Hold the front page

Data quality for complex risks is taking centre stage for 2020. As Lloyd’s continues to transition from a document first to a data first environment, the issue of data quality is critical.

There are whispers that in late 2020 brokers and underwriters will start to be “encouraged” (in the politest sense of the word) to negotiate enquiries digitally (similar to the pressure to bind electronically).

However, this is difficult to imagine in the current environment and – by the way – email doesn’t count as digital! Improving data quality and automating processes lie at the heart of the challenge – how do you digitise the data that is often unique to ultra-niche classes? What are the benefits?

As I discussed in another post, change occurs naturally if such change is in the broad self-interest of the participant.  Data within the complex risk market has been under the spotlight recently, and the Complex Risk Platform is part of a new Lloyd’s strategy to allow complicated risks to be transacted digitally.  The key issue over the next 18 months will be making any change win-win at every stage for the participants involved.

• Win for the brokers, by making it easier to distribute and negotiate, with useful audit trails.
• Win for the underwriters, by providing structured and clean data, to increase actual underwriting time (rather than administration time).
• Win for the increasingly influential compliance departments, who need to be able to independently audit and access transactions on a structured or ad-hoc basis.
• And ultimately this will provide a win for the clients of the market, who are clearly interested (albeit indirectly) that the market continues to improve and innovate.

But to get there, we need to consider four main principles when it comes to data:

1. Creation – is the data created in a user friendly way that works for the variety of business originators in London and overseas?  Are users incentivised to create clean data? Can it be trusted to be ‘clean’ if it is inputted by a variety of different individuals, operating at totally different companies? If new categories of data are to be created in the future – how easy is interoperability with existing categories of data?
2. Collection – Can this clean data be collected in a format which allows easy merging (as it’s from multiple sources)?  Are the rules used to keep the data robust enough to allow for the collection of all of the different types of data that could be collected? Is the collection of the data automatic, or is a manual triage required? What data is not collected, and why not? If new categories of data evolve in the future, can they be easily collected as well – is the process flexible (enough)?
3. Analysis – Is the dataset collected ready for analysis? What software is being used for analysis and are the operators well-trained in using this software?
4. Insight – How can this data be used to generate more revenue, make better risk decisions, provide more clarity to clients on underwriter trends, or meet other company / team objectives?

Deep Dive: data in a complex class – Credit & Political Risk Insurance (CPRI) Dialogue’s 2019 research into the CPRI marketplace found that there are anywhere between 10 – 80 different variables per enquiry.

This leads to millions of different possible combinations – making the job of the brokers and underwriters all the more astonishing.  And with 5-7k enquiries per year, that’s a hell of a lot of data to capture and maintain! Given this occurs in just one relatively small, specialist class, it’s easy to see why each there is no one size fits all approach.

Interoperability is key

Allowing complex data sets to be interoperable with the existing systems in both brokers and underwriters is crucial, because it’s not just about the transactional teams.

It is critical in the increasingly regulated environment that compliance teams are able to audit / access certain data points, finance teams can check roadmaps, sales teams can check targets etc.

Data quality hasn’t always made the front page, but we hope it will get the attention it deserves this year – our message is simple: “one size fits all” doesn’t work for complex risks, a more tailored approach is needed within the standard platforms out there.

Getting this right now will shape the future of the Lloyd’s market for years to come. Feel fired up by the issues I’ve raised? Contact me to discuss:  ben.heaney@dxglobal.co.uk