“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.”
‐ Charles Darwin
Change that is generally accepted as necessary, but not as urgent, often needs a large stick as well as a carrot. In the case of Lloyd’s of London, this stick has come in the form of a decision not to migrate legacy systems and processes to the new systems for any line or book of business, historical or otherwise.
In my previous blog, I had spoken about data and its importance in transforming operating models. Here, I want to discuss the challenges around legacy systems and culture in preparing for a digitized market.
For the London market, the technological challenge is to develop dynamic and scalable digital platforms to enable the data-driven business of the future. These platforms must move beyond legacy systems so that they are able to deliver enhanced customer experience, drive efficiencies and create an environment that encourages future innovations.
Driving improved decision-making requires applying advanced analytics to glean relevant insights from existing data. Insurers can streamline operations through the effective deployment of Robotic Process Automation (RPA), and mitigate risks by eradicating re-keying, duplications and errors. As a result, systems and processes become faster, more accurate and less costly to implement.
Too many insurance companies believe that ‘digital transformation’ refers only to the digitization or automation of existing processes. But it can and must go much further. There is no point in simply automating outdated processes that have left the industry vulnerable to more agile and fleet-footed competition from emerging markets. To meet the challenges of 2021 and beyond, both transactional and operational processes should undergo fundamental modernization that transcends the entire value chain.
Insurance companies and Lloyd’s must be in lockstep with modernization – alignment is key. The center must ensure that, as insurers implement digital technologies, it keeps pace and that its systems are compatible. If their own investment in digital leaves them faster and more efficient than the market, why should insurers fund a modernization agenda that is essentially focused on enabling that market to catch up?
It’s essential that the way in which insurers interface with the ‘digital spine’ (as outlined in Blueprint Two) is clearly defined. This will engender confidence and develop buy-in, encouraging insurers to continue to invest in the kind of technology that supports their transformation journey. A clear return on investment will help further the cause.
The Culture Revolution
Legacy cultures and mindsets are as much an obstacle as their technology counterparts. Of course, Lloyd’s pre-eminent position has been based on face-to-face transactions for over 300 years, and the speed and ease of doing business that is inherent in this approach. But those working in the market have to understand that technology can build on what Lloyd’s has achieved historically, and enhance it rather than replace it.
Insurers must question core assumptions underpinning market dynamics and practices. At all levels of seniority, they must be encouraged to ask ‘why?’ when considering structures and processes. People and processes need to change in alignment with new technology. Companies, large and small, are being compelled to re-appraise both operating and business models. Start-ups with their innovative business models are unencumbered by legacy technology and mindsets. Established players are driving their own business transformations, and embracing the kind of disruptive and innovative thinking that is more traditionally associated with start-ups.
The challenge for the London market is now to build on the digital transformation that COVID-19 has imposed on it and maintain this trajectory. There is a renewed appetite for change, and it is an opportunity that London should grasp. Blueprint Two has a key role to play in this modernization agenda, but the challenge moving forward is to realize the potential for transformative change and capitalize on the digital momentum created by the pandemic.
Technology and culture are evolving, but the pace of change must increase. My colleague, Vince Wooding, has spoken about this in his article here. To sum up in Vince’s words: “The good news is that a growing number of firms are embracing new technology and operating models. Their overarching vision is to focus on what they do best — pricing risk, underwriting and handling complex claims, and to work with transformation partners to drive the required change.”
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