It’s really a tour de force, the 146 page Blueprint One recently released by leadership at Lloyd’s, a detailed road map for the staff and approximate ninety syndicate players that comprise the firm, its reinsurers, customers, associated MGAs, vendors, brokers and agents. Plans, flow charts and implementation strategy that are planned for the next two years, with all the new moving parts in synch by close of 2022. Oh, and did I mention the £35 billion in annual premiums that the organization generates through its stakeholders? Bold plans for a three-hundred-year tenure organization. And there is the unmentioned tension- an entrenched business model planning to evolve into an agile, cutting edge tech leader.
Patrick Kelahan is a CX, engineering & insurance consultant, working with Insurers, Attorneys & Owners in his day job. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.
Lloyd’s is the industry standard bearer for specialty risk management, AKA ‘the stuff an underwriter can’t thumb to in his/her U/W manual’. Its technique and mystique have evolved during the more than three centuries since a few gents sat in front of some pints and pondered financial hedges against loss of shipping cargos. Why then, does the firm think that several months of research, interviews, participant interviews, technology vendor schemes, and resulting blueprint from Lime St are the best answers to changing the course of the culture and operations of a complex global insurer?
Consider this voice from the street (location to remain unmentioned):
“Sadly, it seems that Lloyds underwriters have developed a degree of contempt for the XXXX market, over the last year I’ve seen the worst performance from certain Lloyds underwriters I’ve ever experienced in the last 20 years or so. In particular, not having renewal terms ready in time when renewal submissions have gone in well on time. It’s definitely a hard market from where I’m standing, and it isn’t particularly civilised either!”
Well, hard markets currently abound for many reasons across the globe, and anecdotal responses are a little unfair. But the basis of the speaker’s concerns may not be- Lloyd’s is a huge, multi-variate, multi-cultural, global organization that cannot be changed under dictate, singular plan, or silo-driven flow chart. Underwriters remain subject to the performance matrix of the day, and grand plans from on high take a rear seat when quotas aren’t met, or loss ratios are trending north. Additionally, the firm remains entangled in aftereffects of sexual harassment accusations, mitigating the perceived impact of an over-arching office culture of suits and club decorum (although well past the days of PFLs), and recent years’ declining profitability. Can Blueprint One be communicated, integrated and adapted uniformly in the face of these challenges? And can the evolution avoid the strong effects of the “Quarterlies?”
Culture and process changes aren’t new with the advent of Insurtech, innovation, globalization or change of leadership. Much of what the blueprint discusses has its foundation in technology and transparency across the organization’s depth and breadth. At its core we are talking insurance, so the topic may be busy, but it’s not rocket science. Identify risk, understand risk, price risk, hedge risk, service occurrences that confirm risk (claims), and pay less than is taken in. The firm is smart, therefore, to look to leverage technology for easy inclusion of participants across many regions and many forms of access, easier aggregation of business, more effective application of information, collection of data, and so on.
Consider the Blueprint’s ‘what it is’:
- The firm’s strategic intent, description of vision.
- Current thinking on each of six identified solutions-
- Complex Risk platform
- Lloyd’s Risk Exchange
- Claims Solution
- Capital Solution
- Syndicate in a Box
- Services Hub
- Details of the initial phase of each solution
- Invoking cooperation from Lloyd’s market players in the firm’s future
- How and why success will be gained.
That’s on page 7 of the 146 page blueprint; it is an ambitious, wide scale road map.
It’s clear the more complex a plan is the greater the chance of incomplete implementation; the more incomplete or disuniformity of implementation the greater the chance of not achieving success. The firm has its plan, its foundation for success, if the plan can be implemented.
Skipping forward to “Why we will succeed,” on page 11 , and I chime in with some observations that the principles suggest from other large org’s culture/ops changes:
- Capitalize on prior market investments (that’s funds spent previously on innovation).
- This the “not throwing the baby out with the bathwater” approach. How to include the capital investments of the past few years in how we move forward. A small anchor on innovative thought?
- Learn from the past
- There are plenty of reorg carcasses along the wayside, let’s figure ways to have innovation not die at birthing. Of course putting the words, “Our collaborative approach to building the Future at Lloyd’s will ensure the solutions are designed for the benefit of Lloyd’s and the wider London market,” are contradictory right out of the box. Perhaps solutions designed by and for Lloyd’s global staff and customers might sound more collaborative.
- Communicate regularly
- Cascade those ideas from Lime St. to the world.
- Ensure the corporation and the market has (sic) the right skills to deliver the plan
- Collaborators- prepare to invest time and money in change management plans that will be as successful as any change management programs. Can’t buy success.
- Deliver value to the market quickly
- The rollout cannot interrupt business. There are those darn quarterly reports.
- Deliver the technology in parts
- Deliver solutions in parts- of course each discipline needs different starting points; the law of unintended consequences will prevail.
- Retain control and operational responsibility (for tech)
- Autonomy is resolving rollout issues will be suppressed to ensure uniformity. There will be scapegoats.
- Ensure the appropriate governance is in place
- Central control of the collaborative integration. Decision making is the firm’s.
Rather than ramble on I am going to shamelessly borrow some innovation/org change concepts from a Property Casualty 360 article penned by Ira Sopic, Global Project Director at Insurance Nexus that has an apt perspective- “Agility is the key to technology innovation for insurers.” But let’s build a contrast from Lloyd’s presentation.
Agile? Can a global, £35 billion insurance giant be agile? Do Lloyd’s customers demand innovation, or will they benefit materially from innovation? We can see what the author and Lee Ng, VP of Innovation at Travelers Insurance say.
Fundamentally, the article notes org agility means looking at how decisions are made across an org and making significant changes. That’s ambiguous until the addition of, “you can’t prove innovation before it happens.” Uncertainty of innovation’s results can be overdone with analysis. ‘Agile’ is the opposite of ‘waterfall’, an approach where plans and decisions are made at the top and cascaded down through the org as steps in a process are encountered. Rolling out comprehensive plans by their nature inhibit iteration- big plans have milestones, have successive designs, benchmarks and schedules. Agile has ideas, iterative maps, acceptance of failures. Lloyd’s has established a grand approach to the former method- I kid you not, here’s an exemplar flow chart of planned core technology:
Many participants influencing and accessing the tech core of the firm, and those magical skeleton keys to open the doors- APIs and interfaces.
Continuing, agile can be successfully piecemeal- protect the primary ROI factors of the biz, experiment with agile ways of working with collateral functions, build the innovative environment without whacking the quarterlies. The inherent problem with piecemeal approaches? They are hard to measure for success, and hard to program into project management software.
Another agile tack to take? “Done is better than perfect’. Resist the urge to over plan, over measure, and to set expectations that the first attempt is a go or no go for the entire org. A popular innovation concept applies- try, and fail fast. Then try again. There are many vendors who are experts in narrow parts of an org’s innovation path- it’s OK to rely on them. Investment in a POC or two is as good as implementation.
Perhaps another day will allow discussion of the plans for the six Solutions, particularly Claims and Risk Exchange (the nexus of provision of service and of customers’ expectations from the firm.) In spite of a skeptical take on the Blueprint I certainly want Lloyd’s to remain the bastion of risk management in a increasing risky world, but the concern is the firm is approaching this insurance elephant as a full take away meal, instead of as tapas.
In closing consider this- if there are five levels of Blueprint implementation and each effort has a 98% probability of success, after the five levels there is an aggregate probability of integration success of 90%. That’s not bad, unless the interplay of five operational areas serving clients is considered with 90% effectiveness at play- aggregate 59% average Blueprint compliance outcome.
Consider those little bites, Lloyd’s. The industry is pulling for you.
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