Digitalisation, not Brexit, London Market's biggest challenge

Next year is the fortieth anniversary of when Lloyd’s decided to make a dramatic, concrete and steel statement about its past and future.

1978 was the year work started on Richard Rogers’ Lloyd’s Building. This striking building encased iconic elements of the old market, like the Lutine Bell and the Committee Room, within brash post-modern architecture that literally turned the building inside out and broke with contemporary and historic building styles.

Despite how the building screamed bold change, Lloyd’s and the London Market have remained bound to tradition and been cautious, if not conservative, even after the building opened in 1986. While the Lloyd’s Building pioneered architectural firsts for London, like external elevators, Lloyd’s the institution, and the wider London Market, have been slow to embrace how technology could transform and enhance their business.

There are reasons for this. Tradition is a factor. Why change a process if it works and has worked well for years, if not hundreds of years? An even bigger obstacle is how the complexity of the market -  and specifically how any change needs to be agreed amongst so many, often competing, stakeholders – means a slow adoption of any change, even when it seems so obvious.

So, it is to the credit of Lloyd’s and the London Market that those stakeholders are beginning to embrace seriously how technology could be a transformative force rather like how the Lloyd’s Building shook up the City skyline.

The goal is to make more than surface changes to how the market operates. The modernisation agenda (the Target Operating Model) has the placing platform at its centre, supporting and augmenting the benefits of the face-to-face negotiation that have been at the heart of Lloyd’s since it was established. Automation of documentation and other underlying processes should benefit syndicates across the market. For example, the shared electronic claims file system shortens significantly the length of the claims lifecycle from first notice of loss to settlement. The new Write-Back functionality also provides London Market businesses with greater flexibility when managing and handling claims. It removes duplication and inefficiencies by offering enriched claims data, transparency, and management information while giving near real-time claim notifications.

Technology transformation is happening at a fortuitous time. Since June 2016, any debate about how the market is being buffeted by the forces of change has referred to Brexit rather than technology. This is presented as an existential challenge and the recent decision by Lloyd’s to open an offshoot in Brussels is cited as an extraordinary development by the market and the institution.

However, as I have written before on Finextra, Lloyd’s is used to thinking internationally and should be able to address the challenges of Brexit. There is no lack of vision to consider how the market needs to walk the talk of seeking international business. Indeed, well ahead of the Brussels news, Lloyd’s had opened up operations in Colombia, Brazil, China, Dubai and Singapore.

Brexit is coincidental to the greater system modernisation of Lloyd’s and the wider London Market, but digitisation will provide the market’s operations with agility, capacity and efficiencies at an uncertain time. Its value is far more fundamental than how the market adapts to the end of UK’s EU membership.  Regardless of whether Brexit is soft, hard or a damp squib, digitisation is shaping the market’s future here in London and internationally.

When reflecting on how Lloyd’s and the London Market have evolved, the Lloyd’s building again sums up how the driving forces of the market are this interplay of stoicism, pragmatism and tradition. The latter is respected, but adapted for new conditions, and the market’s players keep on trading regardless of how their working environment is transformed, even starkly modernised.

Longevity is a key strength of Lloyd’s and this means things take time and follow intense periods of deliberation, debate and argument. The good news is that the market is waking up to how technology assures future longevity, and can help in absorbing a local difficulty like Brexit, but more importantly, how it reveals new horizons for doing business.