Update on business reform Market Reform Forum Update on business reform 14 December 2004 Andy Brookes Lloyd’s BPR

Objective: up to speed in half hour…… Accounting and Settlement – coming next Electronic Claims Files Contract Certainty and Documentation LMP slips Kinnect Review of 2004; high level plans for 2005

Principles underpinning reform Reduce ‘Londonisms’: international firms must buy-in – governance role Change requires authority and a degree of neutrality: individual firms cannot do it alone; Lloyd’s and the Associations will lead Commitment to co-operate essential, on design and implementation Network effects: a convoy for implementation Cost / benefit case is rarely convincing on its own. FSA – the ‘smouldering’ platform. Transparency – the (now) burning platform Minimum requirements; don’t ‘over satisfy’

Overall approach to market reform Drive standards for data and harmonisation of process LMP slip; A&S; claims management; ACORD work; contract certainty initiatives Build supporting electronic infrastructure, throughout the life cycle of a contract A&S; electronic infrastructure for claims (CLASS, ECF); Kinnect Result: transparency in processes and performance. Then market firms and trading partners can measure and manage LMP slips, policy production, A&S take-up, claims processing

Electronic Claims File XIS development work XIS started repository enhancements work 1st Oct (£1.6mn development and implementation costs) Contract schedule for CLASS for Lloyd’s going to managing agents for signature (total spend £600k) XIS started enhancements on CLASS for Lloyd’s 1st Nov Governance – not simple, but should work Claims project board set up; working with LMA Systems Delivery Group Market associations – LMA, LMBC, IUA - groups in place Line of business practioner groups Working on the implementation timetable XIS phased delivery of repository functionality Categorisation (Q1); search capabilities (Q2) DRI in July 2005 Which firms for which lines of business?

Contract Certainty and Documentation 4 Process options identified by the CCSG XIS involved earlier/quicker is the focus Potential initial implementation areas identified by LMBC documentation overview committee (DOC) and CCSG – 300 risks starting Q1 2005, include ‘old’ way to assess impact. Planning underway. Implementation guide on LMP web site Performance monitoring group has made initial proposals regarding measurement for London Market Standards Committee Policy checking by XIS: needs to be explicit and earlier Lloyd’s and XIS codifying the checks; rationalise; publish performance data. Binders first – early data indicates high rejection rate

LMP Slips November BSA headline (sneak preview): 88% Formatting hit 95% (contract certainty, process efficiency) Up for firms that the team has seen Likely to continue to check 25% of Lloyd’s slips in 2005 “Persistent underperformance” LMP slip a year on – minor changes to update Implementation guide in discussion with LMBC prior to publication Thematic work Claims parties Problem area “claims agreement party”: not Lloyd’s 1999 UMR on Panel 1 Period (include time zones) Law and Jurisdiction: still a problem area LMP slips for binders Check list in production; publication shortly

Measuring reform Purpose of measurement Trustworthy data (vs. “I’ve heard it takes…..”) To drive process improvements Provoke firms to improve performance – measurable targets where possible Measure impact of reform agenda Dimensions Timing; Quality; Cost; Satisfaction – customer service survey Sequence of delivery LMP Slips – more of the same Document production; XIS policy checking; start with binders Use of A&S and Claims electronic infrastructure Overseen by the London Market Standards Committee Medium term: post project rationalisation What data has the MA’s and Brokers got?? Market participant responsibility - Commit resources with the necessary skill to produce requirement definition documents - Must recognise and progress market wide initiatives – help us to own and communicate solutions - Must integrate the project plans into their own plans - Must change internal processes in order to maximise the benefits - Provide and accept leadership: MRIB, Lloyd’s, Kinnect Democracy comes later

Kinnect November 1 release Went well – enhanced placement process: harmonised business process; rough edges smoothed; market acceptable Next major release 6.1 April 2005 – complete slip preparation etc Hiscox signed-up; live January (not December) Working on endorsements Principles agreed; design end-January Q2 delivery was aim – now September (or slightly earlier) User adoption is key: Kinnect as core process Step by step adoption plan agreed through H1 Additional risk classes H2 (poss late H1) 2005: terrorism; international property Tiner (FSA) speech on contract certainty – core objective for market place over next two years Kinnect is a version comparison tool; wordings assembly; collaboration tool for XIS checking

What did we get done (and not done) in 2004? Failed to do (so far) LMP Slips and GUA Compliance 88 % - heading for 95%? Audit Team sampling 25% - working well Binders for 01/01/2005 – just Initial ACORD standard – but late New liability schedule (marine) for use with GUA LMP template for Lineslips ACORD standard for all classes Contract Certainty and Documentation Contract Certainty report issued and market wide Steering Group formed R/I and Marine reports done ‘User Guide’ on website Lloyd’s and XIS codifying policy checking Put in place concrete changes to improve contract certainty and policy production Lessons learnt: data essential – measuring slips gives traction and has been used to change behaviour; getting governance right essential – sufficient to give legitimacy and market sponsorship and expertise, not so much that it collapses under its own weight; communication – details of what has been delivered, who is doing what, what is difficult – essential and has not been enough. Accounting and Settlement Detailed design progressed well after initial delay – published December Funding nearly finalised – on critical path? Implementation timetable – MRIB aiming for end year Start build, first A&S deliverable Claims ACORD interoperability standards - vital XIS agreement (for infrastructure improvements) - painfully slow Small number of ECF pilots in progress Common London standard (LMP claims vision) Italics = not planned, but significant

Market reform objectives for 2005+ Compliance checking – push for 100% accuracy (Q4) Implement LMP standard for Binding Authorities (Q1) and Lineslips (Q2) Define more of the content of LMP slip (on-going); put this into ACORD data dictionary (Q2); sponsor incorporation of LMP slip within ACORD placement message (Q3/Q4) Further standardisation of the placing process for endorsements Fully claused slip used for several lines of business (initially 300 risks; Q1-Q2) Policy production; codify XIS policy checking (binders, Q1; other, Q2); publish statistics on checking process(Q2); track and reduce error rates (H2) Agree approach to Legacy wordings (Q2) MRIB to set out timetable for phased implementation (At minimum) new procedure for premium (Q4?) Complete phased roll-out through 2006 Implement Electronic Claims File (repository) – (Q1 2006) Implement CLASS at Lloyd’s – (final deliverable Q1 2006) Drive implementation by lines of business; 10% electronic (Q4) Explain plan for common claims procedure in London (Q4) Agree formal training programme with CII (Q2) Measure use of new infrastructure and (hence) business benefits (on-going) Ramp up communication (on-going) LMP Slips Contract Certainty and Insurance Documentation Accounting & Settlement Risks and controls….. Much like this year. i) XIS say the costs are £9m, prolonged hiatus as the market tries to get those costs down. Lots of stakeholders involved and no one controlling the process. ii XIS failed to deliver to on the software. iii Despite all our efforts, the design signoff finishes up being prolonged rather than taking a week. iv. MRIB failed to deliver their firms. Claims Other

Update on business reform Market Reform Forum Update on business reform 14 December 2004 Andy Brookes Lloyd’s BPR

What you need to do Different projects, different action required Get information, get it to right place Who’s doing what: clarify responsibilities Who is signing to pay for A&S? Who is digesting A&S design (IT and business)? Next year’s plans, budgets, IT programme Your suppliers Who is responsible for the change programme? What needs to change? (IT, processes) = coherence; getting the benefits Training