London and electronic placement: Plus ça change…
Last Thursday, we revealed the sobering news that the London market had scrapped much of the work that had been done already delivering the PPL NextGen platform.
Since the Blueprint One was unveiled in October 2019, Insurance Insider has applauded the Corporation of Lloyd's vision for market modernisation.
Coming at a time where the market's confidence was at a nadir, CEO John Neal painted a compelling vision of a marketplace that was more flexible, faster and more open.
And in so doing, he helped endow the marketplace with confidence that it had a future, aided of course by major tailwinds from market conditions. A feel-good factor that had been distinctly missing in the Nelson-Beale years was back.
There was also a sense that a new day had dawned in London market modernisation with an all-in commitment from a broad coalition of stakeholders.
Thursday's news that the contract with technology provider CGI inked last year spring was being dissolved felt like a disappointing reversion to type from the London market.
Plus ça change, plus c'est la même chose.
Matching vision with execution
Ultimately when it comes to successful modernisation, London must be able to match vision with execution. This kind of technology build for a core activity needs to become par for the course.
The near-term consequence of the failure to successfully deliver with CGI is that the non-user friendly and clunky PPL will remain in place for longer – with sources suggesting that a transition to the new system will not now be attempted until the quiet period of summer 2022.
This will represent a delay of six-12 months based on the prior schedule of H2 this year, and one would expect a significant (although currently undisclosed) cost overrun.
Sources have said that the scoping and design work will be re-usable if a new technology provider is brought onboard.
At this stage it is being suggested that all options remain on the table, creating scope either for a tender to be reconvened, or for one of last year's unsuccessful bidders to be engaged.
Another intriguing possibility would be a partnership with an existing platform. Whitespace, with its slick UX and established proposition, is likely to have its advocates and is believed to process around 5% of London electronic risks at present.
One source also suggested that marine-only platform InsurWav – the joint venture between EY, Maersk, Microsoft and others - could also be a contender.
How ever PPL chooses to proceed, it will want to move quickly and decisively to ensure that time is not wasted and to re-establish confidence.
Challenges of change
Worse even than the opportunity cost and increased expense of the delay is the symbol this provides of a marketplace that has again been unable to get the basics of modernisation right.
One of the central challenges of change in the London market is the complexity of the ecosystem and the sheer number of participants.
Maintaining broad-based support from the key constituencies is critical for modernisation to have a real chance of success.
This setback risks undermining the market cohesion that had been built. It also sends the wrong signal to the London market's underwriters, brokers and ultimately its clients at a time when EC3 is trying to smoothly manage the transition to a hybrid workplace.
We have talked about 2021 as a year of delivery around market modernisation – and in particular around the Future at Lloyd's which excludes PPL – and have been waiting for the rubber to really hit the road on the big projects.
Now that it has, we have an early red flag on the market's ability to execute.
I do think, though, that there is an important positive to be taken away from this episode.
The easier course here for the PPL board would have been to just keep going.
PPL, Lloyd's and the trade associations could have rolled out what CGI built and mandated its use. Then, sometimes if you say loud enough that you have won, people somewhat removed from the action think you have won.
The PPL board opted not to try and do that. It decided that the London market's practitioners should not have to put up with another sub-standard piece of technology.
If there is a mantra underlying the call they took, it is that it is better to do something right than to do it fast.
And as much as it is better to do things right and fast, the decision to draw a line in the sand on quality is one that can be respected.
Having chosen to do so, PPL of course is now under pressure to deliver technology that lives up to that billing.
The importance of doing so cannot be overstated. For the London market to survive long term, it must ultimately land the transition to digital, and this is a key piece of that puzzle.
Market forces will not give it an endless chance to get it right. As such, London must raise its game – and it must do it now.