Is Tech killing the Lloyd's Broker
For 325 years or so the London Insurance market has been located in a small but very significant corner of London. Right from the start in Edward Lloyd's coffee houses, the merchant ship owners looked to off set some of the risk they would incur if their ships sank on their long and treacherous journeys. As the aristocracy got wind of this newfangled enterprise trading on the river side, they wanted a piece of the action, but to enter the dens of iniquity was not an option. As such, young boys were engaged as runners between the gentlemen's carriages in the street, and the merchants in the Coffee house, taking a cut for their efforts. And so the role of Broker was formed.
Now the role is a complex mix of maintaining the Client's best interests to find appropriate tailored cover for their needs, anything from show business legs, and athletes feet to events, space launches, tankers and complex medical and industrial liability. They then combine this with claims handling, engaging experts and liaising with multiple parties. Then providing data and analytics to Carriers to negotiate renewal terms on behalf of those clients.
Until recently Lloyd's brokers would have dealt almost exclusively with wholesale business, placing policies and treaty arrangements where their clients are other Insurance practitioners, Retail Brokers to Insurance companies, and of course placing unplaced parts of risks from other Brokers. However, in recent years many have branched out to embrace the wider channels to Market, and setup their own Coverholder activity, particularly with the growth of Delegated Authority. I am sure the audience of this piece understands this concept intimately, but in case not, DA is the position of an Insurance Intermediary being given Authority by an Insurer to write business on their behalf. There will be many terms and conditions attached to this Contract Of Delegated Authority, what classes of Business, territories, limits etc.
This has meant that Lloyd's Brokers no longer enter a Risk into their back office system that is one of 5 or 6 that day, the technician, taking the time to ensure all the references, details of the sections and periods of cover. An important and clear requirement. After it is entered the document, or slip is produced to show all the information, walked round to the carriers and agreed. those that agreed to support this risk then have their details added in the system and a transaction is raised, a debit note produced and a closing to the market to tell them what money they might expect.
Now its is about volumes. an MGA or Lloyd's Coverholder are looking to process many many risks in a day, ideally through self service "Click and Bind" portals or other agents. This data is now available for transmission but the back office systems are still expecting a manual input of each risk, policy number, year, inception date, expiry date, one by one. Many will support the set up of the Master Binder contract the terms of the Contract of Delegated Authority, and allow the Broker to process an amount of money each month representing the premium and claims being handled, but not provide for the individual policies to be recorded.
Here is where the market started to get anxious to lay its hands on that data, to really understand what it was underwriting. Pressure was put on the Broker to supply this, so they received a spreadsheet from the MGA or Coverholder or retail agent and sent it on as received, whether in PDF or in Excel - it was a start! But not easy to handle and many years of cutting and pasting ensued.
Then the Insuretech revolution, tech brands popping up with a multitude of solutions to provide more and more data capture and processing. Each addressing either a class based system, X is really good at Marine, Y is good at Property or build your own system with tools and components, great for the aspiring Broker looking to make more money out of software design than broking, and often those that did try and write their own systems, have gone on to offer those to other Brokers, with varying levels of success.
The Markets now has an almost impossible to navigate landscape of Click and Bind, Workflow, Document Management, CRM, Accounting, Policy production, systems all addressing one area and requiring linking up. As for the latest new release for a Lloyd's Coverholder matching Portal, is this further forcing the Lloyd's Broker to reconsider their role?
In the meantime the market continued to advance behind the back of the broker, who was spending most of their days ensuring clients risks were placed and claims were paid, seeing little benefit to spending huge sums on tech solutions but at the same time appreciating scaling their offerings to handling large volumes of risks was not going to be possible with out tech.
To address the Broker's lethargy or inability to invest the kind of sums the Carriers were, and given that was mostly due to proportionately less money in the deal, certainly amongst the smaller niche brokers, it marched on backing various solutions and portals to encourage the movements of that data.
We believe the Broker, either the traditional activity of the Lloyd's Placing broker or those that have set up as a Coverholder, or even backed the creation of a network of specialist MGAs are now waking up to the fact that Data is a powerful commodity. In 2017 the word on the street was that in 5 years the data the Agent (of whatever ilk) was in possession of would be more than the premium charged for insuring the interest.
So the London Market and the TOM initiatives are looking to address a number of needs, from DASTATS to handle the volume of risk data on Delegated Authority contracts to PPL for placing a risk into a Lloyd's Syndicate, all the while more efforts in the replacement of paper based notifications to the Bureau on what risks and transactions are being processed. Whilst more work is needed to join these initiatives up, to align terminology and data identification its is a set of efforts going the right way, even if its the equivalent of construction Air traffic Control for the whole world of Aircraft and then also including all modes of transport not just planes!
So how can the niche Lloyd's Broker, Coverholder or MGA leverage their balance of data capture, in the correct structure to process and transmit it in to London, whatever class or business and in whatever territory they reside or do business? Its a matter of embracing the back office system, the source of all the information about the money - after all Insurance is only the movement of money and the promise to pay all reasonable claims, with the need for evidence to prove both. It's not just about having the latest portal.
The shopping list must include a class agnostic, flexible back office system with policy production, claims processing and proactive integration mission with the increasing number of market offerings and initiatives. Delivered fully hosted to support multiple territory operations and outsourcing. Added to this the support for importing volume data from Clients, the list of policies they have written that now need onward transmission, with all the requisite taxes, levies and deductions processed. Options to send or received that data to a market repository, compare the reported premium against limits and terms and if required batch produce Certs and Debit notes. Not to mention compare inward reported claims against that data to ensure it was indeed on risk. along the way comfortably handle the variety of odd situations, cash matching and convertible currencies and the onward reporting into Lloyd's.
The Broker needs to join the data revolution and understand the value of that aligned data, not just the requirement to pass it on down the chain. But their needs have diversified, from Treaties and DA to Facultative and direct placements.
Talk to us - If this how you see your operations evolving, are you setting up a new MGA or Coverholder, are reporting requirements challenging or is your growth now putting strain on your in-house systems, do you want to work with a team that, like you, has its Clients' best interests firmly placed at the top of its list of priorities, and can help you navigate the journey.