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Adjusting the LMP to shed more light on the Grey Book of IT

The London market reform process known as LMP is liable to suffer because IT practitioners do not know what is expected of them. The time is long overdue to tell them exactly what they need to do, argues JEFF WARD of TriSystems.

LMP, THE ambitious plan to modernise the London insurance market, is up and running at last. After years of talking, the new LMP Slip and the General Underwriting Agreement are available for use. Although take-up has been slow, the leading brokers are hoping that 90% of London market risks will be placed on the new slip by the end of the year.

Anyone who wants to see London's insurance community prosper will wish the project well. LMP is about greater clarity, transparency and speed, and lower costs. Whatever its imperfections, it is the only show in town. The organisations driving the reforms have shown an impressive willingness to be flexible and take on board constructive criticism, and they deserve support.

It is all the more baffling, therefore, that there has been almost total silence on the subject of information technology. "What?" I hear you cry. "Haven't you read the Grey Book?" (The Grey Book provides guidance on LMP's systems requirements.) Well, yes I have, actually, and I'm still a mite confused. And so are most of the IT representatives of the insurers and claims managers that I know. You see, we're still not quite sure what to do at this point.

Implications underplayed

LMP has consistently played down the IT implications of the reforms, because the aim has been to minimise the impact on systems. That has not stopped supporters of LMP from acknowledging that the process will depend on syndicates, companies and brokers making the necessary IT changes. To quote the LMP website: "Although LMP is primarily a programme of business change, to enable the full vision to be implemented it will need to be supported by technology."

Most people remember Electronic Placement Support. EPS was largely an IT-driven initiative to bring efficiency to the London market that failed because it took insufficient account of business imperatives. Will LMP prove to be its mirror image - a business-led process that suffers because it underplays the IT dimension?

To avoid being over- critical, one should recognise the immense size of the challenge. Re-engineering projects can take an age, even with groups that are small and well directed.

One of the most important tasks in situations like this is to manage expectations. LMP originally gave the impression that it would start to deliver big wins in a short timeframe. Its own self-imposed deadlines were too ambitious. Maybe the idea was to galvanise the market, but, when it missed its own targets time and time again, it undermined the whole vision.

It is also fair to acknowledge that LMP appears to have regained momentum thanks to the introduction of the new slip and the huge will to see it succeed. Even so, much more needs to be done to spread the message, especially among IT practitioners on the subject of what they need to do now, at a detailed level, to get started with LMP. Never mind the grand strategy, the vision and the acronyms. What information, as a bare minimum, does Reinsurance Co Limited need to capture off this new slip to be in business?

If the IT community is to deliver, it needs more detailed information. Systems people have to know unequivocally what changes they must make to enable them to handle all eventualities. There have been many LMP workshops for underwriters, brokers and claims handlers. But only a couple, to my knowledge, for IT practitioners. They were professional and informative, but only a small fraction of the market was represented. Everyone else is probably sitting back at base waiting for some sort of a definitive instruction manual to arrive on their desks.

The Grey Book

To help enlighten us, we do have the aforementioned Grey Book. However, although my company has a large number of London market clients, I have yet to meet any market practitioner who has done more than glance at it.

The Grey Book is in its own way an impressive document. It certainly contains a welter of strategic information. Unfortunately, it does not answer some very important questions. For example: how much will it cost a company to change IT systems to accommodate LMP?

No doubt the argument will be put that it is impossible to generalise. Each company and syndicate is different in terms of both size and needs. Fine, but we are still entitled to a rough estimate of what is involved and, therefore, what it might cost a typical London market operation to get going with an LMP slip, follow through with some LMP claims and stay within the rules. Is it £10,000, £100,000 or £1m? The question of cost cannot just be ducked.

In any case, the Grey Book is more than a year old and has to some extent been overtaken by events. The new slip has appeared, for example, requiring more additional data elements.

Repositories

Repositories are central to the LMP vision. Their job is to provide a secure electronic home for all the information unstructured as well as structured needed to reduce dependence on face-to-face meetings. Typically, they are where underwriters and brokers will go to gain access to information relating to specific risks and claims. Repositories are an essential part of the vision that will lead to a faster, less costly, e-capable marketplace.

There is, however, an important caveat. Underwriters and brokers are notoriously impatient with any technological innovation that appears to waste their time. There is little tolerance of systems that are complicated or fail to work smoothly. User-friendliness is the order of the day. The onus is on IT departments to produce "one-click wonders" - environments that are as easy to use as a conventional Windows-based interface.

Because some people have talked about a "London market repository", there is an understandable tendency to think that they are talking about one discrete project. In practice, we are talking about many. Individual brokers, re/insurers and third-parties are already constructing individual repositories, each one with its own index, protocol standard, presentation interface, and so on, making it potentially very difficult to integrate systems. We urgently need guidance to prevent a proliferation of different standards.

Above all, we need a credible, timetabled assessment of where LMP has got to, where it is going and how it is getting there; and where information technology fits into the picture.

The emphasis has to be on "credible". When LMP was launched in mid-2000, we were told that the reforms would be in action by that year's renewal season. Expectations that could not be fulfilled were raised and then dashed over and over again as LMP 2000 became LMP 2001 and then just plain LMP. People lost interest, and, for some, the project lost credibility.

So let us sit down and talk through what this means in practice and in detail; and this time we should be realistic. IT departments need to own and have confidence in their part of the process. LMP may not be IT-driven, but in the 21st century it is an aspect of change that cannot be ignored.

Jeff Ward is director at TriSystems, a supplier of software products and services to insurers and reinsurers.

-  Insurance Day