Lloyd’s of London is a 330-year-old insurance market where brokers may still queue up to meet with underwriters face-to-face, where much work is still done on paper, and where, by its own admission, “modernisation and use of technology and data are coming late.”
But plans are afoot to change that. Lloyd’s recently announced the formation of Lloyd’s Lab to attract startups that can apply fresh thinking and new technologies to the challenges Lloyd’s faces. According to Inga Beale, Lloyd’s CEO: “This is why the Lloyd’s Lab is so important — to enable us to have a sustainable, fit-for-the-future model.”
For the first cohort, Lloyd’s has identified five themes it would like applicants to address. They are:
- Enhancing customer experience
- Building a relationship-driven culture for the digital age
- Powering data-driven underwriting with new insight sources
- Creating smart insurance products
- Wild card
Applications are being accepted through July 22nd. Those that make the first cut will be invited to pitch to Lloyd’s senior leadership and Market representatives in London on September 3rd. The first cohort will start working on October 8th and will be based in co-working space in the Lloyd’s Building on Lime Street.
In this interview, Trevor Maynard, Head of Innovation at Lloyd’s, explains the program further.
Q. Trevor, which startups are eligible to take part in the program? Are there any restrictions or preferences based on geography or maturity?
A. Anyone who has potential solutions to the challenges we’ve described in our themes is eligible. That can be early-stage startups, it can be established suppliers; really, it’s just a question of whether they’re willing to be based in London at the Lab.
Q. So you’re not really concerned about maturity? It could be two people with an idea or a large company?
A. We’re very much open to both. Sometimes the smaller ones have got the more radical ideas and that’s something we want to expose ourselves to. But at the same time, existing suppliers or large companies may have excellent innovation teams internally and they’re just as relevant.
Q. You’ve chosen L Marks to help your source innovative startups for the program. How are they going about it?
A. They’ve got a long list of contacts that they’ve been approaching. It’s fair to say that a lot of those are the InsurTech types. We have also issued press releases and placed information on lloyds.com and lloydslab.com so that has led to a bunch of companies contacting us directly which we’ve passed to L Marks for follow-up.
They’ve been scouting and speaking to people that they know. It’s been a successful approach.
Q. How is the final list of participants to be chosen? Do you know the criteria?
A. We’ve got the details on lloydslab.com. The key thing in choosing is how we’ll be involving the Lloyd’s market, because they ultimately are the underwriters that are writing the business at Lloyd’s, so they are important to the decision-making process.
There are a lot of applications. We’ll be boiling it down to around sixty that get reviewed by the Lloyd’s market. Then a shorter list of around 24 will go to pitch day. Then finally the attendees from the Lloyd’s market will vote on pitch day to help us choose the ten teams that will enter the Lab.
In terms of the criteria, there are many dimensions that both we and the Lloyd’s market will take into account. Things like, will it help us refine our understanding of risk? Will it help us enhance the customer experience? Will it increase the speed of response?
Q. Will all of your mentors be from Lloyd’s or will you also involve experts from outside?
A. Both. We will have mentors from the Lloyd’s market, and there are some external mentors who have done startups before and have entrepreneurial skills. We also have a category which we are calling Innovation Advisors, and they can be Lloyd’s market, Lloyd’s Corporation or brokers in the Lloyd’s market. We are really keen to have a good cross-section taking part in the program.
The key thing to realize with Lloyd’s is that we’re a marketplace of companies, effectively, that sell insurance. It’s certainly isn’t all coming from the Lloyd’s Corporation where I work. A lot of it is coming from the market.
Q. How much time can participants expect to spend working directly with Lloyd’s executives or Lloyd’s Market participants?
A. Mentors from the insurance businesses that make up the market at Lloyd’s are going to spend time with the participants over the course of the ten-week program. We hope to have multiple mentors from the managing agents — each team should have multiple contacts there. The exact time is going to depend on the project and the particular questions they’re asking, but it should be considerable and deep.
Q. The program is just ten weeks long. Is that going to be enough time? Many similar challenges are at least 12.
A. We think so. We’ve done quite a lot of work to streamline the process. A lot of information will be provided in advance. There are about four weeks between pitch day and the day they walk into the Lab, during which there will be some contact between the mentors and the teams. We’ll hit the ground running on the 8thof October when they turn up but it’s an evolving process and we can pivot ourselves there if we think we need to add more time in.
Q. Are there particular emerging technologies you are keen to engage with, perhaps, AI, blockchain, or IoT?
A. The lab is challenge driven; it’s not technology driven. It’s not “we’ve got a solution, now where’s the problem,” it’s the other way around. But we are expecting that things like AI, blockchain, and internet of things will feature in some of the participants’ offerings. Those are critical new technologies.
Q. Which emerging risks worry you the most? Climate change? Cybersecurity? Cloud failure?
A. A lot depends on the time frame. Cyber is a subject we’ve talked a lot about and things like cloud failure are part of that. That’s a clear and present danger and we’ve been saying that for eight or nine years now. Over the longer term, climate change is a huge risk to the global economy and it’s what worries me the most, if I’m honest. We’ve said we need to start acting now to decarbonize rapidly. We’ve said that consistently at Lloyd’s for about ten years. Climate change is a massive, global issue.
Q. You’ve said that Lloyd’s could potentially invest in some of the participants in Lloyd’s Lab. Has a specific amount of money been set aside for this? What might those investments look like and how will investment decisions be made?
A. The innovation investment committee does meet quarterly to discuss investments. The amounts would depend on the opportunity and we’d be deciding that case-by-case. The form of the investment is also something that is up for discussion with the startups or whomever we work with.
Q. Does Lloyd’s have a venture fund?
A. We don’t. We’ve set aside some funds for this purpose, but the key reason for this Lab is not about investment for us, it’s about stimulating innovation and solving problems, and identifying new opportunities. Investment is something we have available but it’s not the core reason for us to do it.
Q. Is there an overarching vision for innovation at Lloyd’s?
A. The innovation team at Lloyd’s, which I manage, produces thought leadership work around risk and product opportunities. For instance, we just did a campaign around the sharing economy, and this week published our newest report. We work closely with the Market on this because they’re the ones who are actually selling the insurance.
There are other larger-scale initiatives, such as the Target Operating Model project. They’re focused on market modernization and electronic trading. Lloyd’s Lab is challenge focused.
Together, these initiatives are taken to ensure that the Lloyd’s Market is well-positioned for the future and continues to innovate, as it has over the last 330 years. There’s certainly a vision, with multiple components, and we’re part of it.
Q. Are there other ways Lloyd’s is working with startups? Are there other outreach programs?
A. There are teams at Lloyd’s that are pursuing proofs of concept with younger firms and we’re working closely with them. For example, we have a data lab at Lloyd’s. They’re an internal team and they’ll work closely with the Lloyd’s Lab as members of our working group. They’ve looked at AI, working with an outside firm, looking at our regulatory requirements. They’ve worked with another firm on marine risks and tracking vessels, which is really interesting.
Q. One of the biggest challenges facing InsurTech startups is access to actual insurance data. You — and Lloyd’s Market participants — are rich in data, but many underwriters don’t like to share data because they consider it a source of competitive advantage. How will you be making data available to firms during the program?
A. If some data can be made available to the Lab participants, it will help them create better tools for us and in the long run we all benefit. We have some Lloyd’s statistics that will be made available. We already make those available, in fact.
The detailed data that is held by the managing agents — it will be up to them on whether to share it. We are certainly encouraging a positive attitude to that and we think that if it is appropriately anonymized and summarized, that is something they should consider. But we don’t own that data. The decision will be up to them.
Q. Is there a future in the paper-based, face-to-face trading environment Lloyd’s uses today, or do you expect that that will go digital?
A. The relationships built up by the brokers and underwriters, sometimes over many decades, is going to remain strong and relevant. Sometimes face-to-face is still the most efficient way to place a new and complex risk.
But we do see an increasing role for digital placement, and for technology to be used to increase efficiency and to open up new markets for us. So, while face-to-face will continue to have a role far into the future, you’ll also see an increasingly digital Lloyd’s.
Q. How did you land select the five themes you want the first cohort to work on?
A. We worked with the Lloyd’s market and a group called the Lloyd’s Market Association, which maintains a number of committees. They reached out to people on those committees and we held brainstorming sessions to think about the challenges and opportunities facing the market. From those sessions, we boiled things down to the four themes we’ve put on the website.
Q. One area you’ve identified for focus is cost — Lloyd’s expense ratio is high and has been rising. What specifically are you hoping that innovators can address here?
A. We definitely think technology can help reduce cost. Simple things like rekeying information and automating processes might not sound that sexy but they’re actually really, really impactful. They free people up to do more meaning work.
As the economy is changing, we need to be constantly thinking about our products and asking if they are future-ready. We need the collective mind-power of the Lloyd’s market thinking about the future. I definitely think things like the use of AI and chatbots can reduce costs. A number of people have already started doing that and we can see these technologies coming into our market and taking on some of the more repetitive tasks, freeing up people to focus on value-add. We’re pretty open-minded as to how this could work but we’re also pretty hopeful.
Q. What are you hoping to see with the fifth theme, the Wild Card category?
A. We’re very much taking the view that we don’t know what we don’t know. Therefore, people should bring us ideas that they think could change the Market. We’re really open to those ideas and look forward to putting some of them forward on pitch day. Whether they end up in the Lab will be up to the market to decide, but we do hope and expect to be surprised.
Q. You’ve said you’re looking for solutions that can create true commercial value for the Lloyd’s Market. If the products, platforms and processes participants build for you are put into production, will they be paid for the products?
A. Yes. Any use of their products is likely to be through some sort of commercial agreement with Lloyd’s market insurance businesses or possibly with the Corporation of Lloyd’s. It could be about licensing products and obviously investing is an option. We’re absolutely expecting the Lloyd’s market firms to engage with these teams and, if they like the look of the outputs, to engage with them in commercial discussions to take it forward.
Q. How will you judge the success of the program? Have you any specific KPIs in mind?
A. One key attribute for success is Lloyd’s market involvement, and we hope to see licensing, as I said, of the output. We are succeeding if we are stimulating the culture of innovation and growing that culture of innovation. These will then lead to increased efficiency at Lloyd’s. In the long term, we’ll be asking if we’re seeing disruptive innovations in the market, reduction in expenses, increases in speed of dealing with claims. There are lots of things we want to see, but in the near term it’s about seeing Lloyd’s market interaction and engagement with the teams that come in.
Q. Can you say a bit more about Lloyd’s data lab and how it works with Lloyd’s Lab?
A. The data lab provides an internal service for Lloyd’s. For example, the new City Risk Index is a product produced in collaboration with Cambridge. It covers 279 cities around the world and 22 threats that those cities face. It analyzes them and the amount of GDP they could lose. The data lab was one of the teams involved in that. They took the data from Cambridge are helped get it ready.
So they’re involved in those internal projects, but they’re also involved in doing various proofs of concept with the market such as the marine data project I mentioned. The key point is that we’re looking to join up to make sure future efforts will be linked with the Lab. We won’t be duplicating; we’ll be working closely with them.
Q. The cultural differences between startups and large incumbents can look difficult to bridge. How do you plan to help your first cohort navigate within a giant organization? How are you preparing executives at Lloyd’s who may be unfamiliar with the ways startups work?
A. As you can imagine, we’ve worked on a program to bring the Lloyd’s market mentors together with the startups. This week we had a really interesting event where we had people from other labs L Marks has been working with and they spoke to the market about how these programs work and what they got out of it. They mentioned a number of the issues you alluded to.
One of the reasons we are doing this is to bring Lloyd’s closer to the agile ways of working and we expect many of the byproducts of this to be around learnings from that.
We are working on communications material that go in both directions to ensure people are ready for this. We’ve been talking to the Lloyd’s market already, telling them to speak early to their legal department, speak early to their procurement department, have the conversation about data. Actually, one of things that came out of this week’s meeting is that we’ll produce something about Lloyd’s, so the startups can quickly come up to speed. We’re prepared but we’re also expecting to learn as we go.
Q. Are you also hoping to create some to cultural changes inside Lloyd’s by exposing the Market to the way startups think and work?
A. Definitely. We think they’ll have a lot to teach us and we hope our challenges will be fascinating to them.
A. Trust is key in the sharing economy. There is already considerable trust in that sector. But our reports have shown that insurance can help by providing cover when things go wrong and if embedded in the contract —as it already is in some sharing economy platforms — it will actually stimulate more people to supply to the sharing economy. One of the conclusions of the first report was that if insurance was in place, a number of the people who had consumed but not supplied to the sharing economy would be prepared to supply — if whatever they were making available would be protected by insurance.
The most recent report looks at some differences around the world. It looks at the UAE, and it looks at China, as well at Germany, the UK and the US. There are some interesting differences. For example, China is very much in the forefront of the sharing economy and a huge percentage of the population has participated. It’s some interesting stuff.
Q. What else would you like people to know about Lloyd’s Lab?
A. I haven’t talked about the showcase space. The Lab is on the 4thfloor of the Lloyds Building. We’re also going to have a space in the main underwriting room opposite the Lutine Bell. That’s where we’ll allow different providers of innovative ideas to come in to present to the Lloyd’s market on a rolling basis. There are about 5,000 people who go in and out of the market every day, and we’d like them each to stop by for a chat to learn about the innovation of the day. We’re thinking we’ll have universities and internal Lloyd’s teams as well as startups participating.
This is the first cohort of several to come. We expect to change and learn throughout the process and to develop themes for future cohorts in the coming months.
If anyone wants to get in touch, firstname.lastname@example.org is our email address. We’re keen to hear if people have emerging risks that they think the insurance industry ought to be aware of or if there are products we need to consider developing. Equally, if your readers have technologies or methodologies that they think are pertinent, then that would be of interest to us as well.
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