Lloyd's New CEO Spells Out Vision For World's Oldest Insurance Market

Across the globe, the Lloyd's name is synonymous with taking on tough risks, providing tailored solutions to complex problems and offering the financial strength to back it up.

This has often been proven in the United States–which is not surprising, as it remains one of our key markets, representing more than one-third of our business. To take last year's record hurricane season as an example, Lloyd's once again stepped in, paid its claims, and played its part helping those affected to rebuild their lives.

In recent years, the market has made good progress and is in great shape. But we cannot take our current standing in the world for granted. We must ensure that we remain the marketplace of choice. If businesses choose to use another platform, it should be because of the advantages of that platform, not the disadvantages of Lloyd's.

To achieve this, we face a number of important challenges.

The development of insurance centers in Bermuda and Dublin has meant increased competition, with capital and expertise now more mobile than ever.

The world is also presenting us with more frequent and bigger risks, as shown by the record hurricane seasons of 2004 and 2005–a trend that is likely to continue.

But perhaps the biggest challenge for Lloyd's and the wider insurance industry is our need to catch up with other financial services in our use of technology.

Businesses are always going to face challenges. What's important is how they are dealt with. I am extremely fortunate to be CEO of an organization with a strong brand and a track record of adapting and managing change throughout its 300-year history. Lloyd's now stands ready to face the future and tackle these challenges from a position of real strength.

My vision is simple. We have to get back to basics, modernize our processes, and re-focus on what should be the most important part of our work–the customer.

For too long, the insurance industry has ignored its customers, relying too much on the specialist nature of its products to win and keep new business. If we are to survive, we simply have to change that. Customer loyalty is not just based on the quality of a product. The brand name and customer experience are equally important.

Our research shows that customers rate Lloyd's service as comparable to other insurers–but unfortunately this is not a particularly high benchmark.

Lloyd's performs better than its peers at the quotation stage because it provides instant access to experienced underwriters who make quick decisions. But, not surprisingly, the market performs less well on the speed with which it handles complex contract documentation.

To tackle this, we need to reduce the volume of paper the market produces, speed up processing, and ensure that policy documents and claims are delivered and paid on time.

We need insurers to be clear on precisely what their capital is being used for; insureds to receive a clear description of what they have bought; and brokers to minimize the risks they run managing the expectations of the client. Although we deal in complex risks, we don't need to operate a complex business model.

A number of projects are underway at Lloyd's to streamline the complexity of the market and reduce the burden of operating in it. As part of this work, we have already:

o Completed a duplication review to ensure that businesses in the market are not subject to a dual compliance burden both by us and the U.K. regulator–the Financial Services Authority.

o Sought to ease the reporting burden on businesses in the market by limiting any changes to reporting requirements, unless they simplify or reduce those requirements.

o Begun work to simplify the framework of the rules and requirements for operating at Lloyd's.

o Reviewed the impact of the operating structure and timetable–otherwise known as the Annual Venture–to ensure it is as efficient as possible. We have suggested ways to improve the current business planning timetable and update the agency agreement.

An efficient trading floor is also central to my vision for Lloyd's. I can see that Lloyd's will have a physical trading floor for the foreseeable future, but it has to be supported by efficient business processes. Indeed, nobody could fail to notice the four tons of paper that the market generates every day–enough to fill two jumbo jets a year.

We must also use technology intelligently, as well as intelligent technology. Tech has the potential to revolutionize the way that we work, but there is no single system that can instantly change the way the market operates.

Bite-size solutions that address specific problems and combine to have maximum impact are far more likely to succeed than a single, one-size-fits-all approach.

Much has already been done. Working with the senior body set up to modernize the London insurance market–the Market Reform Group–we have made excellent progress on improving efficiency.

Two years ago, the FSA challenged the U.K. insurance industry to achieve contract certainty by 2007, and we are on track to do so. We will continue this work to make sure that insurance contracts are agreed upon before the coverage goes into effect, providing a much better service to the customer.

An electronic filing cabinet called the Insurers' Market Repository has also been established, which enables brokers to electronically transfer claims files and documents relating to premium transactions.

This obviously makes the whole process much faster and more efficient, and over time should bring an end to the large piles of paper carried around the Lloyd's building.

This is a revolutionary and new way of working for the market. We expect the entire market to be processing claims electronically by the end of 2007, and there are already some 400 premium-related transactions going through the system daily.

We are also streamlining the contract checking process at Lloyd's to make it more effective and efficient. This work involves ensuring that every check is directly relevant and appropriate, and removing any that are no longer needed.

The current number of checks is about 170 per slip, but this work will reduce that by more than half, benefiting every market player and their customers.

We are currently undergoing a pilot of this work, which we expect to be completed in the first quarter of next year. After that, we will look toward rolling it out across the whole market.

The future for Lloyd's is bright. We have made significant progress in recent years, and our track record of managing change will stand us in good stead as we face the challenges of today. We have a clear vision and a clear plan to get us there. What we need to do now is get on and do it.