LONDON--(BUSINESS WIRE)--Unsustainable operating costs and the evolution of the distribution chain are forcing London market insurers to adapt their operating models in order to remain relevant in a competitive marketplace. Across the London market, pressure is growing to reduce administrative and acquisition costs, prompting radical action at both the individual company/managing agent level and at the Corporation of Lloyd’s.
A new Best’s Market Segment Report, “Roles in London Insurance Market Blur as Participants Seek to Add Value” states that the roles of intermediaries, insurers and reinsurers are blurring, driven by merger and acquisition (M&A) activity and resulting consolidation, the accelerating use of technology and analytics, as well as a more flexible approach to the support and utilisation of capital. All constituents of the value chain are looking to get closer to the end customer and, in AM Best’s view, the winners in this evolving marketplace will be those that are best able to demonstrate the value they offer clients whilst minimising costs.
Catherine Thomas, senior director, analytics, said: “Underpinning the market’s efforts to reduce operating costs is increased use of technology and the digitalisation of the way risk carriers connect with the distributors of their products. The solutions Lloyd’s has outlined in its Future at Lloyd’s blueprint have the potential to create meaningful cost efficiencies and improve the experience of placing business in the market, but their successful implementation is subject to a high degree of execution risk due to the level of investment and cultural change still required.”
The report also looks at the way the roles of intermediaries and insurers are blurring. Thomas added, “Technological advancements have the potential to lower administrative costs associated with placing business in London, but acquisition costs also need to reduce if the market is to remain competitive. The length of the value chain is long, which has implications for costs as each party is compensated for their contribution to the process. In a market where the pressure to realise efficiencies is growing, so is the need to for all parties in the value chain to demonstrate the benefits they provide. This has driven a widespread blurring of roles across the London Market.”
Many of the issues raised in this report will also be discussed at AM Best’s forthcoming “Insurance Market Briefing - Europe” event on Tuesday 12 November, 2019, where Catherine Thomas will lead a thematic session on how London market insurers are responding to changing distribution trends, including broker facilities, the growth of MGAs and broker consolidation.
To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=291602.
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