InsurTalk: Lloyd’s of London transformation with Bob James, COO at Lloyd’s of London

Throughout its 350+ years of history, Lloyd’s has become the world’s leading insurance marketplace. Its focus now is on building a braver future – one that is more sustainable, resilient and inclusive and part of that journey is created by the Future at Lloyd’s programme.

In this episode we have a pleasure to talk with Bob James, Chief Operations Officer at Lloyd’s of London at this extraordinary London’s landmark, Lloyd’s building. We discuss the vision beind the marketplace digital transformation, its presence as well as the future of further innovation. We also touch upon the challenges Bob had to face on the journey.

Ewa Banaś: IT Insights InsurTalk: interviews with insurance leaders about what matters to the industry. Hi, I’m Ewa Banaś. Welcome to another IT Insights InsurTalk episode by Future Processing. Throughout its 350 years of history, Lloyd’s has become the world’s leading insurance marketplace. Its focus now is on building a braver future – one that is sustainable, resilient, and more inclusive.

Part of that journey is created by the “Future at Lloyd’s” program. Today, I have the pleasure to talk to Bob James, Chief Operations Officer at Lloyd’s of London. Great to be here with you, Bob, and thank you for inviting us to this London landmark, the Lloyd’s building.

Bob James: It’s good to have you here. Thank you.

Ewa Banaś: Before we move on to the Lloyd’s transformation as the focus of our talk, I wanted to touch upon one thing that I have recently learned about you: Is it true that you’re a surfer?

Bob James: Uh, no. Not now. Maybe I was a long time ago when I lived in California and I had a full head of hair that was a lot longer and less gray. And I was a lot thinner and younger. I was a surfer, but that’s a few lifetimes ago.

Ewa Banaś: And how did it happen that the surfer from California actually ended up here in London creating the future of insurance?

Bob James: You know, it’s actually a very interesting question because I was having this conversation with somebody a few weeks ago who asked me how I ended up here. I got into the insurance business at quite a young age in San Diego, California, working for a U.S. domestic insurance company. Like a lot of careers, I got promoted internally and took different jobs; it led me all around the United States.

Then, in 2017, I had an opportunity to come work for a big insurer here in London. But never, ever in my wildest imaginations did I think I’d end up at Lloyd’s. If you’re in the insurance sector, there is a bit of panache to Lloyd’s of London; everybody sort of knows who it is. And this is true: there are still mornings when I walk from the train station here and I think, “How did the kid from San Diego who used to surf end up at Lloyd’s?”. I think it’s – you know the old expression – sometimes luck is hard work that meets opportunity. I just had the great fortune of someone taking a chance on me.

Ewa Banaś: That’s a very good story, an inspiring one. We never know where we end up in our careers and lives.

Bob James: The older I get, the more I realize most of the stuff you only see in hindsight. But you never know when you go through one door what are the other four doors behind it. If you don’t go through that one door, you’ll never know. So my advice always is to people: go through that door, try.

Ewa Banaś: Definitely. Together with the release of the “Future at Lloyd’s” prospectus, Lloyd’s has redefined its purpose: “sharing risks to create a braver world.” Usually, this kind of shape requires a lot of time to evolve and to grow. I was wondering: what was the trigger that started it all? What was the factor – the story behind it – that the idea of digitalization at such a scale was born?

Bob James: Well, I wasn’t actually working for the Lloyd’s Corporation when the original prospectus, or what we then called Blueprint One, was issued.

But I think it was a recognition that this marketplace had a lot of advantages in terms of a center of gravity of expertise for insurance. I’ve heard that there are somewhere between 35,000 and 50,000 insurance professionals that all work within walking distance of each other here in London.

You just don’t see that in insurance anywhere else. The one place you would see it is if you went to Silicon Valley and made the correlation to the tech community there. But I think there was a recognition that with all those advantages, it was hard to interact with us sometimes if you didn’t have that experience. We wanted to attract new capital into the marketplace.

The processes that we went about to place business were somewhat arcane, and as we all know, the world was changing and is changing at a very much faster pace and in a more unpredictable way. So we thought, in order for Lloyd’s to remain relevant, we needed to address those things and make the corporation and the marketplace a bit more nimble to respond to change.

Ewa Banaś: And looking ahead at the closer future we have now, what are the immediate next steps for the market to uptake in case of the digital transformation journey you started?

Bob James: It’s like a lot of things in life: things are easier said than done. But the concept is actually pretty simple. If you’re going to transact business, could we all use the same language? And I’m not speaking about English versus Chinese; I’m speaking about the language of data.

Can we agree on a common set of data principles and data standards so that business can be transacted in a more common, seamless way using digital pipes to do so?. The advantage of doing that is a few things.

One: the time to serve the customer shrinks, and generally speaking, customers would rather have their service fulfilled sooner rather than later. The cost to service the customer becomes less.

But probably most importantly, because you have a fulsome set of data that everybody agrees is the data we’re going to use, the ability to then leverage that data for product innovation for new ways to serve the customer becomes much, much easier. I’ll give you one example: Lloyd’s writes about half of its business on a syndicated basis, which means there’s one customer but there are multiple risk-takers.

If that one customer has a claim, in order for us to validate who’s on the risk and for what parts, you need to have a complete set of data. Without that, the ability to settle the claim is just much more cumbersome and probably a bit frustrating for the customer.

Ewa Banaś: So it seems like data has to become – or rather is becoming – a lingua franca for the insurance industry from your perspective?

Bob James: Yes, the short answer is I think yes. All you have to do if you want to get a corollary of what insurance might look like in 20 or 25 years – maybe less – is look at what’s happening in the consumer space. Look at what Amazon has been able to do around the way they sell consumer goods around the world.

Pretty much anything you want, you can get on Amazon and get it delivered quickly. Underneath all of that is the ability to process data in a seamless way. For us and for the insurance industry, if you’re processing data on paper and you have to then have that paper, or some facsimile of it, in order to serve the customer, it just slows things down.

It increases the cost, and most consumers now have an expectation that it shouldn’t be that way; it should be almost instantaneous because that’s what I’m used to when I go to the Amazon website or other consumer-type websites.

Ewa Banaś: Generally, the world nowadays is going in the direction of customer centrism in all aspects, so definitely a way to approach it in insurance as well. One of the focus points is sustainability. How will delivering Blueprint Two actually help the long-term sustainability of the market?

Bob James: The insurance market – we like to think of any business segment this way – people tend to think the way a sector is today is the way it’s going to be. I don’t think if you look back over 10 years in almost any segment that’s true.

I think what’s happening is people that can access, analyze, and leverage data on behalf of the customer for creating products or services are going to transform the existing model. If you look at the InsurTech space – all the startups trying to figure out how they can either improve or disrupt the existing distribution or underwriting models – at the core of that is data and technology.

So, from a Lloyd’s perspective or any other large insurance company, if you want to have a sustainable future, you have to be able to keep pace with that change. Blueprint Two is all about trying to make the marketplace more nimble and be able to change along with the faster-changing, unpredictable world.

Ewa Banaś: On this path, on this journey, what were the biggest and perhaps most surprising challenges that you had to tackle?

Bob James: Well, I said it’s a syndicated marketplace, which means we have 50-plus insurance companies that do business here. We have 300-plus insurance brokers. We have 4,000-plus we call them “cover holders” or managing general agents who basically have the underwriting pen for other insurance companies.

There’s a huge number of stakeholders, and then you’ve got the customer who actually buys the product. When you’re trying to design the future, you have to take into consideration what those stakeholders want and try to find the balance.

We want to change the marketplace for the better, but if we take on everybody’s input, it’s probably unexecutable because it becomes too big of a journey. If you try to get everybody to agree, you get to the lowest common denominator, which is not very transformative. It’s trying to find that right balance so you can transform the marketplace, but the marketplace can come along with you and not feel like it’s a bridge too far for them to execute. I think that’s probably one of the big challenges.

And of course, the other big challenge is you’re talking about not just the technology, but changing people’s behavior about how they actually transact business – the brokers, the underwriters, and ultimately the customers. Most people don’t like to change their habits, and a lot of these habits about how business has been conducted have been around for a long period of time.

Ewa Banaś: When you look at the insurance industry generally, what are the biggest pain points? Do those challenges you’ve just mentioned translate also to the whole industry?

Bob James: This is my point of view: if you look at the insurance industry from the standpoint of consumer-oriented products to small business insurance to more complex products to multinational exposures, generally, as you go up that curve, the people serving consumer products have understood the data journey for a long period of time.

Most of that processing is automated, seamless, and instantaneous; it uses artificial intelligence and other things to make risk decisions and service the customer. As you go up that curve, partly because of complexity and partly because these things become more bespoke, it becomes harder to do that. What we’re trying to do is to imitate or emulate what’s happened in the small commercial and consumer side on the more complex risk side.

If I own a business and I buy my auto insurance online and it takes me five minutes, and then I go to buy my business insurance and it takes me five months, my expectations aren’t met. Maybe you can’t get it from five months to five minutes, but maybe you can get it from five months to five days.

Ewa Banaś: Let’s say it’s already the second quarter of 2024. Blueprint Two is already implemented and up and running. You look at the marketplace; you look at the industry. What do you see?

Bob James: Well, if it’s the second quarter of 2024 and it’s done, I see myself on a beach somewhere in California with a very nice cold drink with an umbrella in it. I think what we see is the foundation; it’s really the foundation for the future, not the complete future.

We’ll have a common set of data and a digital way to transact. Costs will start to go down, time to serve will shrink, and customers will see improved ability to settle claims. Once that’s in place, because of the entrepreneurial nature of this marketplace, people are going to say,

“Now, how do we innovate using that data? How do we find new ways to bring customers and capital to the Lloyd’s marketplace, and how do we use this data to develop products that don’t exist today?” Getting there is a lot of work, but I don’t think that’s the end of the journey; it just provides the foundation the marketplace should then be able to build upon.

Ewa Banaś: Looking at the marketplace and the syndicates, what will be the next steps for them to actually fulfill the vision you’ve just outlined?

Bob James: They and their technology providers will have to make sure that they can consume this common set of data that’s going to be created by the brokers and used during the placement process. The good news is that we are using an industry set of data standards through a firm called ACORD, so it’s not like we’ve created something bespoke for the London insurance market.

But they’ll need to be able to consume them on their own systems, which I think will make their processes a bit more efficient in terms of the labor it takes. Then, once they have that data, it’s about what we are going to do with it to make better risk decisions and come up with new product innovation.

I’ll give you an example that I find fascinating. I went to a meeting about nine months ago, and this gentleman shows up carrying a five-foot-long PVC plastic pipe with a cap on both ends and holes in the bottom.

I asked him what it was, and he said, “This is an insurance product.” Inside the pipe are three things: a float that goes up and down, electronics that measure that movement, and a cellular modem that sends that data to a central service to capture the water depth. We put these around properties, and if there’s a flood, we know the depth of the water and we pay out based on that.

That’s a product that didn’t exist – not specifically because of Blueprint Two, but because of the combination of technology, data, and innovation. I think that’s what we’re going to see as Blueprint Two comes to a conclusion.

Ewa Banaś: It’s like this holy trio for the future of insurance. Looking at the situation now, what excites you the most about the marketplace?

Bob James: Most of my career, I was a customer of Lloyd’s where I would come here to buy reinsurance or look for capacity as a broker.

The thing I always found fascinating about this marketplace, especially if you go down to our underwriting floor, is the fact that I could walk around with a London broker and take a very complex set of risks and get a lot of people to be willing to sign up for it. There’s some underlying entrepreneurialism here that is probably unique. For example, we wrote the first cyber policy at Lloyd’s.

We found a way to insure vaccines as they were being transmitted around the world during COVID by using technology and data. The entrepreneurial nature of 50-plus insurance companies, 300 brokers, and 4,000 cover holders trying to serve customers is something that you don’t see anywhere else in the world.

Ewa Banaś: I think this is exactly what makes this marketplace so unique and special in the world. Thank you, Bob, for sharing your insights with us today.

And thank you to our audience for listening to another IT Insights InsurTalk episode by Future Processing. See you next time.