Focus: Technology can complement talent in the London market
BY MATTHEW KIRKE
First published in Insurance Day, 10 December 2018.
The London market recognises innovation and technological efficiencies are vital if it wants to retain – or regain – its competitive edge. This is not optional, it is a necessity.
We do not see this argument as talent versus tech; it is much more nuanced than that. Innovation is built upon both talent and technology. The real question is how to find ways to use technology to support the talent and vice versa.
In a market surpassing 300 years old, made up of many individual businesses, it is sometimes hard to drive technological evolution. And while there is a definite will to embrace technology among both the top management of the London insurance market and the millennials coming up through its ranks, we must also be wary of technology for technology’s sake.
As consultants, we sometimes find ourselves asked to validate a decision already made for the adoption of a new piece of technology or a new system, for example. That is not our role. Change for change’s sake is simply redundant. We need to challenge and ensure change is being made for strategic, rational reasons to drive business forward.
Often senior management at London market firms are acutely aware of the need to embrace technology. And the millennials they employ – qualified, keen people – are not only happy to work with technology, they actively want and expect to do so. We cannot risk those bright, young people becoming disillusioned. They have chosen to enter this industry, they are excited by the prospect of learning, by the potential for innovation and the opportunity to think entrepreneurially. The tech we adopt must be used to enhance their roles and support their expertise. If automation (or lack of automation) becomes a drag on them, they will leave.
Several studies suggest that artificial intelligence (AI) will create as many jobs as it replaces. Some businesses in the London market already are experimenting with AI and machine learning. We need to ensure AI is used wisely in functions where there is a clear place for it to improve efficiency. We need to train and educate people on the benefits of AI to create enthusiasm and minimise fear.
If we look at the investment banking industry, where AI is being used to help better predict loan default risk, we can see that there may well be ways in which such tools could help our market to improve efficiency.
The latest London Matters report highlighted the pressing need for our market to innovate, to retain our position in evolving areas of business as well as our bread-and-butter lines.
The re/insurance market is a sector ripe for disruption. This is especially true of the London market. The way the market transacts its business is clunky, its expenses are too high and its distribution chain convoluted. The market needs to focus on customers and it needs to innovate.
The good news is that we have the tools to do this. The concentration of talent in this market remains unparalleled. The very things that make this market so unique can be put to work alongside technology to innovate both on the process and the product. The key is to find ways to complement the talent we have here in London, put ourselves ahead of our competitors, and place emphasis on our customers’ needs first.
The recent wildfires that have ravaged California are a great example of this. Those policyholders tragically affected by the fires need their claims to be paid and fast. The London market’s 300-year-old reputation for paying valid claims is not in question, it takes time, often weeks, to process claims and make payments because we remain dependent on paper.
A blockchain solution, however, could make a difference. Imagine a solution that could respond to a trigger and have a claim validated and paid within minutes. A distributed ledger should make the notification, processing and payment of non-complex claims almost instant. It would improve accuracy and reduce disputes.
This would not replace the expertise of brokers, nor the talent of underwriters, and it would not replace the skill of claims professionals who deal with the large and complex claims that are the London market’s hallmark. It would, however, make the process swifter and more efficient for the policyholder, and it would release the insurance technicians to focus on the work a machine cannot do.
Several businesses in the London market already are trialling blockchain solutions for certain insurance lines. Once critical mass is achieved we can expect to see blockchain becoming a vital part of the way the market works.
As we have said, this does not replace claims professionals. But it may eliminate some of the more dull, repetitive tasks from the claims process. This would mean that some claims professionals’ focus would change – they will need different sets of skills and training.
The London market is trying hard to modernise in areas where its processes lag behind those of markets elsewhere in the world. Electronic placement is a good example of this.
The adoption of PPL, driven in part by the mandate from Lloyd’s, highlights the willingness of market participants of all types and size to modernise and embrace technology. PPL may not be the silver bullet yet it shows by working together we can find ways to modernise – and should not be afraid to try.
Innovation will not happen in a vacuum. Ideas need to be tested and challenged. As a marketplace we need to commit to innovate to retain our position in the insurance world.