E-Trading Platforms Challenges, Opportunities and Imperative - An InsTech London View - instech.london
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E-Trading Platforms
Challenges, Opportunities and Imperative
- An InsTech London View
About InsTech London InsTech London was founded in 2015 and has grown to become one of the most active networks driving innovation through the use of technology, data and analytics in insurance and risk management. The two executive partners, Matthew Grant and Robin Merttens, each have over 30 years’ experience of bringing new technologies into the global insurance market. Today InsTech London runs regular events (currently only digital due to the pandemic), a weekly podcast and newsletter and provides advisory services to its members. We are extremely grateful to our corporate members, now reaching 100, and an extended community of over 15,000 people who keep us honest and informed about what is happening in insurance, technology and beyond. Report Authors This report has been prepared by Robin Merttens and Puneet Bharal, formerly Product Director at RI3K who then spent a decade at ACORD and is now a freelance consultant. We would like to thank the many people who contributed information for this report. Disclaimer & Copyright The information in this report is drawn from a variety of sources. It includes our own experience, interviews and discussions at our many events. Further information has been gathered from public sources such as company websites and news items. We have not independently verified all of the information in this report and InsTech London assumes no responsibility for the accuracy and completeness of what is written here. This report is for information only and the views expressed here are not intended to be used as advice or recommendations beyond general observations of trends and themes. The reproduction of all or part of this report without the written permission of InsTech London is prohibited. InsTech London Reports The uptake and evolution in e-trading platforms is one of the ten themes we believe will be driving change in insurance in the next decade. This is the second in a series of reports we are producing aligned with those themes. The first was on Parametric Insurance and was published in September 2020. A copy of that report can be accessed here https://www. instech.london/insights/parametric-insurance-2021-outlook-companies- to-watch. The third report in the series will be published at the beginning of April 2021 and will focus on Location Intelligence. To learn more about InsTech London, our reports, themes, podcasts, recordings of our live events or to discuss hosting an event with us, you can find us at www.instech.london and contact us at hello@instech. london. If you believe that your business, or another, should be included in our future reports then please contact us by email using the same address.
Introduction
I was working as an insurance broker with Heath Lambert back in
2000 when Alex Letts approached me to act as a subject matter
expert and wingman for his insurance e-trading idea. Alex was
in the process of raising the seed capital to build an e-trading
platform from BRIT Insurance. We co-founded RI3K and our very
first PowerPoint was rather grandly entitled “e-Lloyd’s – the Future
of the London Market”. Puneet Bharal, who has co-authored
this report with me was one of our first employees and shortly
afterwards became our Product Director. We have both remained
in and around the e-trading platform space ever since.
RI3K was one of many propositions spawned during the dotcom boom and its resulting hive of
innovation and speculation as entrepreneurs and investors tried to define what was newly possible. As
commodities trading floors evolved into internet-based “exchanges” there was strong support for the
proposition that insurers and their brokers would be able to do the same.
As a global hub for reinsurance and specialty insurance, and because of its reliance on its physical
marketplace, the London market was understandably the focus of this activity and remains so today.
The Corporation of Lloyd’s itself funded the creation of the Kinnect platform, to modernise for the new
millennium. Regrettably, all the early insurance e-trading initiatives proved a false dawn for reasons we
will examine later in this report.
Nearly 20 years later there is palpably a renewed interest in insurance e-trading which is what has
galvanized me into writing this report. My observations pull on the RI3K experience and subsequent
insights gained in the last five years observing the insurance innovation world. While it might be easy to
just point at COVID-19 as the catalyst for the reinvigoration of e-trading, the truth is that the dynamics that
give rise to it run far deeper. We will examine these too in more detail later on.
The publication of Lloyd’s Blueprint Two in November 2020 and in particular, the Corporation of Lloyd’s
decision to back off from building its own e-trading platform and allow market forces to take their natural
course, has thrust a key industry trend right into the spotlight. It seemed an ideal time to look at what
history can teach us and to review current e-trading options and what they offer. Then provide context
around what is going on in the specialty insurance space generally and in particular examine how those
platforms align with the specialty (re)insurance industry’s current needs and the collective innovation
effort.
We have identified and list in the Schedules to the report the companies we know about that have
e-trading propositions relevant to the reinsurance and specialty insurance. If you believe you have a
relevant proposition we have not featured and you feel we should have please do get in touch.
This report is a combination of experience, knowledge and insights obtained over 20 years at the sharp
end of insurance innovation. As such it would not have been possible without the support of all the
companies and people I have met, spoken to or who have sponsored and participated in InsTech London
events over that time.
Robin Merttens
Partner, InsTech London
INSTECH LONDON E-Trading Platforms | 3
Contents
Scope 5
Structure 5
History of E-Trading Systems 6
A New Generation of E-Trading Platforms 7
Reinsurance Specific 7
E-trading with New Pricing Models 7
Platforms and the End Customer 7
Distributed Ledger Technology (DLT) 7
The Opportunity 8
Market Dynamics 8
Data Standards 8
Technology 8
Client Demand 9
Market Dynamics 9
Lessons Learned 9
Costs and Inefficiency 10
COVID-19 as an Accelerant 10
Lloyd’s Blueprint Two 11
Data Standards 13
Technology 16
Customers 19
E-Trading Platforms and the Brokers 21
Existing Independent E-Trading Platforms 22
Reinsurance Specific 23
Platforms with New Pricing Models 24
Platforms for the End Customer 24
Distributed Ledger Technology (DLT Platforms) 26
So, What Next? 27
Momentum 27
Spoilt for Choice 27
Data Standards 28
Technology Refresh 29
Digital Models 31
Conclusion 32
Schedule 1 - Market Leaders 34
Schedule 2 - The Contenders 43
INSTECH LONDON E-Trading Platforms | 4
Scope
The term “e-trading platform” means different things to different people both in and outside
insurance. For this report, we define it as a technology or a group of technologies that provide a
framework which enables a community of business partners, providers and customers to share
digital processes and capabilities for mutual benefit. We will concentrate our attention on platforms
that support many-to-many constituents (i.e.many buyers or their many intermediaries to many
sellers), rather than one to many.
As this is a very broad topic, we will be focusing on technologies for trading insurance in the
commercial, specialty and reinsurance segment. Thus, our report focuses on the London Market,
which despite being very traditional, has had and continues to see the most activity in the complex
risk space.
Outside of the scope of this paper are:
• retail and consumer products other than when they help identify a trend that we believe is going to
be relevant to the specialty and reinsurance sector
• single insurer or Managing General Agent (MGA) “portals”
• reinsurer proprietary facultative e-trading systems
• Policy Administration Systems (PAS) beyond considering them in the context of legacy
components linking to virtual communities. If you want to know who is who in the PAS space,
organisations like Gartner and Celent provide excellent assessments of all of these.
Structure
The first half of the report will look at the history of e-trading platforms. We will look at lessons learned,
the broader business and technology landscape, and then how customer expectations are influencing
platform requirements now, and into the future. We delve into the current state of play in the insurance
e-trading space, the issues the industry faces in driving broader adoption and make some suggestions
about how to get the most from e-trading platforms and the other technologies at our disposal.
The second half of the report precis the various e-trading platforms, their scope, proposition, progress
and level of industry support. This is presented in two schedules with Schedule 1 containing those
that we believe are already demonstrating market leadership (“the Market Leaders”) and Schedule 2
containing those that have brought interesting propositions to market, but struggle for support and/or
liquidity to trade with (“the Contenders”).
INSTECH LONDON E-Trading Platforms | 5
History of E-Trading Systems
The dotcom boom of the late 1990s to early 2000s manual data entry (and re-entry) with little if any
saw many industries start to move operations to true structured data capture and distribution. At
the internet. Most of those industries dealt with best, transactional e-trading systems enabled
physical goods, so the internet provided a new shop remote working by replicating (not removing)
window and a chance to shorten value chains. The existing manual processes, as well as most of
(re)insurance business involves the exchange of their inherent inefficiencies, onto webpages, and
only data and money so the benefits of the internet provided a one-to-many distribution capability
– to provide a framework for the more efficient with accompanying audit trail – a fairly limited
exchange of each - was seen as a big opportunity benefits case.
by investors and entrepreneurs alike. With the
absence of the logistical complexities arising from The scar tissue left after so many failed ventures
the need to deliver a physical product, the benefits and the shift in emphasis and investment into
should have been easier and faster to realise. huge market-wide modernisation and infrastruc-
ture projects deterred others from entering the
The theory has never really manifest itself in space for a decade or so. In the intervening time,
practice though. The insurance industry, parti- the evolution of insurance transaction platforms
cularly in London, has been grappling with the stalled with technical capabilities and user expe-
digitisation of its processes and the resulting rience stuck pretty much in early the 2000s. The
data handoff for nearly 30 years. There have limitations of the first generation of internet-based
been numerous pan-market e-trading system trading systems had been overcome by other
initiatives in that time, from EPS to Kinnect to G6 industries, refining, evolving and extending their
to Project Darwin to the London Market Target business capabilities through adoption and use,
Operating Model and Blueprints One and Two. becoming not only viable, but business-critical for
Around the same time as Kinnect, there were most sectors.
e-trading systems funded privately or through
industry-backed consortia, the first being CATEX Outside of insurance much of the rest of the
and the best-known being Inreon (a Swiss Re and business world, and indeed most consumers,
Munich Re joint venture), and startups eReinsure have accelerated their adoption of technology and
(a specialist facultative reinsurance market, now digitisation providing a wealth of resources and
owned by AmWins), and RI3K (a large commercial assets that insurance can leverage. The internet
re/insurance transaction system, originally funded is now a fundamentally easier place to inhabit,
by Brit Insurance, now owned by EBIX). There was from broadband to 4G mobile, from smartphones
also Broker21, eRisk, RiskClick and numerous to tablets, from fully hosted websites to focused
others. The only survivors are eReinsure and to a apps, from social media to streaming services
lesser extent RI3K which lives on in the guts of the the internet has truly become the environment of
Placing Platform Limited (PPL). During the same choice for business.
period, both New York and Miami tried to create
local “exchanges” which never really got going. Later, we describe how Cloud and web services
providers have democratized the internet and
Despite collectively consuming several hundreds helped to speed up development and deployment
of millions of US Dollars in investment, the for all, while federating costs based on demand.
maturation of the internet as a secure trading These modern technologies help simplify and
environment, and the various London market mo- accelerate solution build and roll-out, and federate
dernisation initiatives, e-trading systems created operating costs across shared global computing
little value for their financial backers and failed resources for latency, security and processing
to make any significant change to the way that elasticity based on need, using built-in tools,
(re)insurance is traded. To the extent that there resource sets and baked-in principles of data
were e-trading systems, their core capabilities access via APIs. This makes e-trading platforms
were a combination of direct messages, PDF fundamentally easier to develop and deploy than
document sharing, face-to-face discussions and ever before.
INSTECH LONDON E-Trading Platforms | 6
A New Generation of E-Trading Platforms
The first generation of e-platforms were a digital version of the existing processes. They had to
be designed that way because the biggest issue they faced was driving adoption and the only way
to get engagement was to provide a digital equivalent of what the market did. The new cohort of
entrepreneurs, armed with better technology and helped by lower barriers to entry have emerged
in the past few years with a new generation of e-trading propositions. These assume that there is
or should be demand for new platforms that help make the industry more efficient in a variety of
different ways, and enable new capabilities. We have identified the following different approaches
and themes to these new entrants:
Reinsurance Specific Platforms and the End Customer
Reinsurance has its own community, regulatory One of the big trends identified in this report
framework and needs. There are therefore a is that of involving the end customer in the
handful of platforms that have been designed transaction and therefore having them directly
specifically for this community, reflecting the par- linked into the e-trading platform itself. This trend
ticular dynamics of B2B reinsurance placements. is being driven by more demanding customers,
They seek to play across the whole process the availability of technology solutions that faci-
from origination – collecting and organising sub- litate it and the emergence of new distribution
mission data – through to the transaction itself models like em-bedded insurance and digital
by providing reinsurance specific workflows. We ecosystems. In this category we have detailed
feature Riskbook, Relay and Tremor in this report features on Insurwave, ICE InsureTech and iptiQ.
(with additional details about each in Schedule 1 – While we maintain that broker disintermediation
Market Leaders). We also provide details of Place is not a winning strategy, we are convinced that
Re, Extraordinary Re and Marrikel in Schedule 2 – value chain contraction is.
the Contenders.
Distributed Ledger Technology
E-trading with New Pricing Models (DLT)
Some new platforms go beyond delivering a digital DLT technology has the inherent potential to
transaction process and provide mechanisms help the insurance industry overcome many of
for pricing risks too. Eg. Tremor has at its heart a its challenges. Not surprising then that there
matching engine providing optimal clearing prices are several (re)insurance specific platforms
for reinsurance programmes based on highly built using DLT including ChainThat (adopted
complex price points. We also highlight in this by the Bermuda Risk Exchange in 2019) and
report the emergence of reverse auction models – B3i (an insurance industry consortium of some
so far only working in earnest in motor (see details 20 insurers who have collaborated on the
on honcho below), but surely with the potential to development of a DLT insurance platform). DXC
expand beyond retail lines. Marrikel and Akinova has DIP (Digital Innovation Platform) as a result
(see Schedule 2) also provide functionality that of its acquisition of Luxoft in 2019. There are
enables (re) insurance placements to be made more details on these in the Schedules too.
using complex auction techniques.
“There should be demand for platforms that will make up
for lost time and help make the industry more efficient in
a variety of different ways.”
INSTECH LONDON E-Trading Platforms | 7The Opportunity
There is now an immense opportunity to finally get e-trading established in the mainstream of the
specialty, commercial and reinsurance space. This opportunity arises from the convergence of the
following drivers:
Market Dynamics
• We have learnt a lot in the last 20 years about how to build and drive adoption of e-trading
platforms and this new generation of entrepreneurs can and is benefitting from that experience. As
a result, they will execute fundamentally better this time around.
• The insurance industry itself needs to address the inefficiencies of its processes and the
resulting cost base. The industry has been shielded from external disrupters so far but will not
always remain so, especially as other industries seize the opportunities to capitalise on new
technologies to offer risk mitigation as part of their quality assurance and added value.
• COVID-19 has acted as an accelerant of digital adoption and provided momentum for the adoption
of e-trading – a belated burning platform.
• Lloyd’s Blueprint Two reduces the likelihood of a market utility type approach and encourages
other platforms that provide compelling transactional solutions consistent with Lloyd’s vision.
• The influence of the analogue era workforce is waning and as a result, the cultural barriers to
adoption are declining.
Data Standards
• The specialty, commercial and reinsurance sector has had to operate without open data
placement/trading standards, with the details of insured objects and terms of trade often being
provided in unstructured formats. Existing trading models and practices are unlikely to address this,
even with Big Data and NoSQL technologies.
• However, data itself is not in short supply and as client industries increasingly incorporate cloud
technologies, Geolocation Positioning Systems (GPS), Internet of Things (IoT), Artificial Intelligence
(AI) and real-time sensors for on-going monitoring, the landscape for new business models evolves
for insurance clients and the insurance industry. All of these technologies can provide real-time data
that can be used to price insurance coverage, manage risk and assess claims pro-actively as well as
provide risk history. The original e-trading landscape did not make use of these technologies nor the
data and innovative risk transfer models they enable.
Technology
• It is easier than it has ever been to build a cloud-based platform using technology stacks
from leading-edge providers for costs that cannot be matched by traditional ownership models.
Microsoft Azure, Amazon Web Services and IBM enable entrepreneurs to leverage the most up-to-
date technologies such as AI without large up-front capital investment.
• The emergence of NoCode platforms like Unqork, FinTechOS and Mendix will only augment the
ability for companies to develop and deploy solutions and products more quickly and cheaply.
This is particularly useful for tactical deployments and proofs of concept.
INSTECH LONDON E-Trading Platforms | 8Client Demand
• Customers are demanding simpler purchasing and claims processes and are evolving their
requirements in terms of products and services. A different approach from the insurance industry
is required to meet these demands – enabled by new technologies.
Let’s examine these influences in more detail:
Market Dynamics
Lessons Learned
The pioneers who built e-trading transaction systems 20 years ago had to learn what does and does
not work, the hard way. Some of it seems obvious now, but much of what we know now was learnt
from bitter experience. This next wave of initiatives should be able to benefit from this knowledge. Key
lessons learnt include the following:
1. Liquidity – world-beating technology counts for nothing without a source of liquidity to drive
adoption. Adoption cannot be driven from the bottom up – in other words, (re)insurer pull is no
match or substitute for broker push (or any other major source of business). The truth is that Aon,
Marsh and Willis Towers Watson control so much of (re)insurers’ premium volume that they have an
overwhelming influence on whether an e-trading platform initiative will take-off or not.
2. Single broker platforms – although brokers hold the key in terms of liquidity, it is very difficult for
individual brokers to get (re)insurer support for proprietary platforms. (Re)insurers worry about
having to navigate multiple user interfaces and possibly integrate with multiple broker platforms.
They have not, therefore, embraced such platforms other than in certain niche areas in which those
brokers specialise.
3. Disintermediation – for other industries, the opportunity to cut out the middleman and link buyers
and sellers directly has been a prime motivation for creating transaction platforms. That is a
strategy that has been tried and failed in (re)insurance and is no more likely to succeed now than it
was in 2000 when Munich Re and Swiss Re launched Inreon.
4. Designing by Committee – we should now be in no doubt how difficult it is to build technologies
by consensus. There are great attractions to the idea that a market committee govern, manage and
oversee design and development, but we have learned from repeated experience that competing
priorities, changing requirements and human egos can and will derail even the best-laid plans.
Moreover, vendors seldom have the negotiating strength to challenge when committees steer the
wrong way. Designing and building by committee does not work.
5. Culture – the single biggest barrier to the wide adoption of e-trading has been the prevailing culture
of the insurance workforce. Many of the more senior and influential element of the workforce learnt
their trade in an analogue era and have shown considerable reluctance to adopt or adapt to a
digital model, and the leadership has either been reluctant or unable to impose change on them.
In addition, insurance has often been a closed shop, reluctant to bring in or learn from staff with
experience from other industries.
INSTECH LONDON E-Trading Platforms | 9Costs and Inefficiency
The leadership at Lloyd’s and in many of the worlds’ these inefficiencies and the resultant bloated cost
biggest insurers of specialty, commercial insu- base so far because it has been able to push its
rance and reinsurance risks have been concerned costs back onto the end customer in the premium.
about the industry’s high operating costs for a There is no market-driven compulsion to improve
decade or more and have therefore been in search or differentiate in terms of speed or quality of
of ways of being more efficient. service where ones competitors are just as
inefficient; the focus remains on cost base alone.
Many of the existing inefficiencies arise from This is exacerbated in London where progress is
the fact that the industry remains document-led, often at the pace of the slowest in the ecosystem.
not data-led, necessitating many manual tasks, This has enabled the industry to collectively “kick
often done multiple times by the counterparties to the can down the track.”
the contract. If insurers cannot obtain the volume
and quality of data to easily fulfil basic business This cannot last forever and indeed the conse-
functions like quote, bind and pay then they are quences have been manifesting themselves for
forced to run their businesses sub-optimally in some time with big corporates retaining more
terms of speed, quality of service and price. risk and the growing use of alternative methods
of risk protection. The worlds’ biggest technology
Current distribution models can involve se- companies are changing the nature of customer
veral intermediaries, each extracting fees or expectation throughout the value chain and have
commissions while providing data in the form of shown what can be done with data, service delivery
spreadsheets, PDFs and emails as the main means and understanding customers, albeit in other
of data handoff. While other industries have been industries.
using technology to shorten value chains, the
London Market has been embedding ever more
complicated ones through its growing reliance on
facilities such as Delegated Authority business.
The industry has been able to survive despite
COVID-19 as an Accelerant
The Corporation of Lloyd’s was forced by the UK Government Guidelines on avoiding non-essential contact,
to close the Lloyd’s Building in March 2020. With face-to-face underwriting abruptly ended brokers and
underwriters were forced into greater reliance on trading electronically through PPL, Whitespace and the
other approved platforms and to the surprise of the traditionalists, did so reasonably successfully.
Risks Placed on PPL per Week in the Last 52 Weeks
Source: Placing Platform Limited
INSTECH LONDON E-Trading Platforms | 10Cumulative Number of Lines Written on Whitespace, 2020
Source: Whitespace
As a result, PPL and Whitespace have both seen an encouraging uptick in adoption which has created a
sense of momentum that can be built upon.
Lloyd’s Blueprint Two
That brings us neatly to Lloyd’s Blueprint Two which was published on 5th November 2020, setting out
Lloyd’s plans for the future in terms of market infrastructure including e-trading platforms. We don’t
intend to regurgitate the report here, but just to pull out the proposals and issues that will influence the
future of transaction platforms in London and possibly beyond.
Lloyd’s intends to build a “digital marketplace” that will depend on five critical elements:
1. Highly intuitive user interfaces
2. Data standards
3. Placing process standards
4. Placing support services
5. A Digital Gateway
INSTECH LONDON E-Trading Platforms | 11Conceptual Architecture
Source: Lloyd’s Blueprint Two
Lloyd’s has dropped the idea first proposed in Blueprint One of building their own Complex and Simple
Risk Exchanges and instead intends to foster and support existing transaction platforms. They will
“support” these providers so that their platforms are designed (or re-designed) in a way that provides good
user experience based on research and feedback. Those platforms will be obliged to use a standardised
placing process and data standards and must be able to capture that data at execution so that it can be
made available as a seamless part of the placing process.
The transaction data will be passed off to a Digital Gateway to be provided by Lloyd’s that will both
validate the data and transfer it in the required format to the technologies that will be responsible for
automated downstream processing. This approach is strongly influenced by past experiences both
with e-trading and the last few London market initiatives. In particular:
1. Private enterprise works best – it is difficult to ever envisage one single utility in the middle of
the global complex risk ecosystem on which every stakeholder is willing to play. Anyway, as the
London market knows well, pan-market utilities and especially those that are effective monopolies
create more problems than they solve. The best platforms will emerge from letting competitive
forces take their natural course as long as the market is quick to support those that provide top
quality propositions. Blueprint Two appears to recognise this and should thereby encourage existing
e-trading providers and newcomers alike.
INSTECH LONDON E-Trading Platforms | 122. PPL as fall-back position – as we observed earlier, PPL has a lot of users and growing market
engagement. However, it is 20 years old and showing its age. Many brokers and underwriters
complain about its useability, lack of mobile support and poor data connectivity. It makes sense to
invest in re-platforming PPL to improve usability and ease of integration provided that can be done
in a way that does not undermine current momentum. Then there is a fall-back if open competition
fails to improve quality of provision.
3. Data and process standards – Lloyd’s can only promote this level of freedom and competition in
the provision of transactional platforms if those platforms can provide a standard contract data set
for sharing and downstream processing.
4. Downstream processing – remains a manual, slow and costly process. While we have highlighted
the market’s front office modernisation failures, back office modernisation has not fared much
better. If shaving fractions of cost is no longer enough, then the market needs to envisage a wholly
new approach.
5. Taking control – while initiatives like Blueprint Two require an element of consensus to achieve
buy-in and accountability, it is clear that Lloyd’s intends, to the fullest extent possible, to fund this
work from its own coffers and push through its agenda with some consultation, but the minimum
of external interference and committee-led torpor. Now that the e-trading part of the project is
more about defining standards than building technology, this makes a lot of sense. The placing API
standards output from the LM TOM off-shoot ‘API Factory’ has shown what is achievable in terms of
quality and speed with the right team, direction and indeed, operational independence.
Data Standards
The primary benefit put forward by the early advocates of e-trading was that it would enable the re-
use of data which could be input once by the instigating party and then re-used by all stakeholders
downstream. In other words, data could flow seamlessly from the brokers’ systems onto the e-trading
platform and then be used by underwriters throughout the process including a data set to enable
downstream processing. That has not happened and here is why.
Standards help industry players to establish a baseline for processes and data. Standards are expressed
in a variety of technologies and notations, each with its strengths and weaknesses. To spare readers
the technical intricacies of this discussion, we will simply express the general conclusion of 20+ years of
experience from various industries:
1. Document standards are not data standards and do not enable a digital paradigm
2. SOAP messaging has had its day. It has had limited take-up, is not easy to implement and works only
with XML.
3. RESTful APIs have emerged as the preferred data sharing protocol due to ease of implementation
and use.
4. REST supports a wider range of formats, including JSON, is generally faster and is widely used by
web service providers such as Amazon, Google, Yahoo and eBay.
INSTECH LONDON E-Trading Platforms | 135. As with all standards, success is not defined by design excellence but by implementation.
6. Implementation is made easier by success stories and low barriers to adoption which in turn is
driven by price and technical complexity.
ACORD is the largest insurance data standards-setting organisation. The ACORD business process and
corresponding data standards for accounting, settlement and claims (known as the Ruschlikon Initiative)
have seen reasonable take-up across the major global brokers and (re) insurers. However, the same
cannot be said for ACORD’s placing message standard (aka ‘GPM’ in London). That is partly because
most (re)insurers only fully populate their Policy Administration Systems (PASes) once risks are bound
and partly because the systems are difficult to integrate with.
Also, the persistent influence of the analogue era, in particular, the insistence on face-to-face negotiation
means that the industry thinks in terms of documents and not data. In the early 2000s the London Market
spent a great deal of time and money to ensure that there was contract certainty at the point of inception
for all clients. The result was a contract standard now known as the Market Reform Contract (MRC).
The MRC was intended to be an evolving standard, moving the market towards more structured data
over time, thus providing a key component of a digital trading paradigm. Successfully implemented as
a document standard, the MRC has not evolved into a structured data standard, as originally intended.
This absence of standardized and structured data is a central obstacle to the digitisation of the insurance
and reinsurance transaction. MRCs are the golden source of contract terms and are used to define
not only the parameters of the insurance (limits, excesses, covered assets, exclusions and so on) but
also details for administration (premium amount, premium currency/currencies, exchange rates to use,
payment terms, payment schedule, claims administration terms and so on) and downstream processing
and reporting.
The MRC format is so loosely defined, and so variable in its presentation by brokers, that insurers have
not been able to make the business case for integrating their PASes to e-transaction systems. There is
no strong sense that this situation is likely to change soon from the Broker side as many remain highly
resistant to implementing data standardization on the MRC. Thus, systems like PPL continue to use
PDFs to present and finalise contract terms requiring all parties to the transaction to take steps to
extract the data manually or use OCR data extraction tools and re-key into their systems. To date, the
capture of structured data is seen as an afterthought, a post-placement activity that is slow, inefficient,
error-prone and costly.
To achieve all the benefits of digital trading there needs to be in place:
• the technological infrastructure to allow systems to interact with ease
• structured and standardised data
• process standards around key processes
• an orchestration capability to keep the various systems in-synch
We are well short of having a sufficiently robust framework to achieve this right now. This is acknowledged
by Lloyd’s Blueprint Two which seeks to make a case for market developed API standards. However,
there is still a lot of work to do and the task is fraught with complexity:
• Developing standards is not easy or cheap, it is time-consuming and expensive. A dedicated
team of business data specialists will need to be funded and supported.
• Once data standards have been released, their on-going maintenance will also require funding.
INSTECH LONDON E-Trading Platforms | 14• Alternatively, the standards can be donated to a standards-setting body like ACORD for
maintenance, but that means relinquishing IP and control. ACORD is the natural home for such
donations, but its funding model is based on membership fees, with access to the standards
and implementation guidance only available to paid-up members, which is a natural limitation
especially in a world of ecosystems and embedded insurance which involves partners from outside
the insurance industry. If everyone is to have access why would members pay? We know from
experience that vendors will not pay for access unless required to, which itself limits adoption and
innovation.
• Standards require consensus - something the global insurance industry rarely achieves and even
when it does, does so over years, not weeks and months.
• This requirement for standards gets more complex over time, extending as it does now into
standards for DLT, APIs etc.
While we mostly bank online now via an App and can reasonably effortlessly connect our bank account to
our business accounting software, the equivalent is rare or nearly unknown in insurance. API adoption in
insurance lags way behind other segments in financial services not least because we don’t yet have the
requisite building blocks in place.
“API adoption in insurance lags way behind
other segments in financial services not least
because we don’t yet have the requisite
building blocks in place”
INSTECH LONDON E-Trading Platforms | 15Making the insurance industry “open” and easier to connect with is about more than core services
having APIs. We also need to build the resources and knowledge to facilitate making the connections.
This is an absolute top priority for the industry starting in 2021 with understanding what is required and
how to provide and fund it.
One of the reasons banking has been so much better at this than insurance is the emergence of
companies like Plaid. The Open Banking initiative created the opportunity that they skilfully identified
and exploited by becoming in effect an integration aggregator. They provide the middleware that
currently connects more than 3000 apps to more than 11,000 financial institutions through one single
API. We are not alone in believing that there is a massive opportunity for anyone who can provide
something similar in insurance. The ACORD Solutions Group (ASG), a services company spun off from
the ACORD standards body, has recently released its ADEPT product (ACORD Data Exchange Platform
and Translator) which is aiming to do something similar. While the ADEPT product is currently focused
on the functional scope of ACORD’s standards, it can be leveraged by independent solutions providers
as well as ASG so we are keen to see if its scope will be extended to support new interaction models and
datasets. Given Lloyd’s support for ACORD standards in the past, the ADEPT offering may also have a
key role to play on the Lloyd’s Data Spine. One to keep an eye on.
Technology
The role of information technology (IT) in insurance has evolved considerably over four decades. IT’s
original purpose was record-keeping – a convenient way to record and recover trading activity – a back-
office function recording something historical. By the 1990s more and more employees were given
access to a computer and the systems the company ran on enabling IT to develop beyond just core
record-keeping and start handling processes, especially those relating to finance and administration.
Then as we observed at the start of this report, the emergence of the internet and the ubiquity of
personal computers for employees gave rise to an opportunity to make large chunks of business digitally
enabled referred to as “The Digital Age”. High volume, low margin retail insurance business was the first
to go fully online, but as we move up the complexity scale, digital adoption has been slower. The Digital
Age has been characterized within our industry by:
• The adoption of models and processes that are simply a digital facsimile of paper-based, manual
processes.
• Mostly bi-partite models involving only the intermediaries and (re)insurers.
• Costly and complex methods of integrating on a system-to-system basis.
• Much of what we do with spreadsheets and PDFs is the equivalent of buying a CD to listen to music
or DVD to watch a film – it is putting the content onto a digital format, but still requiring specialist
machinery to use.
• Dependence on on-premises, legacy PASes sitting at the heart of outdated technology
architectures that are costly to migrate from, inflexible and make it hard to work with other
technologies. This is often coupled with an inability or unwillingness to imagine a technical
landscape separate from monolithic PASes.
• A reluctance to make the investment case for refreshing the technology infrastructure as there is
no competitive pressure to do so and the talent and funding required are hard to come by.
INSTECH LONDON E-Trading Platforms | 16A couple of decades of being in this holding pattern mean that there have only been small limited digital
initiatives which overlay the legacy stack creating “digital lipstick on a legacy pig.”
Industry is now leaving the Digital Age and entering the Platform Age. This new era will be characterized
by a wholly different set of dynamics. Technology and business become the same thing and give rise to
whole new ways of providing insurance and running an insurance business. In effect, every business will
be a technology business, delivering its products and services through technology ecosystems.
Source: Oxbow Partners
“Every business will be a technology
business, delivering its products and
services through technology ecosystems”
The Platform Age is driven by the availability of the following:
• Cloud technology is increasingly popular in many industries as a means of providing enterprise-
level service quality and security through shared resources, thus federating costs and making
processing capacity available as needed (elasticity) by massive server farms managed by best-in-
class companies like IBM, Microsoft, Google and Amazon. This enables start-ups and the biggest
companies alike to access leading technologies with costs based on demand.
• Tied closely with the Cloud are Web service platforms which provide de facto means of exploiting
the potential of the Cloud. The same venerable BigTech giants have brought web service
platforms to market providing users with access to best-in-class facilities for delivering technology
capabilities. The platforms can support the highest requirements for security, disaster recovery,
processing power and latency at a price that is more directly related to usage. The platforms
provide users with access to cutting edge technologies that were previously prohibitively expensive
and bring the potential of Big Data and AI within reach for every business.
INSTECH LONDON E-Trading Platforms | 17• Web Service platforms and the new generation of propositions being built on them use micro-
services architectures so that technology can be much more easily componentized. This
allows users to put together solutions using best of breed components throughout and extend
capabilities or update components as and when required. It also allows for discrete components
to interface with third party technology providers (for example data sources, payment systems,
regulatory checks).
• These same platforms are also built to meet an assumption that they will have to connect to many
other different platforms and services and so most services on them will have RESTful APIs
enabling relatively simple and swift integration.
• Another natural consequence of working on this next generation of technologies is the ability to
implement service “orchestration” whereby two or more applications which are integrated to each
other can automate a process or synchronize data in real-time.
NoCode is a development paradigm that enables users with no prior coding knowledge to create
applications such as mobile apps and automated workflows.
NoCode uses a visual development environment to allow business users and business analysts
to create applications using diagramming techniques similar to drawing flowcharts in Visio.
Users are able to create systems from proofs-of-concept to deployment-ready, using drag-and-
drop components and logic-embedded connectors. This shortens requirements gathering and
development cycles, especially for tactical developments which might find themselves towards
the bottom of priorities for developers focused on mission-critical projects.
• There are now new technologies which are going to allow for a constant evolution in what platforms
can do. In particular, we are excited by the possibilities of NoCode platforms and Distributed
Ledger Technologies (DLT).
• The combination of all these technological developments is game-changing. The significance is
not just that they allow insurers and brokers to do more online or to reduce IT costs, but that they
enable insurers and brokers to provide customers with a whole new set of insurance products and
business models. In particular, they will enable brokers and insurers to access data in real-time
and therefore to deliver products like usage-based insurance, parametric triggers, embedded
products and dynamic risk monitoring based on IoT. To understand the significance of this we need
to look at how it matches up with prevailing customer requirements and attitudes.
“Digital platforms will enable brokers and insurers to
access data in real-time for usage-based insurance,
parametric triggers, embedded products and dynamic
risk monitoring based on IoT”
INSTECH LONDON E-Trading Platforms | 18Customers
Those in insurance who remain unconvinced of the potential of Digital Platforms can only reach that
conclusion by disregarding the interests of the end customer. As a general rule, too many decisions and
strategies which determine technology choices in insurance undervalue the interests of the customer
and instead place undue reliance on how the industry wants to conduct itself – hence the way we stress
the value of face-to-face negotiations and reliance on personal relationships.
This was the case for many industries, but across all sectors customers are demanding a faster, easier
interaction model and more transparent pricing. Insurance will not be an exception. Once platform-led
change arrives at an industry, it replaces the manual and digital paradigms at an uncomfortably fast pace
for those not participating.
As all business, not just insurance, is changing, the nature of risk and the basis of protection must change
too. The insurance industry has palpably failed to keep pace with the evolving nature of risk. From 2000
to 2020 this gap between the actual risk and available protection doubled, according to the Swiss Re
Institute. They attribute this to global trends in digitisation, urbanisation, climate change and the lack of
effective innovation by the insurance industry. It follows that insurance is going to have to flex to meet
the changing nature of these demands which have been a subliminal influence for a while with COVID-19
acting as a recent accelerant.
“From 2000 to 2020 the gap between actual
risk and available protection doubled”
Here is a non-exhaustive list of trends that will force the insurance industry into new interaction models
and insuring new products. Most of these products cannot be priced using historical data, some require
real-time engagement and all require completely different approaches to handling and analysing data
• Operations Anywhere – while the majority of businesses found it surprisingly easy to switch from
in-person work to remote meetings and other forms of digital interactions, the next stage is to
embed the ability of your workforce to operate anywhere, anytime and that in turn will create a
second wave of digital innovation and lifestyle changes around the new workplace/workforce.
• The Sharing Economy – there is a growing trend towards shared ownership of personal transport,
plant and machinery, trains and aeroplanes, offices, short-term property letting (Airbnb) and even
jewellery and high fashion.
• Automation - increased automation means that customers are increasingly reliant on algorithms
for key services. Algorithms will drive cars, 3D print human organs, match supply with demand,
make underwriting and investment decisions and a lot more besides. Who is liable when algorithms
go wrong and what is the insurance industry’s role in protecting customers against this?
• Internet of Things – IoT provides the means to monitor risk, geolocate assets, provide real-
time surveillance and ultimately deliver smarter environments from ships, cargoes, machinery,
generators, and ultimately cities and roads. IoT also allows the insurance industry to provide game-
changing risk management services and real-time insurance products, which are much easier for
the client to understand and purchase.
INSTECH LONDON E-Trading Platforms | 19• Environmental, Social and Governance (ESG) – the globe is committed to more sustainable
forms of greener energy generation and usage (from wind, solar, wave generators); electric cars,
algae-based fuels, hydroponic farms and synthetic meat production. The existing energy, livestock
and crops insurance product set needs to adapt to remain fit for purpose.
• Continuous Access – business customers are looking for a relationship with their insurers that
goes beyond simple risk transfer. They want to work with partners who can ensure that they have
continuous access to their factory, restaurant, mode of transport – indeed all the resources they
depend on. They are looking for insurance partners who both help prevent risk and can help
minimise the disruptive effects of perils and events which means going beyond cutting a cheque.
• Customer centricity – the expectation that insurers can match their product set to clients’
specific requirements precisely when needed, based on the data the client has shared, and what is
available in the public domain and web footprint – now known as the Internet of Behaviours.
• Insureds will increasingly expect greater contract certainty, transparency of pricing and
the claims process, and simpler interaction models in line with other services they use. For
instance, using a combination of GPS, RFID, IoT and blockchain, cargo shipments can be
tracked in real-time anywhere on Earth, drastically improving visibility for all involved, including
the insurer. With such an interconnected environment, clients will expect their insurance
coverage to be part of the seamless whole, where routine changes to manifests, routes,
captains etc. can be managed instantaneously.
• Insureds will increasingly expect simpler interaction, greater certainty, transparency of terms,
knowledge of where they are in the claims process. Expectations of what service involves and
what they are entitled to have been changed by Amazon and Uber.
• Embedded insurance – a value-add service whereby insurance is arranged and bound by a third
party seamlessly embedding a simple risk purchasing process into their own customer journey. It
is achieved through adoption of microservices in which the insurance functionality is abstracted
into technology and provided to trusted partners with large and relevant customer bases. Simon
Torrance in his excellent LinkedIn article on the subject estimates that in Property & Casualty
alone, embedded Insurance could account for over $700 Billion in Gross Written Premiums by
2030, or 25% of the total market worldwide. https://www.linkedin.com/pulse/embedded-finance-
game-changing-opportunity-incumbents-simon-torrance/
• Digital ecosytems - new digital ecosystems, orchestrated by powerful platform businesses who
have millions of customers, a lot of data about them which they know how to make use of and are
trusted by those customers. McKinsey estimates that 30% of global economic activity - $60 Trillion
- will be mediated within these new ecosystems by 2025.
• Alternative risk transfer models are emerging all the time; ideally, more should come from the
insurance industry itself or new entrants will claim the space for themselves.
Some if not all of these trends will be accelerated in response to the fallout from COVID-19.
INSTECH LONDON E-Trading Platforms | 20E-Trading Platforms and the Brokers
The traditional broker model involves managing two distinct relationships:
• with their clients on whose behalf they act as risk adviser and seek appropriate cover at the best
price with the right insurers;
• with the underwriters with whom they place the business – relationships which are actively
cultivated in the belief that it is how they will obtain the best terms.
These two relationships have, to the extent that technology has been used at all, been conducted on
completely separate systems. The interactions with customers are mostly face to face, email and
telephone, but increasingly through the use of portals. The interactions with the insurers is then
conducted on a completely different platform and only in exceptional circumstances is there any
connectivity between the two. This is clearly sub-optimal for a connected world, but it is the brokers
themselves that perpetuate it. Allowing no connection to develop between the customer and the insurer
is an excellent line of defence against both disintermediation and the existing remuneration model. It
also enables the brokers to control who gets the risk data and in what form.
The evolving demands of the customers are clearly, therefore, an actual or perceptual threat to the
brokers and the protection of the current model. Giving ground on this issue requires the broker to
evolve a different set of skills. We argue that this is not a threat to broker companies, only to those in
their workforce those who are exposed by this and reluctant or unable to retool. There will remain an
important role on the customer side as risk advisor and manager to the client and as occasional claims
negotiator. On the (re)insurer side of the equation the key skill will be more about product engineering -
creating and distributing this next generation of such products – not negotiating the terms of a renewal
as there may not be one!
It follows that brokers hold sway on so many of the issues that determine the future of e-trading. Not
only are they deciding the pace at which the complex (re)insurance risk community will evolve, they also
control the liquidity on which e-trading platforms depend. Most London based underwriters of these
classes get not less than 40% of their total premium from Aon, Marsh and Willis Towers Watson and for
some it is the majority. In the space in which these three companies (who may soon be two) play, it is
hard to build an e-trading platform of any global significance without their support.
One option always open to the brokers is in having their own proprietary e-trading platform. By this we
mean e-trading platforms which brokers use solely for their own business. This model, like all e-trading
platform initiatives, has struggled for traction in the past, but COVID-19 will have given it some fresh
impetus. They do have a role for niche products where that broker is either an exclusive or important
source of supply.
Our belief is that it is only Aon or Marsh that have the clout to get a proprietary e-trading platform off
the ground. It would be difficult if not impossible for most (re)insurers to refuse to participate especially
if they made it clear that it was the only channel on which their business was available. Both Aon and
Guy Carpenter have operational platforms. They are included in this list of the current proprietary broker
platforms which are approved for trading with Lloyd’s.
• Aon – ABConnect Placements – an extension to the existing web portal for Aon clients launched in
April 2020. Applies to reinsurance treaty placements only
• Guy Carpenter - GC Marketplace which was launched in 2015
• Ed Broking –TradEd launched in 2017
• Hyperion – TepfinX - originally launched as Tepfin back in 2004 and recently refreshed
• Miller – Flovate for lineslip business only
• Willis Towers Watson – Mercury platform for credit risk and contract frustration business only
INSTECH LONDON E-Trading Platforms | 21• Tiger Risk – which has not sought approval for trading with Lloyd’s.
• globalREmarket, a reinsurance e-placing platform providing a single, secure environment for
reinsurers to receive offers and submissions and to exchange placing information.
• 2017 Tiger Risk announced the formation of a new third-party company called RePlace to
develop globalREmarket in conjunction with Willis Re. At that time, it had close to 1,000 users
from over 200 reinsurance carriers using the platform. It is thought that the tie up with Willis
Re will require a rethink following the announcement of the proposed merger between Aon and
Willis Towers Watson.
To finish this section, we will make a point that is so obvious it probably does not need making. If ever
Aon AND Marsh chose to collaborate in building a new e-trading platform or both combined to anoint
an existing platform as their preferred provider, that would become the market leader. They truly are the
e-trading platform “kingmakers.”
Existing Independent E-Trading Platforms
The next generation of e-trading platforms needs to be aware of all these dynamics and issues. Those
that succeed will be those that are able to help the insurance industry address its prevailing issues
and as a result get their hands on a good source of business. The current cohort of e-trading platform
providers are seeking to do that in a number of different ways. We have already touched on some relevant
themes above and now examine them in more detail. Some fall into more than one category. Here is an
infographic of the companies we have featured.
E-Trading Platforms Featured in this Report
INSTECH LONDON E-Trading Platforms | 22You can also read
