The Future at Lloyd’s prospectus presents more questions than answers according to DevOpsGroup CEO James Smith. Here, he outlines key considerations for the insurance sector as it transforms for enduring relevance in the digital economy.
Earlier this month, Lloyd’s of London announced a set of bold new strategies for the digital transformation of insurance. These initiatives could revolutionise the Lloyd’s insurance market, making it more adaptive and agile to meet evolving needs in the digital economy.
The ideas are sound, but they don’t go far enough in themselves. As Robin Merttens said so eloquently in his keynote at the recent InsTech event, what the Future at Lloyd’s Prospectus didn’t say was more telling that what it did say. The sector needs to change, and it needs to learn to innovate: a ‘do tank’ might be more useful than a ‘think tank’.
So, while it’s great that Lloyd’s is inviting feedback on the prospectus, we need to be mindful that simply talking about transformation won’t drive change. Sooner or later, you have to roll up your sleeves and get on with it. And it should be sooner rather than later. But that’s where things start to get a bit more complicated.
Six options for the future
At the heart of the prospectus are six ideas distilled from months of in-depth conversations with insurance industry experts. Lloyd’s says they offer ways to provide greater value to customers and other stakeholders:
- Platform for complex risk
A culture, process and structure that supercharges innovation in response to customer needs.
- Lloyd’s Risk Exchange
A risk exchange through which your risks can be placed in minutes at a fraction of today’s cost.
A structure that enables new sources of capital to simply and effectively access a diverse set of insurance risks on the Lloyd’s platform.
- Syndicate-in-a-Box (Love this idea; like-minded underwriters create an online niche platform to test the water – IE Editor)
A streamlined system for syndicates to bring new products and business into the market.
- Next Generation Claims Service
An automated claims process that speeds up settlement to improve customer experience and increase trust in the market.
Access for all market participants to an ecosystem of products and services that helps them develop new business and provide outstanding customer service.
These options acknowledge customers’ and stakeholders’ increasing awareness of the threats and opportunities of digital business. Lloyd’s is responding by changing its business strategy to incorporate digital, which in turn places greater emphasis on the role of information and technology.
But let’s not forget that an increased focus on digital products and services changes the technology capabilities an enterprise needs to succeed. Agility, speed and innovation replace efficiency as the primary goal. This demands a learning and collaborative culture and a modern approach to technology adoption.
New technology can foster innovation and accelerate value delivery, but it doesn’t hold all the answers
Fundamentally, the Lloyd’s vision is about operating nimbler and faster to oﬀer customers outstanding products, services and insight. Achieving this will require a complete modernisation of technology, working practices and skills, which brings huge implications.
New technology strategies are needed, with the ability to adapt to everchanging business, technological and demographic environments. And organisations need new ways of working, structuring themselves in different ways, fostering test-and-learn cultures and continually investing in technological capabilities.
Adopting cloud technology at scale is one way to accelerate this. It’s a chance to modernise systems, maximising the agility and customer-centricity that are so essential in the digital age. However, modernisation also impacts wider, more complex organisational matters, such as culture, structure, budgeting and governance.
Digital transformation is about people too
So, technology is only one part of the transformation equation. People, and the way they interact, play a major part in long-term success or failure. To unleash agility, scalability and speed, an environment where business and technology staff work collaboratively with shared accountability needs to be cultivated.
After all, it’s people who bring the creativity and discipline needed to understand and use the technology to achieve transformational change. A recent article published by Harvard Business Review identified that if people lack the right mindset and current organisational practices are flawed, then digital transformation will simply magnify those flaws. This can be an expensive oversight. Research findings published in Forbes identify that 70% of all digital transformation initiatives do not reach their goals, and of the $1.3 trillion that was spent on digital transformation in 2018, an estimated $900 billion went to waste.
As businesses digitally transform, more technology-literate talent is needed. The Lloyd’s Prospectus correctly identifies that more appealing employee value propositions must be created, and companies must invest in retaining and attracting employees. The technology skills shortage is a prevailing issue for organisations around the world, but change is beginning to happen as more companies identify a need to develop future talent from all backgrounds, genders and cultures.
Pushing the boundaries of insurance innovation
“This is a unique and exciting opportunity to be a part of Lloyd’s next chapter and to shape its future for the next generation.” says Bruce Carnegie-Brown, Chairman of Lloyd’s. “The new Lloyd’s market we build together will provide our customers with outstanding, high-value risk services, based on innovation, ﬂexible capital structures and efficient digital platforms.”
In my view, there certainly is a unique and exciting opportunity for the insurance market. And Lloyd’s request for feedback on the six options demonstrates a willingness to expand the thought process with insights from communities outside the insurance sector.
But, as Merttens pointed out at InsTech, the sector has “let a huge gap grow between what technology can do and what we choose to do with it.” When it comes to the crunch, it’s the ways of working – how people use modern tools and collaborate to produce digital products and features that meet customer needs of the moment – that really matters. When you consider this alongside the 2018 State of DevOps Report revelation that “…the highest performers [are] developing and delivering software at the highest levels…low performers are struggling to keep up, widening the gap.” The urgency of the situation becomes clear.
Now is the time to make transformational investments to reshape the way insurers respond to the evolving needs and demands of customers. Organisations that figure out how to harness modern technology-driven changes to offer superior customer value whilst optimising operational costs will be the winners.
Taking advantage of the Lloyd’s future vision to innovate effectively demands a more adaptive approach using technology as a key enabler. Modernisation of technology and working practices combined with capable, well-trained people will empower insurance companies to thrive in the digital economy.