Advania Asks: Can the Lloyd’s Market Use Tech to Evolve?

Advania UK has released a report alongside Lloyd's of London to explore the rising significance of AI and data strategy, digital transformation strategies and compliance challenges in the insurance industry as it navigates the digital era.

The report, titled ‘Insurance at the Digital Frontier’, explores how IT leaders in the Lloyd’s market are unlocking the potential of technology to gain a competitive edge, drive innovation and branch away from its reliance on legacy technology.

Advania and Lloyd's of London explore how a 'new era' of risk management will arise due to greater digital reform and the promise of Blueprint Two - a strategy that will aim to digitalise the Lloyd's market.

It highlights that IT leaders have four main focus areas:

• Operational efficiency
• Artificial intelligence
• Data strategy
• Compliance

Despite these technological advancements, standardisation remains an issue. This means IT leaders are faced with the complex task of how they must digitise operations effectively to enhance compliance, competitiveness and efficiency.

The rise of AI

Many organisations are harnessing the potential of AI to drive efficiency, yet many economic and ethical concerns are raised around its rapid advancement.

The report highlights the need to implement AI with a clear strategy in the insurance industry to produce real benefits such as enhanced decision-making and streamlined manual tasks.

By doing so, organisations can allocate resources to more valuable tasks and minimise time-consuming processes. Advania states how AI can be leveraged for fraud prevention, underwriting automation, risk evaluation and tailored coverage.

According to the ‘Artificial Intelligence in the Insurance Sector’ report by KPMG, the most common AI use cases in insurance were for fraud detection (76%), risk management (68%) and chatbots and virtual assistants (66%).

Advania identifies four key tactics to enhance AI success:

• Investment in data quality
• Start small and scale
• Collaborate with the right partners
• Educate your people

However, Advania warns of the issues overuse of AI can create, such as governance issues and data fragmentation.

Therefore, IT leaders must utilise AI tools and techniques that offer real value and support business goals.

Steve Coldwell, Head of IT at Apollo, explains: “We've actually been exploring true AI capabilities well ahead of the current buzz and hype cycle around generative AI, but a large part of my role recently has been dispelling myths and ensuring people understand the actual potential and limitations of the technology. 

“It starts by being realistic about what AI can and cannot do. It's not some silver bullet that will solve all our problems. 

“Right now, AI tools can help accelerate decision-making and provide valuable data-driven insights. But it's certainly not going to fully automate everything or replace human effort. 

“We need to be clear-eyed about the productivity gains and efficiency improvements the tech can realistically deliver.”

The potential of data

In an increasingly digital world, insurers can enhance fraud detection, reduce costs and deliver a more effective customer experience by utilising advanced analytics and real-time data integration.

Advania warns that Lloyd’s market firms face being left behind if they fail to craft an effective data strategy.

According to McKinsey, those insurers with advanced data analytics can enhance their business premiums and retention rates from 5% to 10% whilst also improving loss ratios from three to five points.

Organisations are supporting underwriters to generate and interpret risk insights by investing in data infrastructure to consolidate, clean and manage unorganised data streams.

Not only will these data-driven approaches strengthen executive support and investment, but Advania highlights how this will also enhance customer experience and risk assessment.

Paul Jackman, CTO at BMS Group, states: “True agility and efficiency in an insurance firm comes from investing in data knowledge and understanding. 

“It's not enough to implement the latest analytics tools – we also need to ensure the underlying data is of the highest quality and that our people have the skills to extract meaningful insights. 

“In my experience, the businesses that empower their users to self-serve, pick up their own data and do their own analytics are the ones that truly thrive.”

The evolution of cybersecurity

Organisations must invest in cybersecurity to improve resilience through training, AI-driven threat detection and advanced security measures to defend against evolving threats and safeguard operations.

Advania urges professional services firms and insurers to remain alert to the risk of cyberattacks, basic malware, state-sponsored actors wanting to disrupt supply chains sophisticated attacks. 

These organisations remain targets because of the personal financial data they handle often.

According to PwC’s latest report on industry risk, cybercrime remains the largest operational threat to the insurance market across the world.

Advania emphasises the need for Lloyd’s Firms to enhance organisational resilience to avoid reputational damage and financial losses. 

Tahwid Rahman, Chief Architect at IQUW, explains: “Cyber security threats are constantly evolving so that requires us to always stay on our toes. 

“We focus heavily on upskilling our staff to be cyber-aware – and I can't overstate how important this is. 

“No matter how many technical controls we put in place, the human element will always be the biggest vulnerability. We have to make sure our people are trained to spot and avoid the latest social engineering tactics and phishing attacks. 

“Beyond that, we've built a robust cyber threat intelligence system that combines third-party data with our own in-house capabilities. This allows us to continuously monitor for emerging threats and adjust our defenses accordingly.”

Advania’s ‘Insurance at the Digital Frontier’ report highlights the rising importance of automation, cloud adoption and AI for IT leaders in the Lloyd’s market.

It highlights that those who embrace the digital reform that is due will gain a competitive advantage and enhance their resilience in our dynamic market.

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