Dynamics Matters Podcast: Ep 43  - Creating a data driven insurance marketplace

With special guest Bent Isachsen, Head of Operations, Hamilton

✔ What is Blueprint Two

✔ What does Blueprint Two mean

✔ The drivers,, challenges and advice from an expert in the field

Transcript

Welcome everyone to episode 43 of the HSO Dynamics matters podcast.

Your regular sonic dive into the world of Microsoft technology related matters and much more besides.

I’m your host Michael Lonnon and in this episode, I threw on a shirt, and a pair of ill-fitting loafers – for the first in years – and took a train to the big smoke … London, for a chat with Head of Business Operations for Hamilton Insurance, Bent Isachsen.

We chatted about the Blueprint Two initiative and what it means for insurers in the London Market – but what you’ll quickly gather from what Bent says, is that Blueprint Two is a transformation programme, and so the drivers, challenges, and advice Bent offers is just as a relevant whether you’re in Financial Services or the Public Sector. And its damn good advice too.

So, grab a brew, sit back, relax, and enjoy the show.

Michael Lonnon

Back in November 2020 Lloyd’s released blueprint two now, before I start piling into some of the questions. Could you give me an overview of what blueprint two is in a nutshell?

Bent Isachsen

Blueprint two is a big change programme, which fundamentally looks at the backend office to support account and settlement and the tax and reg reporting.

Michael Lonnon

What change is that going to have for the London market?

Bent Isachsen

Quite a lot. It’s a 24 months change programme, running in three different work streams. Ultimately, it’s going to be better, faster, leaner and cheaper. As has been said, through John Neal Chief Executive. It impacts the account settlement work we do through the Bureau, which is where we are settling accounts. You have to understand the London market is quite unique in respect of something called a subscription market, and goes back hundreds of years, where we have multiple insurance carriers participating on a single risk due to its complexity. It’s called specialty insurance and that multiple participation on the risk i.e. a policyholder needs to be processed centrally so that each carrier can get the right amount of money. If you look at a complex process that’s clearly expensive. And the technology that sits behind it has not been upgraded since the 80s. That is what Blueprint Two is about. It’s about changing the fundamental building blocks, or what we call the central settlement, i.e. payments of premium from the broker to the different insurance carrier who’s written the risk.

Michael Lonnon

In a nutshell, it’s about simplification and it’s about reducing the complexity that exists within the London market.

Bent Isachsen

It’s simplifying the complexity by using technology and imposing a standard. This is where in Blueprint Two one of the underlying factors in it is the common data record, the CDR, which everybody will need to adapt to, from the broker starting the process to the carrier’s quoting and binding the policy. The common data record is not trying to nullify our competitive advantage, it’s purely looking at what’s required in the account settlement process, and the tax and regulation we need to report on. It’s not dealing with exposure data and rating data, all these unique factors, it’s basically trying to standardise, simplify and digitise i.e. an electronic record, which is billed off to become a firm order and then become a risk which can be potentially used as straight through processing.

Michael Lonnon

How is this data being managed at the moment, outside of this common data record? You mentioned that the Lloyds London market is running on processes that have been in place since the 80s. That seems almost barbaric, so what are they doing today?

Bent Isachsen

Today, we have a reasonably costly process and a costly marketplace, where we have a fair amount of people, on both sides of the fence – the broker side dealing with queries, and writers dealing with queries, and the Bureau processing the risk – asking questions for further data. We then end up with the product out of the Bureau, which is what’s called a message. And that message is different whether it’s Lloyd’s business, or whether it’s company market business. That’s the complexity we have so that’s one of the reasons why the London market from a cost basis is looked upon globally as an expensive market.

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Michael Lonnon

In a nutshell, it’s about simplification and it’s about reducing the complexity that exists within the London market.

Bent Isachsen

It’s simplifying the complexity by using technology and imposing a standard. This is where in Blueprint Two one of the underlying factors in it is the common data record, the CDR, which everybody will need to adapt to, from the broker starting the process to the carrier’s quoting and binding the policy. The common data record is not trying to nullify our competitive advantage, it’s purely looking at what’s required in the account settlement process, and the tax and regulation we need to report on. It’s not dealing with exposure data and rating data, all these unique factors, it’s basically trying to standardise, simplify and digitise i.e. an electronic record, which is billed off to become a firm order and then become a risk which can be potentially used as straight through processing.

Michael Lonnon

How is this data being managed at the moment, outside of this common data record? You mentioned that the Lloyds London market is running on processes that have been in place since the 80s. That seems almost barbaric, so what are they doing today?

Bent Isachsen

Today, we have a reasonably costly process and a costly marketplace, where we have a fair amount of people, on both sides of the fence – the broker side dealing with queries, and writers dealing with queries, and the Bureau processing the risk – asking questions for further data. We then end up with the product out of the Bureau, which is what’s called a message. And that message is different whether it’s Lloyd’s business, or whether it’s company market business. That’s the complexity we have so that’s one of the reasons why the London market from a cost basis is looked upon globally as an expensive market.

Michael Lonnon

Do you think that perception is going to change then following the implementation of Blueprint two?

Bent Isachsen

I think the proof is in the pudding. With a successful implementation of blueprint Two over a period of 24 months, and an adoption process of the London market; and we’re not just talking about Lloyds here, we’re talking about the London market, the proof is the cost. Will the cost base be reduced? There is a number used in the market, at a very high level, 40% cost reduction, £800 million pounds is the carrot for successful implementation. Now, I don’t think a huge amount of detail analysis is built in that number, but you need to give this initiative a face and that’s what’s been cited in the market.

Michael Lonnon

What will the insurance carriers need to do adapt to this change?

Bent Isachsen

First of all, they need to keep themselves informed of progress of the initiative and understanding the initiative. Secondly, they need to look at the people, the process and the technology underlying the processes we have today, because this will change particularly middle and back office. You can also potentially have a look at other areas of the business delegated authority and claims is two other work streams combined so that the overall programme is three work streams, open market, delegate authority and claims. On the claim side, it will have a potential advantage for customers in quicker and better claims handling and time to receive claims funds. Lastly, insurance carriers and brokers need to have a plan for adoption. This is not just here’s the new way, we’re going to do it and you’ll crack on, you need to ensure that people inside your organisation understand it. And you need to bring them on that change journey.

Michael Lonnon

If you have any advice in for those organisations needing to plan ahead, needing to go on that change journey. What might you suggest?

Bent Isachsen

Personally, I believe in communication and openness, I think it’s really important to have open conversations through the organisation board level down to working groups and forums inside the organisation. I also believe the more you can engage people in various market forums and enable them to go and hear from the market what’s going on, feel that they can take some ownership, and this is a great start on preparing for adoption. It needs to be articulated; it needs to be thought through in respect of the approach you take. You need to understand your system landscape, you need to understand your current processes and you need to understand what Blueprint Two is looking to change for you in your organisation. It’s something that each and every organisation needs to take seriously. There’s never been such a big change programme, and the underlying technology used by the central settlement i.e. the Bureau, hasn’t been changed since the 80s so this is a radical change.

Michael Lonnon

What are the positive changes that Blueprint Two could change in other markets, what advantages are there?

Bent Isachsen

I’ve been telling you about the account settlement, tax and regulation, and regulatory reporting, which is rather boring. It’s not exciting but Blueprint Two is building on the underlying building blocks of a Common Data Record. So, what is the art of the possible here when you digitise a risk. Personally, something I have chased for a very long time, almost 30 years since I joined the market, is straight through processing. Could we have a data set starting at a submission, which has elements of the Common Data Record, further develop that into a quote with more elements of the Common Data Record, which then becomes a bound risk? Now it has the core data record, digitally. Does that mean we could have carriers and brokers collaborate digitally together for the best outcome of the clients? I can see this as a great opportunity, but this would require some forward thinking and ensure the investment of the right technology inside each organisation is thought through. It won’t just happen with the existing processes, people and technology you have today. So, if you have that vision for your organisation, you really need to think about it.

Summary

Running an entire marketplace on a technology platform built in the 80s is the equivalent of watching your favourite films on VHS. If its what you have always done it might be hard to break the habit, but dust fills the insert, or your machine mangles the tape, its going to be painful and expensive process to fix it. And that’s the driver behind the Blueprint Two transformation programme. To reduce complexity and lower the cost of doing business.

But it’s a 24-month transformation programme so it won’t be easy. And there will be barriers, politics, and people not yet willing to shed the old ways. But if it improves the customer experience then that’s all that really matters isn’t it?

I hope you enjoyed this episode. Until next time take care of yourselves.

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