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Insider in Full: A Lloyd’s Lab test: What has been the real impact?

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Topics: InsurTech

How can a market measure the true success of an innovation acceleration programme?

Inevitably, the definitions of success may be subjective, but Insurance Insider nonetheless set out to explore the impact the Lloyd’s Lab has had so far.

Some of the more cynical views – that the lab was initially just a sign of Lloyd’s paying lip service to innovation – appear to be waning, as they’re gradually drowned out by a burgeoning, genuine appreciation.

There remains, though, a perception that in certain instances, time and expenditure have been wasted on certain firms which had a solution “looking for a problem”, or that some start-ups were “digitalising for the sake of it”.

But a point of consensus among cynics and supporters is that London needs the lab.

A director in one company which completed the programme said that a vision and mechanism to accelerate change from within Lloyd’s is essential, rather than letting the market “fall rapidly behind what happens on the outside”.

With the accelerator programme now in its fourth year and poised to welcome cohort eight, enough time has elapsed for a number of start-ups to have emerged from it with funding and trading deals, to take a meaningful examination of its impact.

This article explores the opinions of start-ups that completed the process, how mentors have supported innovators through the programme and the views of Ed Gaze, who runs the lab, on its influence so far and how he’d like to take the programme forward.

What emerges is a sense of progress and some true success stories that have dispelled some, if not all, of the initial cynicism.

Inside the Lloyd’s Lab process 

The programme is dedicated to “accelerating and fostering new products and solutions fit for the needs of customers around the world,” according to the Lloyd’s website.

More than 80 teams from start-ups have now used the lab co-working space. Successful entrants have had to pitch successfully for their spot against an applicant list that typically ranges between 150 and 200.

  

 

With two cohorts a year and typically 10 or 11 in each group since September 2018, there’s a growing list of success stories that have come though the lab. To name just a few, these include downtime BI specialist Parametrix, risk analytics firm Praedicat, cargo-focussed InsurTech MGA Loadsure, supply chain InsurTech Parsyl and flood forecaster Previsico.

Without exception, a sub-set of eight start-ups that went through the Lloyd’s Lab process and spoke to this publication were effusive in their appraisal of the experience. Cynics might say they would praise it, because they don’t want to bite the hand that feeds, but they were appreciative of the experience even when speaking anonymously.

The positives included access to underwriters and mentors, (the latter are drawn mainly from Lloyd’s firms and external consultants), as well as the ability to expedite a proof-of-concept exercise and to refine pricing strategies.

There are obvious marketing benefits for start-ups of an association with the Lloyd’s brand, as well as the chance to collaborate with different carriers, and the educational aspect for teams who need guidance to navigate the market for the first time.

Outside of the eight companies this publication spoke to, others declined to contribute to this article largely because they’d pivoted away from their original proposition, while others couldn’t be reached due to intense negotiations to secure seed funding.

There are numerous examples of sizeable fundraises secured by start-ups since they completed the process.

 

A view from the lab 

As the man ultimately responsible for running the lab, Ed Gaze believes the programme has delivered well against three main objectives. These are to bring new premium in through innovative products; to help underwriters make better decisions by giving them better data or better ways of modelling data; and to make the market more effective (through claims tech, as an example).

Gaze said the market has given “strong feedback” that it would not like the lab’s success to be measured by the amount of premium generated by start-ups.

"Maybe the overall effect we've had, has been to develop a community of innovative underwriters"

Ed Gaze, Lloyd’s Lab

But in terms of efficiency gains, he gave the example of data and analytics firm Optalitix, which was in the lab during the first lockdown. The firm ended up working with the Corporation in a process that Gaze said saves 13,000 hours of manual work a year for the market.

“That is now benefiting various people across the market and Lloyd’s, by displaying the cat claims data and aggregating it,” he added.

On the lab’s broader impact, he said: “Maybe the overall effect we've had has been to develop a community of innovative underwriters. We've brought them together into a community where they collaborate really well.”

While lab success stories are easy to find, perennial issues have hampered the process, including the aversion of market firms to share data with start-ups. In some cases, this has been resolved by Lloyd’s firms sharing anonymised data.

Gaze explained this is an area he’d like the lab to do more with, adding: “I would love to be able to give the InsurTechs in the lab comprehensive, relevant Lloyd’s data across lots of classes of business, much faster and more easily.”

In future, Gaze said he wants the lab to operate as an ecosystem, for a community of InsurTechs being in one place. “The more innovators are in one spot, the more chance of ideas coming to fruition,” he added.

Brokers were also brought in for the first time last year, with 12 poised to help firms in cohort eight.

After this cohort, Lloyd’s will run the process in-house and it will no longer be run day-to-day by the consultancy L Marks. This publication understands bringing it in-house is mainly a cost-saving exercise.

Lloyd’s has only made one (£300,000) investment in a lab company – Layr – but Gaze wants to set up an investment fund or investment opportunity for the InsurTechs coming into the lab, though not necessarily all of them. “Where there are smaller opportunities where it would really help, such as seed funding, I think we could play a part,” he added.

The ‘graduates’ 

One of the clear beneficiaries of the lab in recent years was Hyperexponential, which created actuarial technology to assist with pricing. Last year, this publication revealed its $18mn Series A fundraise.

"Building relationships in the market is a long game and having the space to meet with potential clients and partners helped with this"

Amrit Santhirasenan, CEO at Hyperexponential

The firm’s CEO Amrit Santhirasenan said: “The biggest benefit was the opportunity to get some in-person space and time with the market using the lab space. Building relationships in the market is a long game and having the space to meet with potential clients and partners helped with this.”

InsurTech MGA Loadsure, which recently netted an $11mn Series A, was another benefactor of the programme.

CEO Johnny McCord said: “The experience was really good for people not familiar with the Lloyd’s market – I don’t think my team realised how archaic the insurance market could be. But it was a really good opening week in the lab; [CEO] John Neal spent time with us and the onboarding was good. The process was well managed and the mentoring was really helpful.”

Mentoring partnerships

The importance of mentors was a consistent theme in firms’ reflections. There have been around 200 mentors involved drawn mostly from about 40 different managing agents, across the seven cohorts so far.

There are also 200 people in the wider Lloyd's Lab innovation adviser community, which includes brokers, insurers, advisers, law firms and InsurTechs. Some 60 mentors are lined up for cohort eight to offer guidance and networking intros to the various start-ups.

While recognising mentors’ assistance, start-ups also acknowledged to this publication the need to derive the most out of the experience themselves by having a structured plan to maximise the access they gained.

Without a plan, one said, they would have simply “fallen through the cracks” in the process, as it was less structured and more laidback than they’d anticipated.

Some also noticed that even two years after finishing the programme, the lab helped them negotiate commercial deals with trading partners, but one firm participating in an early cohort thought that some firms in Lloyd’s were still “entrenched in their ways and not that open to change or innovation”.

The timing of entering the lab is also an important aspect that influences the outcome. In certain instances, companies may have built sufficient momentum upon entering the Lab to be assured of future success. By the point FloodFlash started the process, for example, it already had support from a number of syndicates. FloodFlash has since secured $15mn via a Series A and plans to deploy its war chest to target the US, Germany, Australia and Japan.

"Inès Cheaib (Gaia COO) and (founder and CEO) Nader AlSalim are two of the most impressive people I’ve ever met in my life, and they’re growing a team of equally impressive people"

Hayley Maynard, head of innovation at Chaucer, on Gaia

Another innovator, Gaia, gained capacity from Chaucer, Beazley and Atrium for a new insurance solution for couples undergoing in vitro fertilisation (IVF).

Hayley Maynard, head of innovation at Chaucer, was one of Gaia’s mentors and said the firm’s founders had hugely impressed her. “We were clear about what problem we were trying to solve. We were not solving the issue that IVF is expensive, we were solving the problem that IVF is uncertain.

“The lab provided the structure early on, as we had to reach milestones and meet each week, so the process kept us accountable and helped to embed a pattern of working that we were able to maintain post the 10-week programme. The lab was instrumental in setting the foundations for us to succeed in building and launching the product.”

Gaia completed the lab programme in the summer of last year, and in February the business raised $20mn in a Series A which will fuel expansion, including into the US. It has also been appointed as a Lloyd’s coverholder.

Collaborating and listening

On the lab’s wider importance, Maynard believes it has accelerated a maturity and self-awareness in the industry, “forcing all parties who come to the table to rationally assess what we do well, and equally importantly, what we don’t”.

She added: “We can be remarkably agile as a market, and the Lloyd’s Lab acts as a platform to supercharge this agility through cross-carrier and cross-industry collaboration.”

Mark Huxley, non-executive director at Altus, has supported the lab and been a mentor since it launched. He believes the lab has now established itself as a brand. “There was a need to create something in Lloyd’s to bring people together around innovation, and to ensure that all the technology being developed outside of the Lloyd’s building, wasn’t left outside and could be ushered in. Its timing was right.”

Matt Carter, practice director, specialty insurance at Altus, is also an advocate of the lab, having mentored firms in the process with Huxley. He said: “It brings in people who ordinarily wouldn't be able to access the Lloyd’s market. It also enables them to immerse themselves in it – that’s been one of its major successes.”

 

Insurance Insider delivers global wholesale, specialty, and (re)insurance intelligence that enables you to act first. Redeem your complimentary 14-day trial for more premium content from Insurance Insider.

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