President Bill Clinton and his campaign team once said that when it came to what's important to American voters, "It's the economy, stupid!" In London, the equivalent would be, "It's the socializing and networking, stupid," when market change is associated with technology.

Contrary to popular stereotypes, the London market is steeped in technology--though historically in the areas of financial reconciliation and settlement through a central bureau, via electronic claims agreements and electronic endorsement agreements.

More recently these systems have been enhanced by the added value of electronic scanning of documents to help in the agreement process between London brokers and London underwriters, and with the administration of claims.

The move toward an electronic placing platform, however, has been painful to London insurance market professionals, who are accustomed to face-to-face transaction agreements. Unfortunately, the immensely expensive project is aimed at benefitting a social network of professionals, who already know and respect each other and can strike up an agreement within 10 minutes by simply walking to a mutual meeting place.

What's more, the deals being agreed to in London by brokers on behalf of clients have no great urgency, as a client's risk manager will normally prepare for the company's renewal a month or more before the new inception date.

The introduction of an electronic placing system has been bubbling under the surface in London since 1995, and has had two well-publicized failed efforts at achieving what could be called a straight-through placing system. These were Kinnect and G6. Both of these initiatives were a solution looking for a technology platform to run on, and a market to attract.

The latest initiative by Lloyd's, also with the support of the rest of the London insurance market, is to supply the technology platform and invite solutions to run on it. In London, this type of free-for-all has not always been to the advantage of what is basically a "village" of users.

Centralizing basic back-office functions of a people-based activity has always made sense--rather like having one water supply, not one for each competitive supplier.

The question is whether the problem ultimately is worth the effort. Moving London toward this competitive solution will not make sense to everyone, as it could bring confusion to another unique feature of the London market--the subscription element, where risks are shared among many underwriters.

Underwriters will have to get used to business being offered electronically from many different sources. This is the last, but most vital element when the London Exchange comes into play.

The ACORD standards for insurance are well used in the United States, but not yet as widely used in London. This is not because of any shortcomings in the XML standard they are based around, but because for 20 years the London/Lloyd's market has adopted the precursor to XML--electronic data interchange.

All underwriters and brokers in London use a technology back-office management package, adapted over the past 20 years to interact with the central bureau using EDI.

The cost of change is not something that will be easily accepted, especially as the real value of standards has not yet been sold to the business community in London--who are understandably skeptical, after previous costly efforts at change.

The Lloyd's Exchange has been described as a slow process, gently taking London by the electronic hand and leading it toward a new tomorrow, without realizing this is the crux of the problem in London. It is almost the equivalent of the "emperor with no clothes."

The suspicion is that the end game for those who want technology change is a screen-based agreement system. Sadly, this would be to nobody's advantage--especially the client, who is looking for a well-thought-out response from the London broker.

In London there is an expression that you can wait and wait for a bus, only to have 10 buses turn up at the same time.

The scenario that exists here is not quite as dramatic, but while this "new initiative" is taking place in London, the global market also has decided to take on a technology solution for its broker and carrier business.

This also came about in conjunction with ACORD, but in this case, the global market has no legacy to replace and can start with a clean sheet of paper.

The Ruschlikon project--created by a group of reinsurers and brokerages--is planning to establish a central platform for automation of (re)insurance transaction processing post-binding.

Will these new initiatives result in more success? The global solution of Ruschlikon makes good sense because it is not replacing any existing technology.

The global market has no great history of face-to-face business and could find such a technology solution--initially only for payments, but long term for electronic straight-through processing--a common-sense method of transacting business.

In London the desire for replacing the social and networking business processing with technology will be a harder sell.

At the same time the benefits in London are not being made strongly enough to change the Lloyd's market's perception of the best value for clients--who also like London for social reasons as well as their professional relationship with their London broker.

The London broker's global clients have never expressed any great desire to be brought into a new technology world for their relationship with their Lloyd's broker. Lloyd's is not a "buy, buy...sell, sell" market and never will be.

At the present time globally, moves for more Web/browser activity for personal insurance makes good sense. When the deals are complex and premiums are likely to be in the millions, and also speed is not a problem, then life might not need to be so desperate if the status quo is acceptable.

The technology changes proposed are based on: "We must be right because we know better than you!" Sometimes, however, the business has to stand up and make some pertinent inquiries to question the technologists.

Special Reports /

Tech Still A Tough Sell In Skeptical London Market

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