper being literally wheeled around the market by claims brokers. Just today I passed two people who were pulling a Samsonite suitcase, no doubt full of paper claim files which were being delivered to leading underwriters for their consideration. These individuals were not people returning to the market from holiday or a business trip! Either there are fewer claims brokers or heavier claims files in the market, or both, whichever it is, it is a strange sight for a 21st century marketplace.

As the year progresses the market's repository will be enhanced to provide greater speed, functionality and resilience. It will also have a new governing body to oversee its performance and development plans. With all this in place we should look forward to full take-up by all 250 market firms (insurers and brokers) as part of the further fruition of market reforms.

Reducing the Paper Mountain

Having recently suffered at the hands of Operation Stack on the M20 in Kent, you get time to appreciate just how much traffic there is on the roads these days.  Within the next month however, the London market will contribute albeit in small part, to the improved traffic flow on the M20 by not requiring so many vans to transport paper to and from the two Kent Xchanging offices.   

With electronic premium processing becoming mandatory and the imminent implementation of the new electronic endorsement, our reform programme is actually significantly reducing the amount of paper used in the market. We are all of course familiar with e-mail and probably over burdened by it, but at least the MRG’s initiatives to use electronic data are based, ultimately, on a standard form which allows straight through processing and no re-keying.

This reduction in paper flow must be the right decision with all its consequent benefits and I believe there is a cultural acceptance that this is inevitable. Looking forward to subsequent generations in the market, this is certainly the case. I am sure many of you can relate to my experiences with my own children who do not necessarily take piles of paper to school any more but download their essays etc onto memory sticks which are then used during school time. 

The IUA has also significantly reduced its paper volumes within the office as part of its recent refurbishment project.  If you are passing by the IUA’s offices within LUC, feel free to pop in to compare the current look and feel to our previous paper mountains. 

Market Reform: Full Steam Ahead

In the early days of market reform it was easier to identify individual initiatives on a year-by-year basis.  It was similar to a Chinese reform calendar, 2004 – year of the slip, 2005 – year of the settlement, 2006 – year of the claim.  The design work on these important workstreams for the market tended to coincide with a 12 month timetable. 

The same cannot be said for 2007.  As you may have read this week, the market made significant progress in reforming business processes last year.  We have definitely moved on from design and are now concentrating on implementation and increasing volumes. 

For Accounting & Settlement over 70% of all original premium submissions to Xchanging are processed electronically via an insurance market repository.  12 months ago we were only at 20%.  For electronic claims files, around 75% of all new claims in Lloyd’s are handled electronically and the company market now has the majority of firms operating in the same way.  And in contract certainty, this is now business as usual and the legacy mountain has been decimated by over 60%.

The targets for 2008 for both A&S and ECF are quite simply 100%.  There will also be more activity to promote electronic trading and the use of international standards. 

As the new Chair of MRG, Steve Matanle says “continuing progress will help maintain London as the vibrant market of choice for global insurance”. We will all continue to work together towards this aim and the expectation is that this will be achieved.