Tag Archives: blueprint two

Let’s Do More Than Create Faster Horses

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.”

Crowdsourcing 6 Themes for 2021

After the roller coaster of 2020, it’s a brave soul who’s willing to commit to what 2021 will look like. But running a global network of talented and successful people means that Robin Merttens and I have been able to dip into the collective wisdom of 20 of our friends and supporters from InsTech London.

In an hour-long Zoom call, we were able to crowdsource what is top of mind from 20 of the best people to predict the year ahead – those who are part of making it happen.

One investor, two reinsurers, three consultants, five Lloyd’s syndicates, six growing insurtechs and three others – all that was missing was the partridge and the pear tree.

You can now get the audio highlights (scrubbed and polished to perfection by the ever patient Peter Roach), and my match commentary, of the event on the InsTech London podcast episode 118. What follows are the dominant themes affecting risk and insurance that our panelists recommend you look out for — and why. We agree with Robert Lumley of Insurtech Gateway, though – the skill of making good predictions is about following the direction of travel.

Here it comes – from some of the sharpest minds at PKF, Munich Re, Swiss Re, EY, PWC, Deloitte, Brit, Talbot, Convex, Wakam, Chaucer, Concirrus, CyberCube, Blink, Riskbook, Flock, Zego, Insurtech Gateway, Voice of Insurance, Miller and FintechOS

Insurers must regain trust — consumers want more certainty

Charlie Burgess runs Munich Re international specialty business, and his responsibilities now include Munich Re Digital Partners. A major issue for Charlie is that trust in insurance has been dealt a double blow in 2020 — and resolving that must be a priority in 2021. The rejection of COVID-related claims has accelerated the need for people wanting more certainty between their loss and receiving a payout. This, according to Charlie, will drive more interest in new types of insurance such as parametric. We agree, and wrote at length on this in our October report “Parametric Insurance – 2021 outlook and the companies watch.”

The use of “price walking,” the practice by which insurers charge their existing customers more than their new customers, has also undermined confidence in the market. Look out, Charlie says, for a “short-term rush to offer great deals by insurers to win new customers before the new regulations come into place.”

Ultimately, though, the impact will go deeper, he predicts, fueling the rise of trusted brands from outside insurance stepping in to replace traditional insurance brands, particularly in personal lines insurance. 

We shouldn’t be too despondent, though. Nigel Walsh, partner at Deloitte, reminded us that the insurance industry did pay out billions of dollars in COVID-related claims in 2020. Nigel predicts (or should that be hopes?) that 2021 will be the year everyone starts to love insurance – and that the industry will finally fix its complicated wordings.

By the way, Nigel got his homework in early and has already published his predictions for 2021 – and I learned what gets Nigel going when we spoke earlier in 2020.

See also: 2021, We Can’t Wait to Get Going!

Better integration of technology, better standards and Lloyd’s Blueprint gets underway

By far the most popular prediction across our panelists was the rise of the platforms – our experts expect to see meaningful developments in the use of platforms, integration between technology and, in London, the progress and implementation of Lloyd’s Blueprint Two. John Needham, partner at PKF, and our sponsor for the night, is still hearing concerns from insurers he talks to about the lack of ability to integrate with the new tools that are available, and “frustration that they are having to choose a mainstream platform to play it safe.” Could this change in 2021?

Charlie Burgess welcomes the direction Lloyd’s is taking with its Blueprint but warned that implementation will take longer than planned. Charlie expects “a flurry of automation or digitalization among the Lloyd’s of London market players, both addressing the plumbing and digitalization in whole or some of the more complex risk products.”

Chris Payne, partner at EY, sees the development of a “more pronounced two-speed architecture model” as established companies grapple with overcoming legacy. According to Chris, people are “waking up and realizing that they want something leaner, where they can stand up new ideas or quickly test them, and then decide how they want to launch, whether through a new platform or more easily through their main platform.”

Christian Kitchen, head of technology and innovation at broker Miller, is also bullish about Lloyd’s: “It’s going to crack it this year. Blueprint Two is going to be exactly what we’ve always wanted. The core data record and the digital spine is going to be the framework that all of us build our new solutions on.”

Christian went on: “Now will be the chance for the agile organizations out there, including some of the brokers, to take what Lloyd’s is doing and build out the solutions and the end-to-end journeys that we’ve all been waiting for.” Christian is also optimistic about the opportunities this creates for what he refers to as the “real insurtech companies,” to start focusing on “groundbreaking solutions” as opposed to continuing to try to find work-arounds for legacy systems. 

Karl Lawless, sales director at FintechOS, adds: “Five months of lockdown was five years of digital transformation, and I only see that accelerating next year.” Karl believes the age of the large transformation project is over. “Rather than insurers committing to the traditional big-box solutions that cost tens of millions of pounds and take three to five years to deploy, there’s now an opportunity to deploy best-of-breed digital components, going down the Lego block approach.” Karl reckons we will start seeing components glued together with automation, giving a cutting-edge platform to those that use this approach.

Having spoken to Gary Hoberman, CEO and founder ,of Unqork earlier this year, I am sure low-code and no-code will be a big part of this. And with Unqork having attracted $365 million of funding, according to Crunchbase, clearly I’m not the only one to believe this.

Your platform will be arriving shortly…

Glynn Austen-Brown, partner at PWC, brought a global perspective to the predictions, with a reminder that we all expect technology to make things more convenient and to give us our time back. Insurance will be the next frontier for simplicity. “Look at what people are doing in China. Look at WeChat or Grab. We are going to be moving much closer toward that platform economy that is so prevalent in the Far East,” Glynn believes.

Mark Geoghegan, formerly editor of Insurance Insider and now the “Voice of Insurance” podcast host, advises us to look and see what technology choices the recently capitalized specialty insurers such as Inigo, Vantage and others make. Unlike the previous wave of start-ups 15 years ago these companies, with large amounts of investment, can choose to go with the new solutions and not rely on legacy. (But will they, I wonder?) Meanwhile, Mark predicts that “most of the insurance market is still going to be your friend because they’re not so nimble. They decided that they wanted to digitize three or four years ago, and they’re finally starting to get around to doing it.”

Ben Rose, co-founder of new reinsurance platform RiskBook, picks up on something Christian Kitchen mentioned and says the challenger brokers will rise to prominence in 2021. With the Aon and Willis merger coming up, and the acquisition of JLT by Guy Carpenter that we’ve already seen, Ben reckons that the new breed of brokers, which he observes has been recruiting many star players in 2020, “is really good for reinsurance innovation.”

Ben’s list of challenger brokers to look out for includes TigerRisk, Beach, Capsicum, Gallagher, Hyperion, Lockton, McGill, BMS – all are small compared with the big two. As Ben points out, they can’t replicate what the two giants are doing, so they’ve got to think digitally and about how they can use innovation. “They can’t afford the traditional six-person account team to look after a single client, so they are going to have to explore automation to handle those bigger deals and perform all the analytics expected of them with a much smaller team.”

Ben and co-founder Jerad Leigh are watching closely as these brokers start to move faster and spin up partnerships with start-ups to bring a digital service that’s been missing from the reinsurance ecosystem for quite a while. This is a topic I discussed at length with Rod Fox, CEO and Co-founder of TigerRisk, and with Barnaby Rugge-Price, CEO of Hyperion. And you can learn more about RiskBook from Ben when he joined us for the London leg of the ITC global tour.

Data-powered customers and risk reduction

Jenny Williams from Convex picked up on the theme of data, and she is thinking about it from a platform perspective, too. Jenny pointed to the recent news that S&P has acquired IHS Markit, a company that provides financial services and many insurers with data, for $44 billion: “We’ll see more partnerships and acquisitions in the data ecosystem space.” She added that “lots of different companies offer different variations of data on different assets and their risk and perils.” Companies (and InsTech corporate members) such as e2value and Hazard Hub are doing well in the U.S.

The challenge, according to Jenny, is that each specific data set requires expertise to collect and curate. Jenny is looking out for “more of a one-stop shop, targeted partnerships that may help reduce the offering overlap, while expanding the breadth of useful data that’s available to us.” We go deeper into this topic in my interview with WhenFresh CEO Mark Cunningham.

Christen Smith, head of sales at Flock, a growing insurtech company, echoes a point made by many others, that “customers and brokers aren’t going to be happy with the old solutions or with the old way of doing things. UBI (usage-based insurance) won’t be good enough any more.” Christen added that “we’re going to have to take the next steps into exposure-based insurance and really move the needle to impact consumer behavior.” Flock has recently expanded beyond offering commercial drone operator insurance into broader commercial insurance, no surprise then that for them “it’s going to be a big year for stepping things up a notch in the space of connected insurance, and really delivering for consumers and brokers in a new and different way than has been done before.” Watch this space. we say.

Glynn Austen-Brown picked up on an emerging but powerful theme around customers who are “looking for more services that are aimed at risk prevention and other value-add services, for example boiler servicing, energy bill usage reduction and help with home repairs.” Glynn also sees this theme as driving more partnerships and more embedded insurance — “things like Uber and Airbnb partnerships will become much more prevalent in regards to services and products that insurers offer. Customer stickiness will be everything.”

Data-powered automated syndicates

Andy Yeoman, CEO of Concirrus, expects to see meaningful progress from companies using data and algorithms, what he refers to as “technology-fueled market entrants.” We’ve seen Brit insurance launch the Ki syndicate and gain £500 million investment this year (my discussion with James Birch and CEO Mark Allan of Ki has been one of our most popular podcasts). 

Andy expects the newcomers are “going to use those algorithms to replace the work, whether it be submissions or some of the underwriting decisions,” and their role will change: “We’re going to see their use move from follow syndicates, to lead syndicates. And in doing so, all those organizations are going to create investable asset classes because they’ll ultimately have a predictable yield.” This will make insurance attractive for more external capital, with “trillions of dollars of pension funds monies” coming into the market, maybe not in 2021, but soon after. You can learn more about Andy Yeoman and Concirrus from our discussion last year)

See also: 11 Insurtech Predictions for 2021

But we need to deal with the data-ingestion problem

Of course, all these great opportunities for using data will fail if insurers can’t get the data they need. Jenny Williams is hoping that 2021 will “see some real progress in the very difficult area — submission and ingestion of data in commercial and specialty lines.” The problem that Jenny refers to is caused by the volumes of valuable data that is locked up in email attachments in non-standard forms that are received by underwriters. While the data may now be getting to the underwriters, it’s hard or expensive to extract. Jenny explained why. “It’s not just about ingesting standard forms such as ISO or ACORD; we’re talking about the really funky messy Excel spreadsheets with merged cells, multiple tabs and complex risk details that require real expert interpretation to identify the statements of values, loss runs, engineering reports, etc.”

Jenny is encouraged by some proof points from companies such as Eigen Technologies, Groundspeed, EY, Expert AI, that are among those she sees leading the way. There is more need for collaboration between the technology and insurance experts, but for Jenny it “feels like we’re at a tipping point, and this might be seriously commercially viable next year.”