Lloyds Chairman Outlines Challenges

It further drives him to distraction when he gets in one of the elevators and sees brokers moving between the floors with huge stacks of file folders under their arms when much of this movement of information could be sent electronically.

Indeed, it is improving the processes at Lloyds that he sees as one of his principal challenges; the other two are perception and price.

"Perception, process and price. What do people think about the place? How do we get it to run in the 21st century? And how to we get the cost of doing business here down to a level which people are comfortable with."

Regarding perception, he says he has been pleasantly surprised at how well Lloyds is perceived within the industry. Early this year he spent a day in Washington, D.C., talking to senators and congressmen about the fact that Lloyds is a healthy market.

"To my pleasant surprise, I didnt have a hard sell," he says. "All of them said, Lloyds is great; what would we have done without you in 9/11? We know youre in good shape now and youre a major insurer in the United States."

And while people in the insurance community also know that Lloyds is now in good shape, he says he needs to relay that message and convince the wider worldthe buyers and end users of the Lloyds product. "There are an awful lot of people, fairly influential people outside of theindustry, who are not aware what Lloyds is doing," he affirms.

"So I am doing a lot of work to convey to as wide an audience as possible, the health of the society and the way in which we now operate it," Lord Levene notes. "The perception needs to match the reality, and the only way you can do that is through a lot of hard work, which is precisely what were now engaged in."

With regards to process, he says Lloyds is working to get as much done electronically and systems are currently being revamped. "If it succeeds, it will go a long way toward improving our situation, but we have to do it. We have to make it happen," he adds.

"We have to bring the operation of the place into the 21^st century, which will have an immediate impact on the third [challenge], which is price or cost," he stresses.

"People have said to me, years ago, Lloyds was the cheapest place to transact their business," he says. "Now, its no longer the cheapest place, and weve got to become more price competitive."

"A lot of that relates to process for obvious reasons," he says. "If you need a lot of man hours to transact business, its going to cost you more money; if youve got a more streamlined process, it will cost you less money. Its not rocket science."

Despite the challenges of the three Ps, Lord Levene says that even market critics of Lloyds have acknowledged that a Lloyds presence provides an important gateway for business opportunities.

Before he started as chairman, he says he talked to people, particularly in the States, who had corporate capital investments at Lloyds. "Quite a number of them said to me, Hey youd better get your act together. Youd better go and sort this out or were out of there," he recalls.

"I said to them, I understand, but you havent been waiting for me to come along, so why are you still here? Then everyone would look at me and say, Well actually, because Lloyds is where all the business is," he continues.

When they thought about it, they admitted that Lloyds is a "huge magnet" for global business, he notes.

"What we have to do is we have to ensure that it remains both a huge magnet for business but its also a very attractive place in which to operate," he says.

Part of the "sorting out" of Lloyds started last year, before Lord Levene came on board, when the decision was made to model Lloyds as a franchise. Under this system, a franchise performance director and his team will work with individual Lloyds businessesthe franchiseesto improve the commercial performance of the market.

On March 1, Rolf Tolle stepped into the role as the markets first franchise performance director. He formerly was chief underwriting officer and a board member of Faraday Group, the London-based insurance operation owned by General Re Corp.

According to Lord Levene, the Lloyds franchise initiative is aimed to weed out the few bad players, which are bringing down the reputation and fortunes of the market as a whole.

He says: "We want to avoid the disasters, the years that make everybody look awful and which quite unreasonably ensure that those who are performing well are tarred with the same brush as those who are performing badly."

This is a market and in a market everybody does their own thing, he emphasizes, "but nobody wants to see the reputation of the brand dragged down by consistent poor performance, which reflects badly on everybody who operates in the market."

Lord Levene says Mr. Tolle and his staff will look at the business plans of agencies operating in the market to ascertain whether the business plan is adequate. "They will look at them objectively, but they will also look at them with the background of quite a lot of industry knowledge," he says.

They will look at a business plan and say one of three things: "We think its fine, or we have one or two questions which wed like you to answer, or we dont like it and well tell you why," he explains.

With the latter position, the next step would be to say, "Wed like you to take it away, think about what we said and come back and tell us what you feel," he says. "How long thats going to take, how many bites of the cherry theyll have, I dont know. It will obviously vary in each case, depending on what the issues are."

If an agreement cant be made, then the response to the managing agency has to be: "If thats the way you want to run your business, thats fine, but were not prepared to have you operate under our brand name, and we suggest you go and do it somewhere else," Lord Levene emphasizes. "We are not prepared to have people operating under our brand with whose business plans we are not happy."

He says that most people he has spoken with agree that that is what the market should be doing. "Of course, everybody will agree with the principle until [they are] affected," he said.

Reproduced from National Underwriter Edition, April 7, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.