Technology can play a key role in reducing Lloyd's above-average operating costs, according to a recently published report.
The study author, Catherine Stagg-Macey, a senior insurance analyst at Boston-based technology consultant Celent, said that any casual stroll through Lloyd's headquarters in London reinforces how paper-driven that market is today.
"This is a Luddite trying to keep its head above water in the 21st century," she said.
The report said that the treatment of data as a strategic asset–meaning that risk data is clean, accessible and transparent within the organization–will be key to any future Lloyd's streamlining.
In addition, straight-through processing, or the seamless flow of information in a consistent electronic form through various automated and human interface systems, will also provide the key to operational efficiencies in the coming years, the report said.
"The adoption of straight-through processing and frictionless communication is reflected in a number of initiatives, including electronics applications and e-signatures, automated requirements gathering, and the use of Web-oriented and service-oriented architecture," the report advised.
Electronic trading will serve as a key element in Lloyd's modernization, but this initiative has been hampered by missteps, including the development of a trading platform known as Kinnect, which predated standards, off-the-shelf trading platforms and open-source technology.
Since that time, six leading Lloyd's underwriters have moved ahead with plans to improve electronic data processing within the market.
"There is still debate as to whether the market needs a central hub such as Kinnect aspired to be, or if the G6 peer-to-peer approach is better," the report noted.
"Celent would suggest the argument is redundant. These standards will ensure that data is communicated in a standardized format. The delivery mechanism is irrelevant," the study said.
The fact that Lloyd's is a democratic marketplace means that change will be slow. "The shared view is that there is no one solution to fit all. The next few years will see the emergence of a number of solutions such as peer-to-peer coexisting with hubs, and standards such as ACORD playing a pivotal role," the report said.
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