Lloyd’s Lab: shaping the future for complex, hard-to-place risks
Twelve selected startups had emerged from 230 applicants and moved into the lab of the traditional company for the next 10 weeks. What are the connected goals? How will the innovations born here influence the captive insurance market?
We could not believe our luck when the email reached us that we and our business model would be part of the second cohort of Lloyd’s Lab. Even team members who are not rooted in the insurance industry could not hide their joyful anticipation. One of the most traditional and legendary houses in the industry will be a home for us in the next 10 weeks.
In particular, my colleagues from the programming department initially had their doubts. Going to work in a suit? In the age of digitisation, are there fixed opening times for underwriters’ boxes? In addition, several articles found on Google put the charm a little in question.
A digital version of Lloyd’s can shape the future of the insurance market, redefining it and solving problems that captives are already exposed to today: giving individual, complex, hard-to-calculate and hard-to-position risks a new home.
Another article appeared later this week, written by Toby Esser, chairman of AFL Insurance Brokers, which somewhat challenged the core competencies. Following his participation in the RIMS Congress in Boston, he concluded that the insurance world has evolved into a globalised and digitised age, with challenges and opportunities.
In his view, as an independent Lloyd’s broker, the biggest challenge facing the re/insurance sector is the growing complexity and interconnectivity of risks.
“Lloyd’s must decide if it wants to become a specialist or a generalist,” he wrote.
The article reflects the research of the BlockART Institute very well. The risk landscape is subject to continuous and constant change—the result of a volatile, uncertain, complex and ambiguous (VUCA) world. Quo vadis Lloyd’s?
Not only Esser was plagued by that question, but it was clarified on Wednesday. Lloyd’s CEO John Neal personally presented the participants with six applications that reflect the future of the house. There is also a 36-page strategy paper to be realised and implemented within the next five years. Lloyd’s is using an approach that has already been used successfully in many other industries: working with startups.
Lloyd’s five-year goals
- Complex risk platform: A culture, process and structure that supercharges innovation in response to customer needs.
- Standardised risk exchange: A risk exchange through which your risk can be placed in minutes at a fraction of today’s cost.
- Capital platform: A structure that enables new sources of capital to simply and effectively access a diverse set of insurance risks on the Lloyd’s platform.
- Syndicate in a box: A streamlined system for syndicates to bring new products and business into the market.
- Claims solution: An automated claims process that speeds up settlement to improve customer experience and increase trust in the market.
- Ecosystem of services: Access for all market participants to an ecosystem of products and services that help them develop new business and provide outstanding customer service.
In summary, it is a Lloyd’s ecosystem, which makes use of the digital possibilities and of the already developed solutions of the participating startups (ClauseMatch, CoVi Analytics, Describe Data, Field Pro Direct, ImageFast, miBroker, Optimize Claims, RequirementONE, Retechnica, Ryskex, Sustema and Tremor Technologies) and in which they can participate, cooperate and learn.
The insurtechs are supported by a highly qualified team from the company L Marks and Paolo Cuomo, the face of the Boston Consulting Group in the insurance-specific ecosystem of London, as well as mentors from the individual Lloyd’s syndicates who complete the lab team with advice, action, data and a lot of dedication.
Already after the first week, the challenges for the Lloyd’s Lab are crystallising. For readers who are like me and wonder why bring the startups into the house and not do it yourself, the answer is because too much knowledge and a long affiliation to the company sometimes poison your own innovation vigour.
This is not a phenomenon of this project, it can be found in all branches of industry. Furthermore, the participants are specialists who focus on pieces of the puzzle of the final construct. Some focus on streamlining the value chain, while others focus on digitised and accelerated damage claims management.
Still others focus on the processing and meaningful pooling of data; others still want to exploit blockchain technology profitably or contribute to the future Lloyd’s ecosystem with the help of artificial intelligence.
But all the participants have one thing: a specialisation. Here is the big challenge for the L Marks’ team: to create a profitable symbiosis, because a digital ecosystem can work only if the components are perfectly coordinated. Accordingly, the planning horizon of five years does not appear too long.
Will it work?
Two questions remain to be answered: does such an ecosystem solve the strategy question asked by Esser? And what exactly is the impact of such an ecosystem on the captive insurance market?
Yes, a digital version of Lloyd’s can shape the future of the insurance market, redefining it and solving problems that captives are already exposed to today: giving individual, complex, hard-to-calculate and hard-to-position risks a new home. This will be perhaps not only through traditional participants in the insurance market, but designed so that other groups of investors who have a risk appetite can participate in it.
If one rummages a little in the history of the traditional company of Lloyd’s, one can see that the future on a digital basis was the beginning in the nearby teahouse. Tradition meets digitisation—welcome to Lloyd’s Lab!
Marcus Schmalbach is a lecturer in business administration at a university of applied sciences in Southern Germany and a PhD in the field of captive insurance companies at the University of Gloucestershire, UK. He is academic head of BlockART Institute which is doing research in the field of blockchain, AI and alternative risk transfer and also founder and CEO of Ryskex. He can be contacted at: email@example.com