After attending the first U.S. public address by Lloyd's CEO Richard Ward, then listening to him dissect the formidable challenges he faces over lunch with a select group of business journalists, I came away with the firm impression he's the right person to transform the world's oldest insurance market.
Lloyd's is so incestuous that everyone knows everyone else–and, worse yet, just about everyone owes everyone else–so it would be that much harder for anyone coming from inside the market to turn everything upside down and force long overdue changes in standard operating procedure.
That won't be a problem for Mr. Ward, who came to Lloyd's last April after spearheading a successful rebirth of the London-based International Petroleum Exchange–rebranded as ICE Futures–from a wild trading pit into a fully electronic market.
Mr. Ward has absolutely nothing invested in the Lloyd's market from a personal standpoint. He is not married to any traditional way of doing business, or loyal to any particular group of players. There are no sacred cows to spare or friends to protect for old time's sake. He brings a fresh perspective and should have no compunctions about shaking things up.
The fact that Mr. Ward had no insurance background when he came aboard nearly a year ago was a disadvantage at first. He had to hit the ground crawling–spending months getting up to speed by sitting on the box with underwriters, walking the floor with brokers, and sifting through mountains of documents with claims officials.
But in the long run, it was worth the additional startup time to bring in an unbiased outsider–someone who wasn't raised on the "religion" dictating how Lloyd's operates. He's free to carry out the technological revolution Lloyd's has long required.
Shortly after he became Lloyd's new CEO, I dubbed Mr. Ward "The Mystery Man" in a column–not only because he was brand new to the world of insurance, but after he declined to speak with the press about his plans and vision. I gave him the benefit of the doubt back then, speculating–quite accurately, it appears–that he was determined to learn first hand how the idiosyncratic market functioned, rather than spout off the top of his head about what he would change before he knew what he was talking about.
As the months passed, however, with no public appearances and repeated requests for interviews rejected, I briefly considered another column, to be headlined: "The Invisible Man." I wondered whether Mr. Ward was operating too long behind the scenes, leaving buyers, outside brokers and the media to begin doubting whether he really had a handle on what needed to be done, and was prepared to do whatever was necessary to modernize the paper-clogged, costly Lloyd's market.
While I still wish Mr. Ward had gone public earlier to lay out his game plan, and hope he takes a higher profile going forward, I must admit I was very impressed this week with his grasp of the problems plaguing the market, and his plans to make the Lloyd's infrastructure state of the art.
In his speech before the New York Chapter of the Risk and Insurance Management Society and the Association of Professional Insurance Women, he promised greater contract certainty, electronic processing of all new claims and direct access for outside brokers–all by the end of this year. If we dont achieve these goals by the close of 2007, I might be looking for another job, he quipped.
He certainly set the bar high, but with Bermuda already breathing down Lloyd's collective neck and other challengers sure to emerge, he knows his market doesn't have all that much time to streamline its clunky processes. (For full coverage of his speech yesterday, click here.)
Mr. Ward has already seen contract certainty come a long way during his brief time in office, with 90 percent of policies delivered within 30 days of coverage inception, when it used to take months for most buyers to see their policy documentation. He wants to keep improving on that record. (For more on this effort, click here.)
Getting all new claims onto a computer screen by year's end would be another major achievement, while opening up the market to any broker would truly be revolutionary.
Mr. Ward maintains he is not trying to phase out the time-honored Lloyd's tradition of sitting down with an underwriter to place a risk. He says that with its specialty expertise and subscription formula, Lloyd's thrives in that kind of face-to-face dynamic. But given his background in electronic trading, and his statements that not all risks need to be shopped at Lloyd's by London-based brokers, there's no doubt more and more business will end up coming before underwriters as bytes of data rather than bits of paper as time goes on.
Of course, the Lloyd's trading floors are far from "pits"–with underwriters whispering, rather than shouting out their quotes and conditions. Indeed, they probably resemble more closely the library-like Starbucks than the original Lloyd's coffee house. But at a time where more and more information–and business–is conducted over the Web, that can't last forever. Mr. Ward has the experience to get this sensitive transition started.
Still, it will be interesting to see how opening up the market to more brokers plays out. One can't just hang up a shingle as a "Lloyd's Broker" and expect to start placing business. You need to learn who the players are, what risk appetites they have, and establish your own credibility in representing exposures. That's why I think this particular reform will take the most time to fully implement.
But for the moment, Mr. Ward faces enough of a challenge automating all of the support functions. If he can get policies delivered at their inception, error free, and make claims files accessible online from a single platform, he will have earned his pay.
Mr. Ward has a ways to go before earning the headline I posted on a column about him in December–"The Electronic Man"–but his instincts are sound and he appears to be, at the very least, "The Right Man" for this formidable job.
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