The challenge is not in technology, but in influencing the hearts and minds of London market players to embrace technology…

Attending the 2016 Verisk Risk Symposium in London this month, I was struck by the fact that, so far as I am aware, I was the only analytics professional in the room. It occurred to me also that, in the world of insurance, IT is not perceived as a sufficiently sexy topic for discussion. As one of the speakers present pointed out, the challenge is not in the technology itself, but in influencing the hearts and minds of London market players to embrace that technology.

But what exactly does this mean for the Lloyd’s market?

In the first place, there is a perception problem to overcome. The task of modernisers is to demonstrate to underwriters that IT is not as mundane as it may seem and that, from an underwriting perspective, it has the potential to drive breakthrough changes in the London market. The industry has invested much time and effort in developing a common language for loss; and as new coverage capacity/opportunities emerge, the challenge remains to understand the limits of our knowledge.

In a drive to remain competitive in international markets, Lloyd’s has embarked on a modernisation and growth agenda with the focus on addressing the following key issues:

  • Electronic trading
  • Delegate authority
  • Risk placement platform
  • Structured data capture

You could be forgiven for thinking that, Yes, of course, electronic trading, placement platform and structured data capture should be a given. Well… not necessarily in the world of Lloyd’s. Even in 2016, this honourable institution is still considered a paper-based market, with the emphasis on face-to-face interaction – it brings to mind the old Mary Poppins movie I watched as a child.

That said, there is definitely something I like about the face-to-face approach in British culture; deals still happen on the strength of a handshake. It is a personable and warm way of doing business, especially when it comes to insurance. To this end, when influencing hearts and minds, it is important to remember that many people perceive the face-to-face tradition as vital to the industry, and, quite rightly, it is not something they would want to lose. The aim is to complement rather than to replace.

The main challenge facing the London Market today is over capacity. Lloyd’s is therefore seeking to expand internationally. This involves looking at new disruptive technologies – such as distributed ledger – commonly labelled as ‘block chain’ – which allows the full history of a transaction to be tracked without having to use traditional data storage approaches.

But, all things considered, is the London Market really about to become the Silicone Valley of insurance?

It’s true that currently Accenture is heavily involved with Lloyd’s TOM (Target Operating Model), but, sitting in the room during their presentation, I couldn’t help feeling more than a little sceptical. We were treated to the usual stuff from the geeks on the subjects of data modelling and cyber risk, which included the same tired warnings about ‘deterministic’ and ‘probabilistic’ risk. (The first time I read about this subject was in 1990, shortly after NASA published its report on risk relating to the fatal failure of the Challenger space shuttle – i.e. nothing new in terms of thinking.) What really made me smile was when one of these ‘experts’ highlighted the correlation between the number of employees in a business and the potential increase in cyber risk (of course, more passwords in circulation, etc…) I need to confess, the feeling in the room was, ‘Yeah guys, don’t tell us you’ve cross-checked your cyber data when the two parties involved have a common interest to succeed’.

Welcome to the UK, folks. You may be able to wing it in America, but the London crowd did not look as impressed as the guys might have hoped.

Conversely, we all know that cyber is a growth area in an industry that does not like to be associated with ‘mundane’ technology. The UK cyber market is estimated at 1.8GWP (Gross Written Premium) and according to PWC it is set to grow to £7.5bn by 2020. Despite this, no one really understands how to model cyber, as it can be:

  1. Operational, e.g. a break in trading because of a hacking attack
  2. Informational, e.g. risk to the data held
  3. Physical, e.g. the sprinklers in the building have gone off because a hacker has broken into the system and activated them…

The next subject up for discussion was data protection, particularly in the light of the new EU General Data Protection Regulation.

The feeling in the room was that whether or not the UK Leaves the EU, companies will still have to deal with EU businesses and therefore would still need to comply with EU regulations. There was a lot of discussion about the concept of breach notification.

All in all, it was an interesting day, but hardly exciting. There remains a strong resistance to technology, it being perceived as boring and simply not as sexy as pure underwriting.

With this in mind, any changing of hearts and minds will require much time and effort.

At Giroux, we are actively engaged in bridging this perception gap, while bring a unique approach to the issues faced by the industry.

Just last Monday, I ran a workshop with a team of underwriters to help them design their own data warehouse for their business – armed with nothing more than a pad of yellow stickers and rolled up sleeves!

If nothing else, the Verisk Symposium has inspired me to press forward with my mission of positioning GIROUX as the true catalyst for IT in the insurance industry. Bridging these two very different worlds is unequivocally our raison d’etre.

The good news is that underwriters are smart people; persuading them to embrace technology as part of their day-to-day work may present a challenge, but I’m confident it is about to happen very soon.

Thanks for reading.

Eric Giroux, Founder and Managing Director, GIROUX