Nigel Roberts, Head of Distribution — AEGIS London.

When lockdown was the problem, e-trading was the solution. But now the pandemic’s grip is easing, have we created a technological rod for our backs, asks AEGIS London’s Nigel Roberts. 

When some commentators look back at the London insurance market’s performance during the pandemic, they see it as the period during which market modernisation occurred at unprecedented speed. Leadenhall Capital Partners’ chief underwriting officer and head of ESG Jillian Williams was recently quoted as saying: “We have seen a move to greater efficiency in the market.” Lloyd’s launched its virtual underwriting room; Willis Towers Watson noted that “implementing digital technologies including those that automate tasks or processes went from a ‘nice to have’ to a ‘must have’.”

For decades, the London market chased the dream of full e-trading – and with the sudden arrival of Covid-19, that dream seemed to coalesce into reality. The sheer urgency of the situation overcame market practitioners’ long-held reservations. Face-to-face was no longer an option.

Now, 18 months later, the return to the office is well under way. With the new focus on e-trading squarely in underwriters’ thoughts, the prospect of a more efficient marketplace post-pandemic seems a possibility to many. But I’m not convinced.

To be frank, I don’t believe the last 18 months was really about the realisation of insurtech’s full potential. In reality, the market simply grabbed at new ways of talking to one another. Let’s not delude ourselves that making a few Zoom calls and dabbling in online trading will do anything meaningful to remove cost from the distribution chain. In reality, what we’ve actually done is create a new rod for our backs. Having devised so many different ways of talking to one another electronically, we may actually have succeeded in making the market less efficient.

Let me explain. Right now, underwriters are in a quandary. Should they continue working from home? Should they work from their office? Should they be going into Lloyd’s? Indeed, should they be attempting to cover all three bases? The rapid proliferation of technology and new ways of trading have been necessary, but they have lacked any sense of strategic direction. Without a strong, coherent thread of technology to bind all these options together, the end result is not greater efficiency but rather greater diversity of trading methods.

The situation is exacerbated by what strikes me as a lack of clarity about what PPL – the market’s e-placing platform – really is. During lockdown, PPL was pretty much the only game in town. Practitioners used it because they had little in the way of an alternative, not because they bought into it at a fundamental level. While the trading figures looked impressive, what we were actually seeing was a false dawn.

Increasing volumes of electronically traded business are only part of the solution the London market needs. The missing part of the puzzle is a clear end-to-end vision of what the market believes e-trading to be. That might sound reassuringly easy – but it’s hard to deliver.

In an ideal world, e-trading means that a risk is inputted once, the structured data from which then flows into everyone’s systems – retail broker to wholesale broker to underwriter to back-office systems and so on. The challenge is that each of these stakeholders does things in a different way. Harmonisation means that the devil really is in the detail.

With the current lack of harmonisation, we may all be singing the same hymn, but each of us is in a different key. From an insurtech perspective, what we need to do is agree on the key. Until we can achieve this, the proliferation of e-trading will continue. We’ll see more follow syndicates and e-trading syndicates – things that sound like progress but are actually just different ways of working that don’t increase efficiency.

As with all complex challenges, the answers are not easy – and I don’t claim to have them. Who’s best placed to get us all singing in the same technological key? Certainly, there’s a role for industry bodies such as Lloyd’s, the International Underwriting Association and LIIBA. They may be able to sit around a table to come up with a template. And then there are groups like US producing brokers, whose views need to be taken into account.

I chair the Lloyd’s Market Association’s Delegated Authority Committee which has recently published the findings of its DARE initiative. We began that process not by asking the market what it wanted, but by asking people outside the market. Our aim was a digital marketplace driven by outside-in thinking. That, to my mind, is the right way to set about finding a solution. Don’t tell the world how it has to deal with London; ask it how it wants to deal with London. That will give us the strong steer we need and a vision around which market stakeholders can rally.

Ultimately, technology is a tool – and tools can be used in many different ways, some efficient, some not. Forty people using forty hammers can either be chaos or a powerful force to shape steel. The key is to work in unison with a common goal and common technological vocabulary. Buying and building new technology is only part of the answer. Agreeing how we’re going to use that technology is where the real win lies.

First published in Insurance Day 30 September 2021.