“Marine has had its challenges in the insurance class in the past year or two and we had to take a serious look at performance across the market”, admitted John Neal on Friday in a keynote speech to attendees at Marine Insurance London.
He noted that Lloyd’s marine classes, marine hull and marine cargo in particular, came into sharp focus for the 2019 planning period, largely because they had not been performing well for a significant period of time. “We could argue that for marine hull that it had been a systemic issue, probably for two decades”, said Neal.
He noted the good news that differences in the way products were constructed in hull, cargo and yacht “were beginning to happen”.
Neal said that Lloyd’s had to support syndicates that were delivering sustainable returns and to promote hard the businesses that Lloyd’s thought were doing well. He insisted that it was not just marine that had been in a troubled space. Some other of the older classes of insurances – aviation and transport – had been suffering the same problem. For example, Neal observed that the loss of one 747 equalled the loss of the entire Lloyd’s market premium for aviation for the whole year.
Neal accepted that, although some of Lloyd’s actions last year “were a bit more intrusive than they needed to be”, the subsequent feedback was that the actions had achieved the impact they needed to, and that “on paper at least, we are set up for success in 2019”.
Neal emphasized that, “despite some of the stories”, Lloyd’s did not shut down any businesses. “We may have challenged some businesses around their viability, but we did not shut any down”. He said that Lloyd’s had been “very explicit” that if things were changing at a syndicate and the syndicate had a different plan, “come and talk to us about it and we will listen”. Neal said that, as of today, none of them had felt the need to come to talk to Lloyd’s. “I’m seeing that as a good sign that they are being disciplined in their approach. It is certainly not us saying that we are not open for business”, said Neal. He observed that Lloyd’s had committed to plans allowing syndicates to write £7.5bn of new business in 2019.
He felt that there was “absolutely no reason why marine can’t return to the forefront of what we do at Lloyd’s and can be at the cutting edge of the way we represent ourselves to our end customers”.
Neal felt that the advancement of new technology should be used in marine specifically, whether that be “artificial intelligence, data protection, analytics, statistical forecasting, big data, telemetric solutions, high-resolution satellite imaging – we could go on and on. Our job is to encourage the greater uses of these technologies “
In addition to the much-needed changes in 2018, the market had begun to show improvements in its processing capability, said Neal.
However, he said that the movement into newer technologies in commercial insurance had been “a long time coming, and is a long time overdue”.
In a recent consultation with the market, Lloyd’s conducted 1,000 interviews, of which 25% were with customers. Neal said that one key takeaway was the passion of the responders. “If they respond with passion, even if it is negative, it shows that they care”, said Neal.
While noting the many unique positives, such as Lloyd’s reputation for writing specialist business and the £225bn paid out in claims since 2000, Neal also observed that there had been several important negatives.
“The lack of progress in digitalization, the very high cost of doing business, the lower line size compared with competitors, inefficiencies in the model and the way in which the corporation is set up, are some of the areas that people have spoken to us about”, said Neal, adding that “we are seeking to tackle those challenges”.
He felt there was a bit of a sense, particularly among brokers in the market, that Lloyd’s had been a bit too “down on itself”. Neal said that “we know why we had been. I think we had to create something of a ‘burning platform’ to get things back on track and to persuade people that some of the modernization activity needed to be done. I think that we did that well, maybe a bit too well, based on some of the feedback”.