Fear Factors

Insurers have never been change-friendly, but to still see underwriters, brokers and claims adjusters hauling piles of paper around the market is just ridiculous. Why is this industry so technophobic? What's the downside of going high-tech? After attending ACORD's London Conference last week, I have a feeling the only thing the insurance industry has to fear is fear itself. If youre not afraid of your own electronic shadow, read on!

Indeed, with many of the necessary data standards and much of the required technology infrastructure already in place to allow for electronic trading, ingrained traditions and fear of change are now the biggest hurdles facing insurers and brokers looking to go digital, according to experts speaking last week at the ACORD conference.

Technology is the least of your worries, said Sue Langley, director of market operations and North America at Lloyds of London, during a panel on the future of placing.

Fear is a big hurdlethe fear that Im not going to have the same personal relationship with the brokers and underwriters, she said. Ideally, you wont lose that with electronic placing, but you will be able to dispense with the queues for simple changes or endorsements.

Its almost like were pausing for breath, added Paul Jardine, CEO of Catlin Underwriting Agencies Ltd. and chair of the Lloyds Market Association. Weve got the tech in place, so now we have to win the hearts and minds of the market.

Mr. Jardine said that it might be time to throw down the gauntlet so progress becomes more of an imperative. We have targets on contract certainty and claims going electronic, and we may want targets on electronic placing as well, he added.

Mr. Jardine also cited commoditization as one of the fear factors holding up progress on electronic trading.

A bigger challenge is to become more of a portfolio manager and look at the bigger risk picture, rather than the loss of face-to-face contact on smaller risks, he said. We need to make sure that when we are deploying expensive talent, it should be where its most cost-effectively employed.

Throughout the conference, the inability to secure senior management support for the implementation of standards and the move to electronic trading was cited by speakers here and in attendee surveys as one of the main challenges facing the market.

Leadership is a finite resource in any organization, said Mark Kinsella, chief technology officer at Benfield in the United Kingdom. Youre constantly competing for the attention and backing of those who exert leadership so standards are made a priority throughout the operation.

The information technology department and the various business divisions they serve must therefore work together to make a compelling business case for standards implementation as well as electronic-trading, or risk losing budget battles to shorter-term concerns.

If we dont get some significant volume being handled electronically soon, itll be seen by senior management as a nice to have rather than as a have to have priority–especially in a softening [property-casualty] market with the pressure on to contain costs to keep profitability up, said Mr. Jardine.

We cannot depend on a Field of Dreams mentality that if we build it, they will come, he added. We need to show the volume to justify the investment.

Any thoughts on other factors that might be holding up e-trading in insurance?