London’s insurance market turns to electronic trading – Financial Times
Use of a new electronic trading system for London’s specialist insurance market has jumped after Lloyd’s said it would force brokers and underwriters to use it.
The London Market Group, which represents both Lloyd’s and the insurers and brokers who work nearby, said that almost 3,000 policies were written on the electronic system in June, about double the amount in the same month last year.
The system, called PPL, was first introduced in 2016 but initial adoption was slow as underwriters and brokers stuck with the traditional paper-based trading process.
In February Lloyd’s of London chief executive Inga Beale said that she would gradually force the market to use it, saying that the system would cut costs and improve efficiency.
The LMG data shows that adoption has jumped sharply since then. Figures for the second quarter of 2018 show that inside Lloyd’s, the system was used for 16 per cent of policies in the lines of business in which it was available.
In the specialist markets outside Lloyd’s the figure was 23 per cent, but not all of the insurers and brokers in those markets reported their data to the LMG.
“We are above the target which we set for the market, which was 10 per cent in the second quarter,” said Bronek Masojada, chief executive of insurer Hiscox and chair of the PPL board. “Slowly and surely, the numbers are going up.”
He added that the move to electronic trading was crucial for the London insurance market. “The world is going digital. London has got to go digital too . . . the great thing about digitisation is that you reduce borders and it opens you up to competition. That’s good for the customer.”
Brokers and underwriters who specialise in financial and professional lines of insurance — such as directors’ and officers’ liability cover — have been the most enthusiastic users of the PPL system.
Property policies have also been increasingly popular and there are signs that the marine market, long seen as one of the most traditional areas of specialist insurance, is starting to use it.
There is still some resistance to PPL. Critics of the system complain that it is cumbersome, inefficient and inflexible, and that there are alternative systems which would work better.
The LMG data show that almost a quarter of Lloyd’s syndicates missed the target, and 13 per cent did not use the system at all in the second quarter.
Mr Masojada admitted that the system needed improvement. “It’s just like the first mobile phones. We have to make sure it gets better over time,” he said.
He is hoping that increased transparency will spur more adoption in the coming months. The LMG is producing anonymised league tables covering the second quarter of the year, but from the third-quarter the tables will name the insurers doing most and least with the new system.
“We hope that will encourage a race to the top. We are using the competitive dynamic of firms and teams against each other to drive adoption,” he said.