Progress v Tradition - the Battle for the Future of Lloyd’s

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Robin Merttens, The InsTech London Partner

The is the keynote speech given by Robin Merttens at Insurance Insider’s InsiderTech event on 16th May.


Thanks Mark, and thanks for giving me a chance to speak and thanks to all of you for coming to listen.

So who here has been to an InsTech London event? Well, you guys know what we do. For those who haven’t, we support InsurTech, which is a strange cult that believes in a better way of doing insurance and which meets discreetly in dingy basements to put the world to rights, eat pizza, and drink warm beer.

InsTech London came about by accident. Together with Paolo Cuomo I set up a MeetUp group 4 years ago, which now has 3500 members and is a very active and vibrant club.  It shows there are a lot of insurance innovation enthusiasts out there. Those four years bring me nearly 20 years in and around insurance innovation, going all the way back to co-founding RI3K back in 2000.

That sort of longevity makes me an insurance innovation expert - and I use the word “expert” in the way Niels Bohr, apparently a famous Danish physicist, defined it: “A man who has made all the mistakes which can be made in a very narrow field”.  That’s me.

I was going to talk to you today about what’s happening in insurance innovation and how it’s going to change the world. And then the Future of Lloyd’s Prospectus got published and I changed my mind. The opportunity to comment on something entitled “The Future of Lloyd’s” was just too good to pass up.

What did I think of it?  Well, I thought it was really good.  I have the attention span of a gnat, read it all in one sitting, and agree with every word of it – except for one part.

It repeatedly says things like “we’re good at innovating”, ”a history of innovating”, and “a strong track record for innovation”.  Well for 300 years of the 330 years that might well be right, but for at the last 20 years  - it’s just not. 

Nokia leadership were once asked what mistakes they made? What caused their downfall? Their response was to the effect that “we didn’t fail because we did something wrong – we just went on doing the right thing for too long.” That sums up the London market nicely. What we did here was right, and worked for over 300 years.  But the world went digital at the start of the millennium, and we didn’t.  What was the right thing is now the wrong thing - the result of 20 years of little or no genuine change. It’s time to stop deceiving ourselves about being innovative. We’re not.

Talking of self-deception, let’s also stop with the idea that somehow innovation is only going to happen in retail insurance – to motor and household only. That somehow complex business/specialty lines are immune – that innovation will somehow slide quietly by leaving us free continue for time immemorial with face to face and paper - that’s the last defense of the truly delusional. Every part of what we do is going to be completely changed - marine, aviation, off shore energy, liability– you name it. Sure, some will take longer that others, but it’s already upon us.   So let’s stop with the self-serving propaganda - we DO need to change, to learn to innovate. Let’s accept that as the new reality and get on with it

That’s why I found what the Future of Lloyd’s Prospectus DIDN’T say to be far more compelling than what it DID say.

  • It didn’t say that the same aspirations were made in 2001 when Lloyd’s tried to build Kinnect, and again, when Richard Ward became CEO and produced Project Darwin. Who remembers Lloyd’s Vision 2025?  The visions and aspirations were all the same. The truth is that in our heart of hearts we all know what needs to be done – don’t we?  It’s not about defining it, it’s about doing it! As someone put it to me - We need a “DO TANK” not a “THINK TANK”
  • While the Prospectus alluded to “Cultural issues” – it also didn’t say  - and can’t – is the reason it hasn’t happened is that the Analogue Generation – those who learned their trade in the analogue age – have, to protect their own interests, organized a very effective rearguard action to prevent the digitization of the market, and the leadership in that period has not been strong enough to prevent it.
  • What the Prospectus also doesn’t say is that the Vision articulated in it requires a complete revision of the Lloyd’s distribution model – of the relationship between underwriter and broker.  And even to Lloyd’s regulatory framework. The Simple Risk Exchange – presumably a kind of massive portal with forms which you need to fill in and auto-pricing – just needs the retail broker to speak to the client to provide the information and get a quote. It certainly doesn’t need a wholesale broker sitting in London!  It doesn’t need a chain of 3-4 intermediaries raking off more than 40 points in commission. If we go this route, it has to be the end of the Distribution Phoney War – this is the beginning of the end game.  The markets’ distribution model needs an overhaul and that’s a big part of this.
  • Legacy – what it also doesn‘t say is that even if we build this swanky new infrastructure, the whole market is still sitting on legacy administration systems that are simply unfit for the brave new world envisaged in those stories in the prospectus.  There’s not a single insurer or Managing Agent operating in London with a Policy Administration System that’s designed and fit for the digital age or, to my knowledge, building or procuring one.  So, even if Lloyd’s pull this off and build the infrastructure of our dreams, we’ll just be sticking digital lipstick on a legacy pig.
  • And finally, what the Prospectus didn’t say is how such a vast and vital project is going to be run. Because another unsaid truth is that we’re absolutely crap at procuring and running projects of the kind that the Prospectus envisages. You can’t run innovation projects by committee.  Committees mean consensus and consensus takes you to the lowest common denominator. Consensus is what happened to LMTOM – committees are populated by well-intentioned folk who use legacy thinking to inform their innovation design. That road takes you straight back to spreadsheets and pdf’s again.

And I have one final rant and then I’m done with ranting– and here I know I’m on fertile ground – please let’s not delegate the design and procurement process to the same handful of big consulting houses with whom the market has spent collectively many millions achieving remarkably little by way of output over the last 20 years. Again, I go back to my current mantra – we need Do Tanks not Think Tanks. Consultants might be able to tell you what and how, but we have to DO it. We have within our community the requisite knowledge - you just need to know where to go to find it and back it.  We’ll come back to that in a minute.

I feel a bit better having got that off my chest – based on those who would believe me I’m an unreconstructed optimist about all of this. Really. I work in this market and believe in this market.  You can’t spend 20 years trying to innovate and getting nowhere unless you’ve been sustained by some kind of faith! 

I think I may have been a Jehovah’s Witness in a former life. You know, those folk that knock on my door on Saturday mornings  - start with their pitch, get interrupted and politely told “Thanks, but it’s not my thing” and then unbelievably come back with the same message in a few weeks time. That’s me – preaching my gospel to the unconverted. Same method, a different gospel.  

Why do I do it? What brings me to back to knocking on your collective doors time and time again. Well, partly pure stubbornness of course, partly blind optimism, but also the feeling that one can make a difference. Particularly now that one can now feel the tectonic plates shifting and the mood changing. To quote Ian Dury  – there are reasons to be cheerful. What are they?

  • Firstly, and self-servingly, the emergence of InsurTech. In a world that runs mostly parallel with and alongside mainstream insurance, there is real innovation going on and real money being spent in support of it.  And furthermore, London leads the way, especially in anything to do with the specialty classes.  If you want to innovate, if you’re interested in it, then this is the place to be. It’s this that needs to be fostered and supported.  
    • This is where the new distribution models and improvements in user experience and engagement start their lives.
    • This is where Concirrus, Cytora, Digital Fineprint Eigen Technologies and so many others are transforming the way we handle data and obtaining insights from it.
    • And most important of all, this where the new products are coming from in the form of exciting new MGA’s like Stable, Archipelago, Azur and Coverly.  These aren’t bedsit businesses – they’re all run by former industry professionals of many years standing in the their 40’s and 50’s who really know what they’re doing – are combining industry knowledge and innovation to make something special.  And the cool things that they’re doing are in all cases supported by the capacity coming from the enlightened among the London market.

If you DO want to innovate then I urge you to foster these businesses – partner with them, provide them with the domain knowledge they don’t have, invest in them and back them. They can do much of this innovation agenda for you.  If challenged, I reckon I could take 4 or 5 successful InsurTech business and glue them together and they would do most of what the Prospectus envisages on the transactional front. Not to the requisite scale and not as a central service – but the functions are still the same. 

To quote from the McKinsey’s report earlier in the week

            "Insurance companies should pay close attention to insurtechs — not because they’re coming to attack, but because they're coming to collaborate. For established insurers, insurtechs can be digital enablers that drive the adoption of digital technologies along the value chain. To realize the potential, it’s important that both sides focus on the strength they’re bringing to the table.

What are the other reasons to be cheerful?

  • The age profile of the market is changing and the U35’s absolutely get it. The LMA is generous enough to provide InsTech London with funding and that allows everyone in the market U35 to come to our events for free – and they come in their droves. They come because they hear a world that they understand and believe and to meet kindred spirits. We need to believe in them and empower them.  This is the first generation since Homo Sapiens evolved as a separate species  70,000 years ago that the young  have as much to teach us as we do them.  As a man with kids in their 20’s that’s really scary, but it’s true. Accept it.
  • As I said earlier, there’s been an innovation agenda for a while. Lessons have been learned. Humans are the dominant force on the planet - because we adapt and evolve and we solve our problems. So this time round let’s not build all this stuff using the same broken model that failed before – set up committees, smother in governance and red tape, and seek career safety by using big consulting firms.  

So, this time let’s do it the right way, which is to trust in our young professionals.  They’ll design your next generation technology for you - they ARE the next generation!  Don’t go to the same old technology providers with their tired old legacy kit – talk to Amazon, Google, Apple – they’ve changed the world and they can change ours. And don’t write long specification documents and put our RFP’s – embrace design thinking and agile development and be brave.

To do that well we need to rediscover our collective curiosity. As a community, we protect ourselves by living in a self-endorsing world where we surround ourselves with people who believe what we believe in.  And we resent being challenged – we shun those who do it – and I should know.

Change/ innovation is driven by curiosity - by a keen interest in all the things that are going on around us - by asking ourselves how we could do things better – what this new world means to us and how the provision of insurance changes as a result.

Above all, I’d like to see the whole community get wholeheartedly and genuinely behind John Neal and his vision. He clearly knows his stuff and his much more support and credibility than his predecessors. 

It’s our last chance. We’re in a very dangerous place right now.

We’ve let a huge gap grow between what technology can do and what we choose to do with it. 

We get away with it because we pass the massive additional cost of our inefficiencies back to the customer in premium and they don’t know any better.  That won’t last.  It’s the gap that Netflix, Uber  Amazon and AirBnB walked into and killed off the incumbents.

And most of all I’d like to see all those that have prevented the attempted reforms of the past back off this time  - analogues, the world has changed – enjoy the rest of your careers, but don’t stop the next generation from having theirs.

I’m a pretty affable easy-going kind of guy. Give me a glass of red wine of an evening and good company and I’ll be anyone’s friend. There’s only one thing that really winds me up – that’s my generation and our seemingly brazen disregard for our legacy.

Collectively, we have pretty much wrecked the planet, left a huge pension deficit, a non-sustainable housing market, unprecedented levels of national debt, the NHS on its last legs, and now Brexit.  What a truly awful legacy.

For those who work in this market let’s not make that any worse, and compound it further. At the very least, let’s give the next generation of insurance professionals a decent legacy – a chance to have long and fruitful careers like we’ve had, rather than run the whole London market into the ground in the selfish pursuit of our own analogue interests.

Mark, thank you for giving me a platform to hold forth. Thank you all for listening to me, I appreciate it. For those who don’t agree with me, I’m sorry, but perhaps admire my consistency instead, because I have been saying much the same thing for 20 years! And for those who agree with me, or at least some of this – see you at InsTech London soon.