EXL redefining London Market Lloyd's business around data and AI
The new digital age has finally dawned on the London Market, and digitalization is moving ahead at pace as Lloyd’s insurance marketplace fights for relevancy on the global stage. Highquality data will lay the foundation for more efficient ways of working across the marketplace with new Lloyd’s digitalization standards, Blueprint 2.0. But while the carriers and brokers are keeping an eye on regulatory and technological change driven by Lloyd’s, they are also on their own individual digital journeys. Operations management and digital and analytics services specialist EXL, with its unrivaled knowledge of the insurance domain, has found a niche in serving the digital needs of the most complex and uncommon commercial risk of London Market participants.
London Market participants are in a race to redefine the business, and it’s all about who can generate and make better use of data
The specialist London Market is where complex, low-frequency, high-severity risks are insured. According to Lloyd’s, the London Market structure encourages innovation, speed, and better value, making it attractive to policyholders and participants. At these intersections, data becomes an underpinning enabler for positive change. Harnessing data has emerged as the critical goal for London Market insurers, including
- Addressing future post-bind data needs, Blueprint 2.0,
- (Re)examining the spaghetti-like plethora of legacy data for better operations, and
- Harnessing data for a more efficient and effective pre-bind world.
In the age of real-time data and instant decision making, innovation for London Market participants is about absorbing incoming application data, enriching it through external data sources, analyzing complex market dynamics and pricing considerations to facilitate fast and smart decisions on underwriting risk, and driving operational efficiency to better serve policyholders and process claims speedily in sync with regulatory changes.
Bringing artificial intelligence (AI) and data transformation to the prebind process can unleash tremendous efficiencies and performance improvements
The pre-bind process is where the greatest operating costs lie, and fundamentally this is the biggest challenge for the London Market. Underwriters and their syndicates must work hard to make informed judgments of the risk undertaken and accurately price the risk. However, most specialty carriers have a complex operating architecture underpinned by a patchwork of legacy systems. In our conversations with market participants, we learned that the operating model is stymied by unstructured data, manual triage, a complex array of back-office systems, and incongruent technologies and platforms supporting piecemeal operations.
Flooded with APIs built to different standards, the market resides in a complex web of distinct broker, carrier, and market portals. The unfortunate result of this complexity is highly paid and experienced underwriter teams working on data entry activities that shouldn’t exist in the first place instead of focusing on pricing and risk analysis.
"It’s about getting data in a timely and accurate way using EXL’s Insurance expertise and their Xtrakto.AI tool. In my opinion we can get there far quicker than people think we can. Is there a cost benefit opportunity? Without a doubt yes, but for me the real value is building a better data asset that helps generate better underwriting insights and therefore make more informed and timely decisions."
– Nick Hutton-Penman, Deputy CEO at Tokio Marine Kiln
London Market leaders need to consider data architecture driven by business goals
Getting data to read efficiently is only one part of the challenge. Data is only as effective as its accessibility to business groups. Underwriters need access to claims data, pricing needs to use quote and policy data, and finance needs all the data additional to cashflows. Therefore, insurers can’t treat in isolation for a single use case; they need to be able to bring it together and make it work across several user groups.
The process of integrating data for wider business use has many challenges. Given the fragmented nature of systems, user groups, and data, inbound data is often poorly structured, suffering from validation issues and incompleteness. Therefore, at the top, there must be strong governance processes to manage disparate data sources and bring them together to work for the entire business, not just specific user groups.
Secondly, data needs to be combined with analytics to help decision making. Being able to process a pre-bind quote doesn’t mean it’s business that underwriters want to write. To complete the workflow circle, the data needs to be read and acted upon quickly, and this is where analytics around submission triage comes into play, giving a seamless route to underwriters only focusing on business they want to write.
Data is the holy grail for future transformation in London Market, and participants must have the right data strategy to see success in their transformational journey
As London Market insurers face a critical challenge in legacy data gaps, historically, only a fraction of the information has been captured accurately in quote and policy systems. Insurers need to take a strategic decision on whether they want to go ahead with efficient data capture on a go-forward basis or retroactively. As we know, past data trends define predictive models’ outputs, and they are critical for the success of business use cases.
"The Lloyd’s of London (re)insurance market is still steeped in tradition, with brokers and underwriters often relying on face-to-face interactions to do business. This is the way it’s been done for more than 300 years, and many deals still require brokers to walk the Lloyd’s floor to get them done."
COVID helped to drive some element of change with the mass adoption of writing risk electronically. However, market traditions are starting to evolve, and the way (re)insurers and brokers do business is changing, and and we are working with Canopius on this journey. We’re introducing the right technologies to demonstrate a more effective way of operating. There’s a whole new world of self service and digitalisation that can be implemented, but we need the foundational data right to drive our business forward and that is our major focus, preparing us for the next step of our digital journey.
"We engaged with EXL who specialise in this data transformation. However, it also helps that they have a deep understanding across the Insurance life cycle, and we can also leverage their digital capabilities within this vertical. “Great relationship, one team."
– Graeme Phillips, CIO at Canopius, an EXL client
For the future of these markets, it becomes imperative to have a defined data strategy, a data architecture to support it, and strong governance at the top to ensure quality. For legacy risk data, insurers can modernize submission processes to extract augmented datasets that can be leveraged for insights and model development for technical pricing and risk assessment.
As Graeme outlines, "We are thinking through how to get data straight into databases and systems that need them vs. having to use scanning and scraping technologies with manual processes. But before we get there, we need a strong data structure and foundation that would allow data to go in quickly and be accessible through self-service tools."
EXL is marrying its domain expertise in insurance with AI and serious data chops to hit the nerve of the unstructured pre-bind data challenge
In recent years, EXL has had an impressive run, as its innovation and investment in AI now show real benefits. Its solutions engineered around blending domain, AI, and data-led capabilities have made them clear winners in the insurance space. EXL has always known that the London Market needed to use data more effectively to write better risk. Demand was inherent for a long time, and different solutions have tried hard to tackle the challenges. In 2019, EXL reevaluated its toolsets and capabilities to position itself for the London Market. The service-provider-built, purpose-led data solutions such as its unstructured data extraction solution, Xtrakto.AI, targeted users, outcome, and value with tailored use cases for underwriting helping clients create a data-asset from unstructured data sources. EXL filled capability gaps to address the demand and cross-merged analytics and workflow capabilities to deliver a unified solution specific for these markets.
EXL augments its capabilities for specialist carriers with an ecosystem of custom tools and solutions around AI and data and analytics
EXL has proven analytical use cases in submission prioritization, cross-sell and up-sell, product recommender engines, pricing sophistication, and decline and NTU analytics.
EXL leverages underwriters’ and brokers’ 360- views to form a wrap-around service offering utilizing the core data asset to deliver a tangible business outcome to London Market insurers: GWP growth, loss ratio improvement, risk selection, and an improved customer/broker experience.
"We chose EXL because they had done a significant amount of work in London/ Lloyd’s Markets. They [EXL] definitely have traction in the market with their transformation toolkit including data ingestion solution Xtrakto.AI… it is solving a real market problem."
– Nick Hutton-Penman, Deputy CEO at Tokio Marine Kiln
EXL’s understanding of the market’s nuances helped the company design its solutions as modularized components rather than purely horizontal applications. We agree with this ethos of a purpose-led approach to problem solving. The December 2021 HFS OneOffice™ Pulse Study data in Exhibit 1 shows that global insurance carriers have ranked the key challenge for success of strategic or transformative initiatives is developing a business case.
"Our strategy has consistently been to ensure that our insurance domain knowledge and our AI and data and analytics expertise would work together to unlock real value in our clients’ operations. We are now outperforming the market and helping our clients achieve remarkable results, so we feel our strategy is being proven where it matters most."
– Mohit Manchanda, EXL’s Vice President and Head of Insurance for the UK and EU
First, EXL developed a model to process medical transcription using its AI and data science capabilities and then advanced its models to process more complex and unstructured data coming from marine, property, casualty, or other specialty business. With these components developed, EXL has a faster go-to-market strategy and can quickly adapt and customize for any specific opportunities arising in this market. EXL believes that agile technology can be easily scaled and reshaped for future needs and in accordance with any new regulations that might come into play.
The Bottom Line: Differentiating and winning in the London Market is all about making a smarter bet on risk selection. This isn’t just about more sophisticated financial modeling; it’s about data handling at unprecedented speeds. EXL’s success in this market is because it understands this all so well.
EXL is empowering underwriter and market participants with modern pricing and risk assessment tools and solutions. As it expands further into the London Market with its tailored solution, we believe that EXL will need to continue adding skilled social re-engineers to help its clients with navigating change—especially the human-to-human interaction in the deal-making phase of the London Markets. EXL will need to keep developing an ecosystem that makes it easier to help clients modernize and become more data-driven to gain a competitive advantage. Lastly, the service provider must continue to grow its alliances and further strengthen its partnership with standard-setting bodies like ACORD and others.
Reetika Fleming, Research Leader, HFS
Divya Iyer, Associate Practice Leader