Lloyd's of London wants 80% of business to be placed with its underwriters electronically by the end of 2019, CEO Inga Beale said May 16.
Addressing the annual conference of the British Insurance Brokers' Association, Beale also said she felt Lloyd's has "crossed over that big barrier" to technology adoption, but not without some encouragement in the form of financial incentives and penalties tied to electronic placement.
Inga Beale, Lloyd's of London CEO
Source: Lloyd's of London
Lloyd's, a market within which underwriter syndicates do insurance business, much of it on paper, said in March that it was making the use of its electronic placement system mandatory in order to spur take-up. It wants its syndicates to increase the proportion of business they receive electronically in 10% increments per quarter starting with the second quarter of this year, reaching a target of 30% by year-end.
Before Beale's speech, Lloyd's had not given a time frame for hitting the 80% target.
Beale said moving to 80% electronic placement was "pretty dramatic" given how much paper gets shuffled about the market. There have previously been several failed attempts to introduce electronic trading at Lloyd's as underwriters and brokers have resisted change to traditional business practices.
"It fundamentally feels to me as though we have crossed over that big barrier and that we have actually got some buy-in and an understanding that we need to embrace and use technology," Beale said.
She noted, too, that Lloyd's has put in place certain incentives and penalties.
In the March mandate it said that if a syndicate exceeds the 2018 targets, it would qualify for a partial rebate of its annual subscriptions it pays to Lloyd's, up to a maximum of 15%. But if the syndicate misses the targets, fees will increase up to a maximum of 15% "to contribute to the cost of modernizing market systems and processes."
If a syndicate meets less than 50% of the target for a quarter, it will have to submit a remediation plan to Lloyd's setting out how it will meet forthcoming targets. And if at the end of the year a syndicate has not achieved at least 50% of the combined third- and fourth-quarter targets, Lloyd's said it "reserves the right" to boost the syndicate's capital requirement by 5% at the next "coming into line" date — a biannual capital-setting process.
'No more excuses'
Beyond Lloyd's own modernization and technology adoption, Beale painted a bleak picture of the overall insurance market's usage of technology.
"I don't think it is any secret that we are lagging behind the rest of some of the financial services when it comes to digitization and the use of new technologies," she said. "There can be no more excuses. We don't have the time to sit back and think about it. We have to be out there adopting, embracing new technology or we won't have a future. We need to keep reminding ourselves of this because often we are actually thinking we are doing okay and we are making money."
Beale also said there is an "innovation gap" in insurance, with insurance products failing to keep pace with the risks customers are facing.
"It's a gap we need to work on closing," she said.
Beale also warned that traditional players may be displaced by technology-enabled startups.
"We have got an abundance of capital out there that wants to be part of our sector and it is flowing right now into some insurtech players," she said. "Some brokers and some underwriters are going to be cut out of the value chain."