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Document Sample
Market Reform
Programme Office
Placing reform and technology
overview
LMA: Electronic Support for the Placing Process
John Harvie 8th May
Implementing the reform vision
• Work with the grain of the market
• Grasp the difficult issues
• Not be proprietorial
Market Reform
• Represent the London Market on reform
• Focus on cross-market co-ordination, not
centralised delivery
• Take incremental steps: momentum is
paramount and better than perfection
• Actively communicate with the market
• Reduce ‘Londonisms’
• Champion the formation and adoption of
process standards
“the only way to bring technology change is by
finding the right partners. We can never, and will • Use the lead implementer model
not, attempt to build a bespoke system again”
• Use measurement to drive performance
improvement
Richard Ward (Insurance Times April 07)
Page 1
The mandate for reform is competition
This decentralised approach to delivering electronic support for
placing is still emerging:
This presentation sets out :
– the context for placing reform by examining the issues facing the
Market Reform
international brokers and the impact on their business strategies
– the impact on London Insurers and the changes that are likely to be
needed
– the components required to deliver electronic placing and how these
components fit together
– some suppliers that have offerings that cover the components
– some next steps
Page 2
International brokers are in the process of transforming their business
models.
Key drivers Response
• Client demands • Primarily addressing internal inefficiencies
– Global service to global clients
– Clearer demonstration of value
• Business touched once at a point close to the
client
Market Reform
– Competition from other sources of
advice
• Producers focused on client not on internal
– Major clients growing in sophistication process
– Require more information and in real
time • Global centres for servicing business
• Pressure on profitability
• Service segmented to address clients needs
– Revenue base under pressure
– High costs of servicing some categories • Product commoditisation of some classes
of business
These forces and the brokers response is what will drive placing reform. Their focus
is not London, their challenge is global.
London is an option not a given.
Page 3
These changes will have far reaching implications for London based
Insurers
100%
Large /complex
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Small/ simple
0%
Lloyds Market 1993 Lloyds Market 2007
Source: Lloyds Franchise Performance
• Simple business is going elsewhere
• Never the less overall capacity in London is increasing
• Although London’s share of global market for general insurance premium is
decreasing
Page 4 Trends that have already begun are likely to continue and may accelerate. Other
classes may be eroded as brokers strategies succeed.
So what are some of the strategic questions?
1. Do we focus on being a purely specialist insurer or should we
compete for simple, less complex business as well?
Market Reform
2. How do we maintain our existing business?
3. Should we be looking to access business as close to the end
client as possible and if so how?
4. Can the processes we deploy today support us in a more
competitive global environment? If not how should we be
looking to improve them?
5. What skills do we need in the future that we do not have
today? What are we doing to develop those skills?
6. How do we do the above and remain an attractive channel for
brokers to do business with?
Page 5
Whatever your strategy, you need processes that maintain a competitive
cost base
Segmentation is a way of matching client’s requirements to the most efficient means of
processing. Even a complex risk may have some simple transactions or process steps that are
capable of being automated.
The extent and Whether the The complexity
complexity of the process step is of the business
information capable of being transaction
Market Reform
required to place codified into a
the risk set of rules
Complex Complex Complex
e.g. information e.g. Complex e.g. initial energy
needed to place quotation on risk placement
an aerospace multi layered risk Face to face
risk interaction with
systems support Volume
Increase
System to system exchange
of information with manual
Simple Simple Simple review and decision making
e.g. information e.g. rules based e.g. straight
to place a small quotation on a forward Straight through, fully automated
standard piece of marine endorsement processing, with decision rules built
commercial cargo into the system.
property
Page 6 Firms will need ways to determine which approach should be taken and will need to embed this
into operations. When fully deployed this segmentation model would involve a combination of
face- face activity and automated activity.
Benefits delivery requires simultaneous change to a number of aspects of
an insurer’s business
Outcomes for Insurers
• Process
– Processes to reflect alternative approaches to placing (Face to Face, System to system, Straight through).
– Processes that are independent of location.
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– Mechanisms to determine how business should flow through the process.
• People and organisation
– Business reorganised to reflect revised processes.
– Underwriting skill segmented, senior underwriters focused on complex work.
– Operational management skills enhanced to manage processes.
• Information
– Improvements in management information to include information on process performance.
– Improvement in information to support placing both risk evaluation and trading (particularly to support the
system to system world).
• Systems
– Systems to manage workflow introduced.
– Management information enhanced to provide information on process performance.
– Systems to provide information on the trading environment (replaces physical information exchange).
– Systems connected up to internal and external messaging environment.
Page 7 The rest of this presentation focuses primarily on the systems
An overall placing architecture can be built from a number of components:
broker perspective
Systems to support
the development of
Global broker the slip e.g. ConCert
• Infrastructure
Internal document
management,
•
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management Slip creation
Systems to manage
information, etc the process
• Workflow
• Core systems
Email, messaging
• Desk top services and document
production systems
Risk recording
Transaction processing
Ledgers
Page 8
An overall placing architecture can be built from a number of components
The carrier perspective
Global Insurer
Systems to manage
• Infrastructure Internal document
management,
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the process
• Workflow
management
information, etc
• Core systems
• Desk top services
Risk recording
Transaction processing
Ledgers
Email, messaging
and document
production systems
Page 9
An overall placing architecture can be built from a number of components
Provides Information to support the
Central applications.
Holds unstructured information in the form of
placing process including data on electronic documents. (e.g. scanned
activity and trends within the market. documents) Removes the need to exchange
Replaces some of the information paper.
exchange associated with the
underwriting room.
Global Insurer
Global broker
• Infrastructure
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Information
• Infrastructure services
Document
• Workflow
repositories
• Slip creation
• Core systems
• Workflow
• Desk top
services
• Core These can be delivered
systems separately or as part of a hub.
• Desk top
services
Work flow / process management
Electronic forms
Market
directory
Enables the transmission of placing
Manages the process of agreement Reference information such as wordings, look information using a structured XML
between multiple trading partners. up tables, contact information that improve the message
Provides a central capability to place efficiency of placing.
business managing the processes from
build to order.
Page 10
An overall placing architecture can be built from a number of components
Central Infrastructure.
Allows brokers or Insurers to send
ACORD standard messages to one
another. Manages the flow of messages between
multiple parties. You connect once the hub
manages the rest.
Market Reform
Information Document
services repositories
Message Routing
Message Management
Message
Message Message Translation Gateway
Gateway
Work flow / process management
Electronic forms
Market
directory
Enables parties to communicate each
using different messaging specifications
and versions. Enables different versions of
ACORD messages to be used to place
business.
Provides a high volume, secure, auditable,
messaging environment with guaranteed,
Page 11 secure end to end delivery and full
traceability of transactions.
(can be used to support messaging requirements other than those generated by placing)
Messages may flow through the architecture in a number of ways
Global broker Global Insurer
• Infrastructure
• Infrastructure
• Slip creation
• Workflow
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• Workflow
Information Document
services repositories • Core systems
• Core systems
Message Routing • Desk top
• Desk top
Message
services
services Message Message Management Gateway
Gateway
Message Translation
Work flow / Process management
Electronic forms
Market
directory
Portals
Multiple messaging architectures can co exist and the market is likely to evolve into an environment
of mixed peer to peer and multi hub messaging
Page 12
Many of the functions to enable electronic placing are already available or
are being developed.
Information Document
Market Reform
services repositories
Message Routing
Message Management
Message
Message Message Translation
Gateway
Gateway
Work flow / process management
Electronic forms
Market
directory
This list is not definitive. It is comprised of those organisations that have made themselves known to MRPO. The judgement as to functions provided is based
Page 13 on discussions with suppliers and covers those areas where they have already developed capability or have a stated intention to develop capability to support
placing. Vendors that provide generic workflow, document management and middleware are excluded, although clearly may have relevant solutions. These
and other vendors may have very similar functions that are capable of supporting other processes. These are out of the scope of this presentation.
Many of the functions to enable electronic placing are already available or are being developed.
Information Document Market Work flow / Electronic Message Message Message Message
services repositories directory Process mnt forms Gateway Routing Mnt Translation
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reinsurance
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Page 14
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In deciding on alternative approaches it is useful to have a set of guiding
principles
• Modular architecture
• Commercial considerations
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• Avoid being locked into a particular solution provider
• Appropriate development costs and usage pricing
• Low barrier to entry
Page 15
Some obstacles to overcome
• Some opportunities may offer efficiency savings for insurer but
require cooperation and support (possibly involving cost) from the
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broker and vice versa. To realise these opportunities there may be a
need to rebalance the overall commercial relationship.
• Lots of old systems that are difficult to change.
• Entry price may be too high for the small broker and insurer.
• The need to change, systems, process and organisation
simultaneously.
• The need for a set of robust common standards that do not vary by
implementation.
• The need to address the cultural barriers to adoption.
Page 16
Next steps for insurers
• Do your analysis of where you can benefit from segmentation of your business portfolio
and what opportunities arise for electronic support of the placing process.
•
Market Reform
Do you need to receive free form documents or structured data.
• Talk to the brokers that represent your principal distribution channels about the
opportunities. Make sure there is a joint benefit before proceeding. Engage at senior
levels about changes in commercial relationships if necessary.
• Talk to the vendors of your existing systems about their plans to develop and embrace
electronic messaging and ACORD standards.
• Make sure that you address all aspects of change, not just the technology e.g. the
impact on processes, people and their roles.
• Recognise that in order to develop and manage a 2 way messaging environment some
form of workflow will be required, whether delivered by a central application or a firm
based solution or some combination of the two. This could be simple.
• Ideally choose an infrastructure partner that can support all of your messaging
requirements whether they relate to placing or not.
Page 17
