Clare Eades Financial Services, Market Update, Business change...
In a market that likes a buzzword, 2016 was a year in which the Insurance market excelled itself. Insurtech, blockchain, digital, artificial intelligence to name but a few are words that now crop up with unfailing regularity in any Insurance conversation. Vocabulary developments aside, the biggest challenge that remains across the market is one of commitment and making much talked about change actually happen. At industry events, industry specialists repeatedly maintain that the market needs to change to uphold competitive advantage; the question for 2017 is; will this be the year when that change finally happens?
Attracting new talent; Insurance vs. innovation?
One of the key topics we are often asked to discuss with our clients is how to attract new talent to the London Market. When hiring into the Lloyd’s or London Market our clients have always struggled with two key needs from their prospective employees; industry knowledge and innovative ideas. Unfortunately the former has always been the priority and introducing new ways of working and innovation from other industries such as retail or manufacturing has not been as prevalent in the market as some would hope. Saying this, there are the signs that this may be beginning to change.
At the tail end of 2015 we started to see more clients expressing an interest in non-Lloyd’s experience. Throughout 2016 some clients hired change professionals from a variety of industries and consultancy backgrounds, not based on their insurance knowledge but the innovative ways of working and ability to promote thought leadership that they could bring with them. We have also started to see a drive from the Corporation itself. At the Dive In Festival, we listened to an excellent seminar where representatives from Lloyd’s said that the market should always be asking “Do we need insurance experience for this role?”. If the answer is no, let’s expand our horizons, harness the opportunity, and make the market relevant to the 21st century.
The contract market
In general, 2016 was a very busy year for IT & Business Change Contractors in the UK Insurance Market. The year began with the 1st January Solvency II deadline which meant there was a familiar demand for SII experienced contractors to help Insurers embed their newly compliant processes. The remainder of Q1 brought particular emphasis on P3 reporting experience. We saw a huge demand for Project Managers, Business Analysts and Developers who could help organisations successfully manage their ‘tactical’ P3 solutions but also select and implement more robust ‘strategic’ solutions in the form of Analytical Reporting Systems (both bespoke and 3rd party solutions).
Specifically, in the Lloyd’s community, all market participants have been involved in the various workstreams of the TOM programme. This programme has delivered a new technology solution for electronic placement, strategy to achieve one touch data capture and enhanced shared central services. This has seen a rise in the demand for skilled change practitioners with expert knowledge of how Lloyd’s of London works (Delegated Underwriting knowledge in particular) that also have the confidence to tackle a programme which affects more than one organisation. Organisations have therefore competed for the ‘best talent’ within Lloyd’s and the rates contractors have achieved through involvement in the wider TOM programme have been higher than the market average as a result. This trend looks set to continue into 2017.
The rise of InsurTech
Investment in insurance technology is booming and InsurTech seems to be on everyone’s agenda. It’s set to have a big impact on insurance providers around the world. Coupled with this, global investment in financial technology, FinTech, continues to soar and insurance is emerging as its next big target market. Investors around the world poured US$22.3 billion into fintech deals last year – a 75 percent leap from 2014. InsurTech attracted around $2.6 billion of this outlay. This is still a small slice of total FinTech spend but it’s a big step up from the previous year’s $800 million. And the trend looks set to continue into 2017 with businesses recognising the importance of innovation to achieve competitive advantage. Nearly 50 InsurTech deals alone were sealed in the last quarter of 2016.
The Insurance industry is vital to the global economy but it can often trail behind other sectors in adopting new technology, for instance embracing digital technology. It’s advisable for Insurers to start investing and innovating now in order to get ahead of the competition and attract new customers. The continuation of a soft market and pressure on rates will undoubtedly mean more new arrivals to the industry, capitalising on the sectors conditions. In particular, will the Lloyds and London Market start innovating and adapt fast enough to keep these younger, sleeker and more efficient competitors at bay?
The recent confirmation from May that the government wants Britain to leave the single market and the triggering of Article 50 in a few weeks’ time is bound to prompt a few challenges in the City boardrooms as a picture of the future begins to crystallise. We know that some companies are already looking to set up a European base to bypass single market issues. Last year we saw a lot of back office business moved to regional areas outside London as part of cost cutting exercises. 2017 may be focussed on the planning of possible alternative European offices and exploring the effect on the London market. There will undoubtedly be an impact on the business transformation and change sector with some large scale project opportunities emerging.
Overall 2017 looks set to be a busy year for those operating in the IT and business change sector of the Insurance industry. The chance to innovate and become industry leaders is there to be seized by the bold. Whether that innovation opportunity is maximised by the introduction of talent from outside the Insurance market remains to be seen, but the signs are hopeful for 2017. Finally, whatever the degree of reluctance for change, external factors like Brexit will make sure that everyone in the sector is forced to explore the way they do business in 2017 and beyond.
For further information about any of the topics covered in the report, or if you would just like the opportunity to catch up with me, please get in touch: Clare Eades, firstname.lastname@example.org