Susanna Fraser-Kuipers, Director of Client Services at Policy Works Inc., has consulted with dozens of brokers, coverholders and MGAs about their business, workflows and tools to manage their Lloyd’s Canada book. From the newly minted to experienced coverholders, Susanna has worked with them all. Below she shares what she's learned.
What are the most common trends you see with Lloyd’s coverholders?
Two things. First, the need to do business more efficiently. Almost every Lloyd’s coverholder is looking to find ways to stay competitive and profitable. Automation and standardization are two words I hear a lot.
Secondly, brokers are placing more business with their Lloyd’s contract. Lloyd’s is now competing with domestic markets for a bigger piece of the commercial pie. Fundamentally, all brokerages are sales organizations. The more efficiently a brokerage manages their Lloyd’s book, 1) the more money they make on that account, and 2) the more time the team must generate new business.
How does this compare with the Lloyd’s coverholders over the last 5-10 years?
The biggest difference over the last 5-10 years is how brokers are viewing their Lloyd’s market. At one point, everyone viewed Lloyd’s as taking the hard to place, or complex accounts. Not any more.
Today brokers are placing smaller, commoditized type risks with Lloyd’s. Gone is the stigma of Lloyd’s only being for those certain types of risk. This is echoed by Sean Murphy, Attorney in Fact for Lloyd’s Canada, who is making brokers know that Lloyd’s has an increased appetite for commercial risks.
What this has done is shift the conversation internally to, “How much are we spending to make that extra commission?” Now that brokers are writing more, but smaller risks with Lloyd’s, the need for efficiency is greater than ever.
You’ve consulted with dozens of Lloyd’s coverholders across Canada. Is there anything these brokerages share?
At the highest level these brokerages tend to be, or position themselves as, one of the premier shops in their region. To become approved as a Lloyd’s broker requires an extensive review process. So yes, there is a certain level of sophistication with having a Lloyd’s contract.
From an operational standpoint, these brokerages have created a process for managing their Lloyd’s business. This isn’t always an easy thing to do. You must understand that being a coverholder really means that you’re acting like an insurance company. So, the challenge is to think and act like a company, not a broker. This includes the processes you use to manage the in-force lifecycle. That can be hard because most brokerage systems and processes are designed as an intermediary not an issuer.
That said, when you start to drill deeper, there are really two camps of Lloyd’s brokers:
- those who are automated, and
- those who aren’t.
This is where you start to see differences emerge.
Regarding non-automated Lloyd’s coverholders, what are the gaps in their workflows?
There are several. But many brokers might not even realize that these are gaps, or inefficient points in their workflows. Here are the most common ones I see:
- Multiple re-entry of data throughout the policy lifecycle, especially when reporting
- Difficulty in calculating pro-rata/short rate calculations for subscription policies
- An unreliable policy numbering system
- No locking down of documents
- Difficulty in creating professional documents
- Inefficiency when creating endorsements
- Lack of a standardized process for managing policies
That’s not exhaustive. Not every broker suffers every gap. But when you start to see a couple of these inefficiencies, the effects start to compound.
What makes a Lloyd’s coverholder succeed?
Two things based on my experience. The first is their view of Lloyd’s as a market: the successful brokerages don’t limit themselves in terms of their view of what can be placed through Lloyd’s. They challenge the notion that Lloyd’s is for larger, perhaps harder to place risks. Instead, they are placing more and more of the smaller-type business with Lloyd’s.
The second is having an operational focus that complements the business focus. The more efficiently a broker can write a piece of business with Lloyd’s, the more profit they make. It’s really that simple. The successful ones realize that “making more money” can mean spending less to write a given piece of business.
Of course, some brokers will say that salaries are costs, and salaries (for the most part) are fixed, so really what is the benefit of making someone more efficient? My reply: opportunity cost.
The real cost is the opportunity cost of not writing more of business. Some costs may be fixed, but outcomes and achievement vary greatly even if the costs stay the same. What would the difference, in terms of revenue and profit be, if just one more risk a day could be processed? It’s not the one big sale, but the profitable management of many small contracts that will tip the scales in this soft market.
Also, better systems can be run by less and less expensive people. Lastly, when brokers need to recruit, that system will get them the best-of-the-best because the new employees can do "important" and "interesting" work since the system does the boring, tedious work.
How does technology help a broker, coverholder or an MGA with a Lloyd’s contract?
In my mind, there are really two levels within any brokerage where technology helps:
- Business; and
Most principals are interested in improving their business, whether that be growing their book (top-line) or improving how efficiently they process the business (reducing costs or bottom-line). Business goals are always top of mind. Few business owners wake up in the morning thinking, “I really need to find a better way to create endorsements, or manage the process of subscribing a policy.”
What wakes them up (often in the middle of the night) is, “How am I going to make more money? How am I going to grow? How am I going to compete for that limited business?”
At Policy Works, we tend to view technology, or the software, as the platform that enables business growth. What I mean by that is software is a great tool when properly and consistently used. The features you’ll find in our solution - like Lineage uploading or professional documents or automating the subscription process - will help Lloyd’s coverholders achieve their business goals, regardless of what they are.
It’s about matching business goals to the operational activity to achieve the required outcomes for success.
Why is a partnership with Lloyd’s coverholders so important?
When you work with Policy Works, you’re not buying software. You're gaining a partner with best practices and a platform to streamline your commercial business. What you’re really buying an unparalleled amount of expertise regarding automating, standardizing and improving your Lloyd’s business.
Susanna and the Policy Works team have been working with Lloyd’s Canada and Lloyd’s coverholders for over 20 years. In that time, we’ve learned a lot and we’d like to share some of that knowledge with you. Our free eBook, “Lloyd’s Coverholders, are you guilty of these 5 Misdemeanours?” explores some of the common mistakes picked up by auditors. If you’d still like to know more, contact us for a demo.