Lloyd’s of London revealed its latest attempt to shake up the staid insurance market, with a plan including cost cuts and increased automation that could help it double its size over the next decade.
“Today, Lloyd’s is 5 per cent of the world flow for corporate and speciality insurance,” chief executive John Neal told the Financial Times. “There’s no reason why we can’t be 10 per cent of the world’s flow. The light on the hill has to be that there’s a much bigger opportunity for the market.”
Mr Neal, who became chief executive last year, has been consulting on ways to reform the market. Last week he unveiled a series of changes designed to stamp out sexual harassment and improve behaviour.
On Monday he moved on to the market’s financial performance with a plan to turn Lloyd’s into “the most advanced insurance marketplace in the world”.
The 146-page document — entitled Blueprint One — has details of the six areas where Mr Neal intends to focus his efforts.
They include new digital platforms for both complex and commoditised insurance business; a more automated claims process; a more straightforward way of setting up a new syndicate (or insurance company) in the market; and a more flexible way to bring capital into Lloyd’s.
“During 2020 we’ll execute on a first phase of activities,” said Mr Neal. “But it is a two or three-year project.”
However he warned that embedding the plans would be a challenge. There have been previous efforts to reform the market, but each has run into scepticism from the brokers and underwriters that work there.
“The market has realised it has to change,” said Mr Neal who outlined his proposals in May. “The support for what we are doing is overwhelming.” However he admitted: “There are question marks around our ability [to execute]. That’s the one thing we have to prove through 2020.”
One of the main aims will be to cut costs for high-volume, non-complex risks such as comprehensive business insurance. This accounts for about half the premiums at Lloyd’s.
Costs currently eat up about 40 per cent of the premium paid for this kind of business, but Mr Neal said he wanted to bring that down to 25 per cent. That, he said, would help to push up demand for the market’s policies.
“The customer will see the value of the product they are buying, and that will ultimately mean more volume and more profit,” he said. “People will be more likely to buy insurance.”
Lloyd’s spent much of last week laying out plans to improve the culture after a survey found that 500 people had witnessed sexual harassment in the past year, and a fifth of respondents said that people in their organisation turned a blind eye to inappropriate behaviour.
“We were shocked by the revelations in the survey and so was the market, so there’s an opportunity for us to seize the moment and make more progress than we first thought,” said Mr Neal.