Lloyd’s reveals radical plans to innovate and cut costs

Lloyd’s has announced plans to radically overhaul its business model by cutting cost and providing more innovative insurance products, services and capacity. The plans include a new platform for complex risks and a way for new syndicates to trade electronically anywhere in the world, without a presence in London. The more than 300-year-old insurance market today published a prospectus setting out proposals for the future of Lloyd’s. The prospectus includes several “transformational initiatives” that Lloyd’s believes will shape its future. The proposals are focused on meeting the changing needs of businesses through innovative products and services, as well as faster, more automated risk placement and payment of claims. Lloyd’s also wants to drastically cut the cost of doing business at the market. This includes a focus on distribution costs and finding better ways of attracting capital to boost capacity. At the launch of the prospectus in London, Lloyd’s CEO John Neal said the market and wider, global insurance industry needs to change or risk becoming irrelevant. He noted that Lloyd’s customers increasingly face intangible risks for which insurers do not have solutions. Many companies choose to self-insure through captives, which pay claims quicker than insurers, he added. Insurers also need to make it easier for alternative capital to “attach to risk” and reduce their costs, said Mr Neal. Some 40% of premium at Lloyd’s is absorbed by costs, he noted. The prospectus sets out six possible projects, although no decisions have been made on whether to take these forward, according to Mr Neal. The six ideas include separate electronic trading platforms for complex and commoditised risks. Lloyd’s proposes a digital platform for complex risk, as well as an exchange where less-complex risks can be placed in minutes at a fraction of today’s costs. There are also plans to make it easier for alternative capital to provide capacity at Lloyd’s, including a potential tracker or following market mechanism. There is a proposed “syndicate-in-a-box” concept that would offer a “streamlined” method to bring new products and business into the market. According to Mr Neal, the initiative would allow for “remote” syndicates that would be able to “exclusively place risk electronically”. Lloyd’s also promises a “next-generation claims service” that aims to improve customer experience and increase trust in the market by speeding up claims payments. Speaking at the launch event, Mr Neal said Lloyd’s could automate many claims processes and dramatically reduce the time taken to pay losses. The market also proposes better leveraging its data, and working with third-party service providers to build an “ecosystem” of services that market participants can provide to their customers. “This is a once-in-a-lifetime opportunity to build for a new future,” Mr Neal said. The proposals are now open for consultation and work will begin on building and delivering prototypes from October 2019, with some operational in early 2020. According to Mr Neal, there will be some quick wins, but larger projects will take longer to deliver.

Lloyd’s reveals radical plans to innovate and cut costs

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