February 10, 2021
Let’s Do More Than Create Faster Horses
by Tim Kershaw
COVID-19 has accelerated adoption of e-trading and smashed paradigms. There is an opening for something fundamentally new.
Six years ago to the day, as I write this, I was a keynote speaker at a TINtech London Market conference with a brief to talk about e-trading and technology that asked: What are the new technologies that will affect people and process and stimulate innovation? Why is now the time to invest? What are the challenges to overcome?
I start with this because it resonates strongly with what the InsTech London “E-trading platforms challenges, opportunities, and imperative” paper now sets out to address, several years later.
Delve deeper, however, as this paper does, and you see that, while progress has not been made as swiftly in our sector as it has in others, the encouraging reality is that a lot has, in fact, changed and even more seems to be about to change in what the paper describes as a “truly digital world that many of the consumers and businesses we serve are already inhabiting.”
The paper is, of course, a must read. For those with less time, you can head straight to the conclusions. Those who prefer edification with their morning coffee and sit back and listen to the excellent podcast with Robin Merttens and Mark Geoghegan. As a poor fourth, here is my brief summary of highlights:
- The environment is more fertile today than ever before. “COVID-19 has acted as an accelerant of digital adoption and provided momentum for the adoption of e-trading, a belated burning platform,” and is smashing some long-held paradigms, not least about shoe leather and queues. “There is more recognition of the imperative for change; greater desire from within to deliver it.”
- There needs to be an intermediate stage between digitizing what the market has today (slips, quotes) to help drive adoption, and then evolve to become a truly digital ecosystem. The intermediate phase will be the foundation to push on from. The digital evangelists in our market are crucial, but it is naïve for us all to think we can step straight into a full-on digital ecosystem. Electronic case files (ECF) eliminated the claims paper but did not fundamentally change the process. ECF opened the servicing bandwidth — previously, the speed of client service was directly attributable to the length of a claims broker’s arms! ECF gave the opportunity to make a significant change from old state, but it was an example of digitizing an existing process and not reimagining it in a digital landscape. Perhaps a case of “digital lipstick on a legacy pig,” to quote Robin.
- Straight-through processing is still something of a dream, and much data remains sub-optimal. The data standards are too narrow, and more open-source standards must come to the fore. Connectivity is a big issue. Application programming interface (API) adoption will gather momentum once the building blocks are in place. There is “much work to be done to achieve the levels of system-to-system connectivity we need. The industry is well short of where it needs to be on defining data and process standards and on pooling the required knowledge and resources to define them.”
- The stage is set for more innovative digital solutions to emerge. It is about being brave, and “the market cannot be a closed club if it is to succeed with connectivity.”
- The big brokers’ influence is key – “the king makers.” The fear of disintermediation is nowadays overblown, but, with a traditional model of “customers to the left and markets to the right,” there is still a fundamental barrier. That is unsustainable and cannot be a continuing strategy, which is something more and more brokers now recognize. It is in and around data, analytics and insight where they can add real value far beyond the transaction. Algorithms will take over. They must, not least because customers like them. “If we fail this time round the most likely cause will be that the brokers sought to protect the status quo for a decade longer.”
- If the big brokers decide to push on, it will happen, and Lloyd’s has a huge role to play, too. Blueprint Two sets up an environment where “private enterprise can be the way forward for the market to adopt, and across multiple platforms.”
- Consensus is a better way forward (the carrot) rather than imposition (the stick), but at some point compulsion must come. “A long-term free-for-all is unsustainable, and there will, as with any space race, be winners and losers over the medium term.”
- The customer’s voice in ‘the future of insurance’ is not loud enough. The market needs to be bringing the customer inside the tent constantly. If we just concentrate on making life easier for brokers and underwriters, customers will build the solutions that suit their needs independently of us. A great example is Insurwave, the genesis for which was the growing frustration from AP Moller Maersk about the inefficient handling of its huge cargo account. The endgame of a genuine ecosystem involves all market participants, which must include customers. “Our customers are increasingly strident in demanding it.”
- Traction has always been missing, but credible leadership is now starting to show up.
- RIP, analog! “The influence of the analog era workforce is waning, and, as a result, the cultural barriers to adoption are declining.”
- My personal plea: Allow the innovators and the technology specialists to now lead us forward. In doing this, we must not forget the other key members of the cast. In the past, we were hindered by a fundamental lack of actual brokers and underwriters being involved. Those that trade, brokers that broke and underwriters that underwrite. Gather the requirements at a trading floor level with active engagement from that community feeding directly into the innovators and technology partners. This is not to build consensus, but rather to be sure to surface the key issues and pain points that communities need technology to solve for. Imagine organizing a music festival without any reference to the bands headlining and their needs. Or designing a restaurant without involving the chef.
See also: 4 Post-COVID-19 Trends for Insurers
In conclusion: We are in the risk business, yet we have been risk-averse. Let us take some risks now or, as Henry Ford would have it, we will forever just create faster horses. Or in our world, perhaps we will just end up with smarter slips. “Now we need to harness this collective will to get it done and take great care that we don’t jeopardize this historic level of enthusiasm,” and “we can’t build our future in an isolated echo chamber. It is a prerequisite that we understand what is going on in other industries and align our technology, products, and services with their requirements and interests.” Now really is the right time, and, to borrow from Macbeth, “if it were done, when ’tis done, then ’twere well it were done quickly.”