From coffee shop to cargo ships to the cloud: Lloyd's Bob James on an ambitious transformation
"We'll be really quite focused on how we change behaviour..."
If you come to the world’s largest insurance marketplace, Lloyd’s, asking for coverage for cargo ships – spanning mechanical failures, pirate attacks or beyond – a broker will negotiate with an underwriter in a manner that would not be entirely unfamiliar to the gentlemen who habituated Edward Lloyd’s coffee house on London's Tower Street in 1688. Once the terms and conditions of the insurance agreement have been approved by both parties, they would deliver a contract of insurance to the customer in paper format for signature.
Lloyd’s has a storied history and is now a great deal larger than the coffee shop in which it started over three centuries ago. The specialist insurance marketplace’s 76 syndicates, 350 brokers, and 4,030 coverholder offices employ 47,000 people across the UK and write gross written premiums of $110 billion annually.
Customers come to Lloyd’s for insurance spanning fine art, nuclear power stations, livestock and satellites, political risk, terrorist attacks, cargo ships, agriculture and more prosaically, employers’ liability.
Those contracts of insurance they issue don’t stay solely in paper format either. They are converted to PDFs, from which data is pulled and added to databases powered by a mainframe-based system that plays home to some seven billion rows of insurance data. The Lloyd’s and Company market system also underpins 2,066,230 premium transactions (the premium for an insurance contract agreed between a broker and underwriter) and 1,689,776 claims transactions annually. The IT systems of this marketplace also power 100 business applications across premiums, claims and settlement services and a rich set of supporting services, including risk management.
PDFs and mainframes may have been unimaginable in 1688 and over the years Lloyd’s has, of course, adopted some technology. For a market of this magnitude, they are also increasingly unimaginable in 2022. More consumer-focussed insurance has increasingly pivoted to a highly personalised, data-driven approach designed to improve customer service, provide more granular pricing and drive efficiencies.
For the London insurance market, modernising this system is a mighty task that is now being tackled, one bite of the elephant at a time, by the London Market Joint Venture comprising Lloyd’s, DXC Technology and the International Underwriting Association (IUA) in a strategic, multi-year project. The transformation is at the heart of the Future at Lloyd’s programme which envisions a far more data-focused, automated, and cost-efficient future. At Lloyd’s, the executive in charge of bringing the vision to fruition is Transformation Director Bob James, who has held various CEO, CIO, and COO roles across the insurance and financial services world.
https://www.youtube.com/watch?v=-GqqMCVG8Oo
This is an all-hands-on-deck task involving multiple stakeholders. On the IT side DXC Technology is acting as lead IT provider and systems integrator and engaging a number of partners from across its global ecosystem.
These include hyperscale partner AWS, which will provide the cloud services underpinning the new suite of tools Lloyd’s will deploy as it migrates off mainframe and onto the cloud; Red Hat, which is handling workflow and rule management tooling; Micro Focus, which is running test automation, optimisation and virtualisation tools; ACORD, for insurance industry standard messaging; Datum Solutions, an IBM Gold Partner, for case management and enterprise content management solutions; and Qlik for data acquisition, integration and reporting tools.
Sitting in his office in Lloyd’s famous offices on Lime Street, London, he told The Stack that in tackling a transformation of this scale, there were three core components: “One is defining what you're actually trying to build. We've done that, that's what you see in the roadmap. Two is getting a trusted technology partner like DXC, to actually build it. The third thing is to make sure you've changed the behaviours of people [who] actually use the new capabilities. We've been focused on the first two. As we get into the latter part of ‘22, and ‘23, we'll be really quite focused on how we change behaviour, because we believe that once adopted, [the new systems] will move money quicker from party to party, which is important from a financial perspective. It'll provide new capabilities and it'll be a much more resilient operating platform. But probably most importantly, for the individual market participants, is that they will have a common set of data that's fulsome in nature.”
The transformation, in his view, is ultimately a data one.
As he puts it: “We can make it real complex, but it's actually quite simple: can we get the marketplace to use a common set of data and speak the same language? Can you move that common set of data through a digital pipe so that it can move electronically from one party to the other without having to have paper handed off? Then, because you now have digital data that is common in its structure, can you validate that data and pass it through to the processing systems for downstream processing; actually place the insurance electronically from a premium and a claims perspective without a lot of human intervention?”
This Lloyd's of London data transformation will include application components hosted using a containerised approach (AWS Elastic Kubernetes Service) as well as a data reporting and analytics platform, also hosted on AWS and using a combination of AWS S3, Red Shift, and Qlik tools that cover data capture, data integration and also report product generation, data catalogue and self-service report and API Access, all coordinated by DXC.
As Bob James notes: “DXC Technology has a lot of insurance heritage. They have served [the London market] for a long time. Importantly, they're a shareholder in the Joint Venture along with Lloyd’s and the IUA. So while they not only provide the technology, experience, and expertise to the joint venture, their shareholder ownership makes sure that their interests are aligned to serving the marketplace.”
Lloyd’s estimates that brokers and insurers could collectively reduce costs by over £800 million through greater efficiency, reduced bureaucracy and automation in the wake of the digital transformation. The transformation will reshape applications that provide functions as varied as risk management, document management, party management, query management, notification services and reference data management.
Like the experienced leader Bob James is, he recognises that culture eats not just strategy, but technology for breakfast and changing cultures is hard. As he puts it to The Stack: “I think the rubber meets the road when we go to the marketplace and say ‘you used to do it like this, it was quite inefficient, but you're used to doing it that way. Now, we want you to do it like this so you might have to change some of your systems and workflows.’ Even though the benefits are there, that whole change journey is not as easy as it sometimes sounds,” he adds.
Stakeholders across the Lloyd’s marketplace are excited by the opportunity the transformation will bring though, he notes: “The real untapped potential, particularly in large commercial risks, or commercial specialty insurance, is the ability to take a look at the data patterns and ask what's it telling you in terms of either coverage gaps, pricing decisions that you might want to make, or other capabilities for your customers.
The transformation – one of the largest and most sweeping digital transformations in the world – is underway and insurance firms are expected to be ready to implement the digital solutions in 2024. The transformation will increase resilience, security, and speed of new application deployment say its champions at the Joint Venture. The technology would have seemed utterly alien to Edward Lloyd, but the focus on market efficiency would not – and from storms to sculduggery, some of the risks that need insuring against are equally timeless.
Delivered in partnership with DXC.
