It is almost three months since Lloyd's of London pulled
the plug on its £70m Kinnect electronic trading platform, arguing
that the development of a common IT infrastructure was best left to
participants in the insurance market.
Since then, some of the insurance market's leading lights have
spoken out about the thorny issue of technology, including Lloyd's
chairman Lord Levene, who said earlier this month that Lloyd's
needed to "drag itself out of the Dark Ages", and condemned the
reliance on paper documentation as "ridiculous".
Levene's comments followed similarly strong words from Robert
Hiscox, chairman of Lloyd's underwriter Hiscox. He warned in March
that Lloyd's would "wither away" if it did not embrace technology
to improve efficiency in the face of competition from alternative
global insurance hubs such as Bermuda.
When Kinnect shut down in January, interim chairman Michael
Dawson blamed its failure on the fact that developments in
technology since 2001 had rendered the platform redundant. However,
others argued that the problem lay not with the technology itself,
but with the flawed nature of the programme, which tried to impose
a centralised electronic hub on a complex and divided market whose
participants were, for the most part, sceptical about the need for
change.
And three months on, it is starting to look as if the market's
underwriters have determined to learn from past mistakes.
A group of six Lloyd's insurers (known as managing agents) who
began collaborating last year, have picked up the electronic
trading baton by working together to create a common set of data
standards and underlying processes to enable the electronic
transfer of data and documents on a peer-to-peer basis.
The managing agents, collectively known as the G6 group, are
Amlin, Beazley, Catlin, Hiscox, Kiln and Wellington. They say the
agreed standards and processes build on existing international
insurance standards laid down by the New York-based Acord group,
and will ultimately allow risk-related data and documents to be
transferred electronically between the six of them and among four
leading insurance brokers - Benfield, Aon, Marsh and Willis.
Hiscox chief operating officer Sue Langley, who chairs the G6
group, said the move to develop the peer-to-peer standard was given
urgency by the death of Kinnect but was always on the cards.
The G6 has no plans to expand its membership base, but it is
sharing the standard with other Lloyd's members.
"We are not a breakaway group," said Langley. "These are
building blocks that anyone can use - whether hubs or gateways -
but we really want G6 to stay as G6 to keep things as simple as
possible and avoid some of the problems that Lloyd's encountered
with Kinnect."
Langley said the initial phase of G6's work, for the placing of
risks, would not bring about huge savings, but was a symbolically
important first step.
"We want to move the market forward, but step by step. For that
reason, we are keeping all of our projects very small - anything
over six months is out - but hope to take things on incrementally
over time."
Simon Sperryn, chief executive of the Lloyd's Market
Association, which represents underwriters, said the work
undertaken by G6 demonstrated that the way ahead was likely to be
based on pairs or groups of businesses working together, rather
than a market-wide approach.
"Flexibility is the way forward. Kinnect has taught us the
difficulty of using a monolithic infrastructure. That does not mean
there is no space for a common approach, but we need to work
smarter in future," he said.
Sperryn said it was important to remember that Lloyd's was still
using paper "not because we are foolish, but because we have always
had to find a means of communicating that everyone can share,
across hundreds of often global businesses".
He said, "Paper may be everyone's last choice, but everyone can
use it."
However, Sperryn acknowledged that competition and regulation
were strong imperatives for making better use of technology, and
called G6's work a "small but valuable example of the setting of
explicit standards for processes within Lloyd's".
Sperryn also said the planned roll-out later this year of an
electronic claims repository (see box) should also be set against
Kinnect's failure.
"This is a two-year project that has run to schedule and within
budget, and will shortly be available to all participants in the
market, giving brokers and carriers contemporaneous access to a
single claims file," he said.
Alongside this, Lloyd's is also planning to launch a market-wide
claims settlement system that should be available when the
electronic claims repository goes live.
"These systems, together with the market's other initiatives,
show that Lloyd's is still engaged in rethinking its approach to
technology and to enabling new patterns of working," said
Sperryn.
"Kinnect may have failed, but that was only one of several
battlefronts. I believe that overall the market is winning the
war."
New Lloyd's CEO has e-pedigree
Richard Ward takes over as chief executive of Lloyd's this week,
more than six months after the departure of his predecessor Nick
Prettejohn.
As chief executive of the International Petroleum Exchange - now
ICE Futures - Ward was instrumental in moving the exchange from
open outcry to electronic trading, and some Lloyd's members may
want him to take a similarly robust lead with technology in his new
role.
Officially, however, Ward's main task will be to oversee the
three-year strategic plan the market announced at the start of the
year , which aims to make Lloyd's the "platform of choice" for
insurers to do business by improving processes across the
board.
Lloyd's trials e-document repository
Next month, Lloyd's will start testing an electronic document
repository for storing new claims that has been two years in
development. The full roll-out of the system is expected to begin
in September.
The Electronic Claims File repository has been built by
Xchanging, a technology company part-owned by Lloyd's. It will give
brokers and underwriters contemporaneous access to a single,
centrally hosted claims file and is expected to speed up claims
processing.