placing reform and technology overview lma: electronic support for the placing process john harvie 8...

Market ReformProgramme Office

Placing reform and technology overview

LMA: Electronic Support for the Placing ProcessJohn Harvie 8th May

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Implementing the reform vision

• Work with the grain of the market

• Grasp the difficult issues

• Not be proprietorial

• Represent the London Market on reform

• Focus on cross-market co-ordination, not centralised delivery

• Take incremental steps: momentum is paramount and better than perfection

• Actively communicate with the market

• Reduce ‘Londonisms’

• Champion the formation and adoption of process standards

• Use the lead implementer model

• Use measurement to drive performance improvement

The mandate for reform is competition

“the only way to bring technology change is by finding the right partners. We can never, and will

not, attempt to build a bespoke system again”

Richard Ward (Insurance Times April 07)

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This decentralised approach to delivering electronic support for placing is still emerging:

This presentation sets out :

– the context for placing reform by examining the issues facing the international brokers and the impact on their business strategies

– the impact on London Insurers and the changes that are likely to be needed

– the components required to deliver electronic placing and how these components fit together

– some suppliers that have offerings that cover the components

– some next steps

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International brokers are in the process of transforming their business models.Key drivers

• Client demands

– Global service to global clients

– Clearer demonstration of value

– Competition from other sources of advice

– Major clients growing in sophistication

– Require more information and in real time

• Pressure on profitability

– Revenue base under pressure

– High costs of servicing some categories of business

Response

• Primarily addressing internal inefficiencies

• Business touched once at a point close to the client

• Producers focused on client not on internal process

• Global centres for servicing business

• Service segmented to address clients needs

• Product commoditisation of some classes

These forces and the brokers response is what will drive placing reform. Their focus is not London, their challenge is global.

London is an option not a given.

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These changes will have far reaching implications for London based Insurers

Trends that have already begun are likely to continue and may accelerate. Other classes may be eroded as brokers strategies succeed.

• Simple business is going elsewhere

• Never the less overall capacity in London is increasing

• Although London’s share of global market for general insurance premium is decreasing

Lloyds Market 1993 Lloyds Market 2007

Small/ simple

Large /complex

Source: Lloyds Franchise Performance

100%

0%

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So what are some of the strategic questions?

1. Do we focus on being a purely specialist insurer or should we compete for simple, less complex business as well?

2. How do we maintain our existing business?

3. Should we be looking to access business as close to the end client as possible and if so how?

4. Can the processes we deploy today support us in a more competitive global environment? If not how should we be looking to improve them?

5. What skills do we need in the future that we do not have today? What are we doing to develop those skills?

6. How do we do the above and remain an attractive channel for brokers to do business with?

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Whatever your strategy, you need processes that maintain a competitive cost baseSegmentation is a way of matching client’s requirements to the most efficient means of processing. Even a complex risk may have some simple transactions or process steps that are capable of being automated.

Firms will need ways to determine which approach should be taken and will need to embed this into operations. When fully deployed this segmentation model would involve a combination of face- face activity and automated activity.

The extent and complexity of the information required to place the risk

Whether the process step is capable of being codified into a set of rules

The complexity of the business transaction

Complex

e.g. information needed to place an aerospace risk

Complex

e.g. Complex quotation on multi layered risk

Complex

e.g. initial energy risk placement

Simple

e.g. information to place a small standard commercial property

Simple

e.g. rules based quotation on a piece of marine cargo

Simple

e.g. straight forward endorsement

Straight through, fully automated processing, with decision rules built

into the system.

System to system exchange of information with manual review and decision making

Face to face interaction with

systems support Volume Increase

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Benefits delivery requires simultaneous change to a number of aspects of an insurer’s businessOutcomes for Insurers

• Process

– Processes to reflect alternative approaches to placing (Face to Face, System to system, Straight through).

– Processes that are independent of location.

– Mechanisms to determine how business should flow through the process.

• People and organisation

– Business reorganised to reflect revised processes.

– Underwriting skill segmented, senior underwriters focused on complex work.

– Operational management skills enhanced to manage processes.

• Information

– Improvements in management information to include information on process performance.

– Improvement in information to support placing both risk evaluation and trading (particularly to support the system to system world).

• Systems

– Systems to manage workflow introduced.

– Management information enhanced to provide information on process performance.

– Systems to provide information on the trading environment (replaces physical information exchange).

– Systems connected up to internal and external messaging environment.

The rest of this presentation focuses primarily on the systems

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An overall placing architecture can be built from a number of components:broker perspective

Global broker

• Infrastructure

• Slip creation

• Workflow

• Core systems

• Desk top services

Internal document management, management

information, etc

Systems to support the development of

the slip e.g. ConCert

Systems to manage the process

Email, messaging and document

production systems

Risk recordingTransaction processingLedgers

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An overall placing architecture can be built from a number of componentsThe carrier perspective

Global Insurer

• Infrastructure

• Workflow

• Core systems


Internal document management, management

information, etc

Systems to manage the process

Email, messaging and document

production systems

Risk recordingTransaction processingLedgers

Mark

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Global Insurer

• Infrastructure

• Workflow

• Core systems


Global broker

• Infrastructure

• Slip creation

• Workflow

• Core systems


An overall placing architecture can be built from a number of componentsCentral applications.

Work flow / process management

Information services

Document repositories

Electronic forms

Provides Information to support the placing process including data on activity and trends within the market. Replaces some of the information exchange associated with the underwriting room.

Reference information such as wordings, look up tables, contact information that improve the efficiency of placing.

Enables the transmission of placing information using a structured XML message

Manages the process of agreement between multiple trading partners. Provides a central capability to place business managing the processes from build to order.

Holds unstructured information in the form of electronic documents. (e.g. scanned documents) Removes the need to exchange paper.

Market directory

These can be delivered separately or as part of a hub.

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An overall placing architecture can be built from a number of componentsCentral Infrastructure.

Message Gateway

Message Gateway

Message Routing

Message Management

Message Translation




Electronic forms

Allows brokers or Insurers to send ACORD standard messages to one another. Manages the flow of messages between

multiple parties. You connect once the hub manages the rest.

Enables parties to communicate each using different messaging specifications and versions. Enables different versions of ACORD messages to be used to place business.

(can be used to support messaging requirements other than those generated by placing)

Provides a high volume, secure, auditable, messaging environment with guaranteed, secure end to end delivery and full traceability of transactions.

Market directory

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Messages may flow through the architecture in a number of ways

Message Routing

Message Management

Message Translation

Work flow / Process management



Electronic forms

Market directory

Message Gateway

Message Gateway

Portals

Multiple messaging architectures can co exist and the market is likely to evolve into an environment of mixed peer to peer and multi hub messaging

• Infrastructure

• Slip creation

• Workflow

• Core systems


Global broker Global Insurer

• Infrastructure

• Workflow

• Core systems


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Many of the functions to enable electronic placing are already available or are being developed.

This list is not definitive. It is comprised of those organisations that have made themselves known to MRPO. The judgement as to functions provided is based on discussions with suppliers and covers those areas where they have already developed capability or have a stated intention to develop capability to support placing. Vendors that provide generic workflow, document management and middleware are excluded, although clearly may have relevant solutions. These and other vendors may have very similar functions that are capable of supporting other processes. These are out of the scope of this presentation.

Message Gateway

Message Routing

Message Management

Message Translation




Electronic forms

Market directory

Message Gateway

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Many of the functions to enable electronic placing are already available or are being developed.Information services


Market directory

Work flow / Process mnt

Electronic forms

Message Gateway

Message Routing

Message Mnt

Message Translation

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reinsurance

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In deciding on alternative approaches it is useful to have a set of guiding principles

• Modular architecture

• Commercial considerations

• Avoid being locked into a particular solution provider

• Appropriate development costs and usage pricing

• Low barrier to entry

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Some obstacles to overcome

• Some opportunities may offer efficiency savings for insurer but require cooperation and support (possibly involving cost) from the broker and vice versa. To realise these opportunities there may be a need to rebalance the overall commercial relationship.

• Lots of old systems that are difficult to change.

• Entry price may be too high for the small broker and insurer.

• The need to change, systems, process and organisation simultaneously.

• The need for a set of robust common standards that do not vary by implementation.

• The need to address the cultural barriers to adoption.

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Next steps for insurers

• Do your analysis of where you can benefit from segmentation of your business portfolio and what opportunities arise for electronic support of the placing process.

• Do you need to receive free form documents or structured data.

• Talk to the brokers that represent your principal distribution channels about the opportunities. Make sure there is a joint benefit before proceeding. Engage at senior levels about changes in commercial relationships if necessary.

• Talk to the vendors of your existing systems about their plans to develop and embrace electronic messaging and ACORD standards.

• Make sure that you address all aspects of change, not just the technology e.g. the impact on processes, people and their roles.

• Recognise that in order to develop and manage a 2 way messaging environment some form of workflow will be required, whether delivered by a central application or a firm based solution or some combination of the two. This could be simple.

• Ideally choose an infrastructure partner that can support all of your messaging requirements whether they relate to placing or not.

placing reform and technology overview lma: electronic support for the placing process john harvie 8...

Documents

market reform page

reform vision market

london market

placing reform

market reform programme

lloyds market

reform focus

complex business