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Lloyd’s of London, IBM Look to Connect London Insurance Market

Promoting ACORD standards rather than a proprietary platform, Lloyd's of London has partnered with IBM to deliver a centralized messaging hub to the London insurance market.

In March 2006, after Lloyd's of London announced that it intended to shutter Kinnect -- a $122 million attempt at a paperless platform and centralized infrastructure for the brokers, carriers and underwriters in its insurance market -- the company suggested that it would focus similar efforts in the future on setting industry standards, as opposed to building its own centralized infrastructure. "Lloyd's will continue to encourage and support the development of electronic trading platforms, peer-to-peer systems and the promulgation of data transfer standards," Thor Valmanis, then Lloyd's VP of communications for North America, told I&T at the time.

Three years later, Lloyd's is attempting to do just that. In February, the company signed a contract with Armonk, N.Y.-based IBM to run the new Lloyd's Exchange messaging service, a pilot program that aims to replace paper-based processes and facilitate the electronic distribution of data among London insurance market managing general agents (MGAs) and brokers.

The service is based on the imarket electronic trading network for the U.K. company market that IBM built and has run since 2003, according to an IBM press release. In addition to the core Web-based messaging service, the vendor will also provide a range of business and technical services to the effort. IBM will make a Starter Connection Pack available to companies that do not have existing messaging capabilities.

Sharmi Biswas, a Lloyd's senior project manager, says the project is not a platform but a message exchange for the market. Some London market managing agents and brokers already communicate and exchange messages via a peer-to-peer environment but, according to Biswas, it's a less-than-optimal way to conduct business and it is not deployed marketwide.

"The problem with that is that they have to maintain multiple connections," Biswas explains. "By putting in, centrally, a message exchange, we're enabling a great benefit in that everyone only has to maintain one connection."

In addition, current messages -- sent between the London market's roughly 66 managing agents and 140 brokers -- are all structured differently, Biswas points out. Through the Lloyd's Exchange, the insurer seeks to remedy that issue by adopting ACORD (Pearl River, N.Y.) data standards. "We're encouraging everyone to use one standard, which will make it more efficient and cost-effective to exchange data," Biswas says.

'Policing' the ACORD Standard

The goal of the Exchange project, Lloyd's director of market operations and North America Sue Langley says, is to simplify, streamline and standardize electronic messaging. "The London market now is actually very efficient. It's easy to place business, we've sped up service of claims by 40 percent and, day-to-day, people use e-mail for electronic trading," Langley says. "The trouble is that the more that play in this space, the more confusing it gets. What this is trying to do is simplify it and police that ACORD standard."

Langley adds that "a bit of demand from the market and a bit of leadership from Lloyd's" drove the project. She notes that a number of participants in the London market had expressed a desire for the company to take a leadership role and set direction in the quest to create a paperless environment. But not everyone looked to Lloyd's, Langley concedes.

"One challenge is that you don't have a single [point of] view. If you have 66 managing agents, you'll get 66 different views," she says. "So what Lloyd's has to do is work to get a majority view, move forward with that and get it implemented."

It's then up to the company to work with managing agents and brokers to actually drive adoption of the messaging hub, Langley continues. "The issue isn't actually the technology," she says of the uniqueness of driving change in the London market. "The issue is a cultural change around how you get momentum and build success when you are working in a marketplace [as opposed to] one company."

Lloyd's first announced in January the agreement with IBM to provide services for the messaging exchange and a contract was formally signed a month later. In March, IBM stated that the service was operational and that it would be made available to an initial wave of market participants in the second quarter of 2009. A progressive rollout across the market is set to continue into early 2010.

"We're running phases of pilots," Langley explains. "We have so many players in the market that everyone can't connect at once, so we're essentially putting them on in batches."

Related Article: "IBM to Run New Lloyd's Exchange"

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