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Insider in Full: Blueprint Two in 2022: Unwinding the Lloyd’s rhetoric

There was a bullish tone and much to unpick from the Lloyd’s annual update on the Blueprint Two programme on Monday...

While tangible components were delivered in 2022, to say there has been clear progress might be damning with faint praise, given the very low bar set a year ago.

Progress has crystallised in the form of foundational data components, including the core data record (CDR) and advancements to a new market reform contract (now renamed as MRC v3) that will enable digital processing.

There were also improvements to DCOM, a delegated authority (DA) system, and the rollout of a faster claims payment (FCP) solution for DA business that has 12 managing agents signed up, representing around 50% of DA business by volume.

Setbacks this year included Lloyd’s putting the brakes on releasing API specifications for firms to connect to a new digital gateway – a tool that will act as a conduit to the flow of higher quality data for digital processing. There were also delays to parts of the DA workstream and the build of a proportional treaty system.

During Monday’s update, rhetoric about the importance of Blueprint Two also started flowing, with Lloyd’s CEO John Neal claiming that with full adoption, the market will see at least a 40% reduction in processing costs through the joint venture with DXC.

He added that Blueprint Two reflects “how we remain relevant, reliable and competitive in a digital world”.

Following the update, this publication has set out what has and hasn’t been delivered on schedule according to the initial timeline set out by Lloyd’s in its second interactive guide on Blueprint Two in January.

  

 

 

The update followed a period in which many sources took issue with various interviews over the autumn in which Neal claimed the programme was “on track, on time and on budget”.

Reactions among market sources ranged from “Erm, seriously?” to others which questioned in colourful language whether that claim stood up to interrogation.

As is always the case with the rhetoric around Blueprint Two, this is about semantics.

Neal has consistently said (including in Monday’s update) that the overall budget will fall within £300mn – in line with the £300mn borrowed for the programme when it was cheaper to borrow back in 2019.

There have been no developments to throw that claim into doubt, though it’s worth noting that little information has been shared on budget spend, even with London market trade bodies.

But “on track and on time”? Even in an era desensitised to corporate spin, this was a stretch.

It is an objective fact, no matter how information about the programme is presented, that the ultimate timeline is not on track, compared to plans published in January

It is an objective fact, no matter how information about the programme is presented, that the ultimate timeline is not on track compared to what was published in January. That interactive guide claimed all core digital services would go live by Q2 2024. Neal said on Monday that Lloyd’s is expecting a one-to-two-quarter delay in the build, taking the programme potentially up to the end of 2024.

He added that “the programme will still deliver in 2024”, with some aspects of the build ready before that.

The digital solutions and the connective tissue around them may still be on track for the same year, but given the history of centralised London market technology projects, plus the acknowledgement of a delay of up to six months, there appears to be an increased risk of full delivery being pushed to 2025.

The delay also calls into question whether proclamations from Neal in January will materialise – for instance, that the “end of 2023 is when you should start to see a fundamental difference in the way in which the market acts and transacts”.

Timeline credibility?

As has been the case with PPL’s long-chequered, twice-delayed work on delivering the NextGen platform, market sources questioned the credibility of the extended timeline for the Blueprint Two build programme.

As one executive remarked: “I’ve just seen this all before. Any time a new delay is announced, you always feel there’s a prospect of a further delay on top of that.”

It is also somewhat strange that Lloyd’s included certain elements as “delivered” in 2022, when they didn’t constitute actual solutions due to be used and were not mentioned as milestones in the January timeline.

One example is the contract signed by Lloyd’s, DXC and the International Underwriting Association (IUA) for the build of the digital solutions for back-office processing. Even this was a protracted process, affected by a decades-old non-compete clause.

Foundational progress, DA uncertainty

Despite this backdrop, Lloyd’s can attribute progress to foundational elements, such as the CDR, as well as improved market-wide sentiment compared to a year ago, given the extent of collaboration and buy-in to the Blueprint Two programme, which is now accelerating.

This was evident on Monday, when c-suite executives from brokers and carriers emphasised the importance of the reforms in delivering a competitive advantage. It was also seen at Insurance Insider’s London Market Conference last month, and through recent pledges by tech vendors to support the modernisation.

Acord, AdvantageGo, DXC Technology, Trace and Verisk (which together represent more than 80% of Lloyd’s GWP) pledged their support in September.

All London vendors currently working with the market's existing central services followed up with a joint pledge last week.

So far, this has been one of the major market-wide indicators of how engagement and adoption is gearing up.

But while there is progress, questions linger on aspects such as next steps for the DA workstream.

This publication previously revealed that Lloyd’s is to create a new data strategy for DA solutions being developed for Blueprint Two, after a rethink.

That decision came after the Corporation tried to find a third-party provider to build a solution for firms to submit data directly into the delegated data manager (DDM) – its online platform which collects, validates and processes DA data.

When the Corporation found no viable solution, this plan for this data ingestion was scrapped.

Lloyd’s told this publication that it is currently working through the final stages of market engagement on its DA data strategy with carriers, brokers, coverholders and other stakeholders.

According to the January guide, DDM was due for full adoption in Q2 2023; it’s not yet clear whether that is still the plan.

Lloyd’s also told this publication that DDM continues to be the mandated system for delegated business for Lloyds Insurance Company.

The Corporation does not intend to mandate DDM outside of LIC, but it is still working with the market and London Insurance Market Operations & Strategic Sourcing (LIMOSS), the body which sources third-party services for the London market, about DDM’s future use.

Separate to DDM and outside of Lloyd’s control, events in Ukraine created delays to some releases to DCOM. The DA programme uses third-party IT companies, and one significant supplier Lloyd’s had been using for development, testing and other support work employed individuals based across Ukraine, Russia and Belarus. Lloyd’s stopped working with this (unknown) provider and began working with a new firm.

Clarity about the future of the DA workstreams should emerge in the new year.

  

 

Year in review

2022 began with an awkward sign of how Blueprint Two was progressing, with the exit of former COO Jennifer Rigby.

This sudden development followed the departure of other Lloyd’s staff experienced in tech and operations, as well as a restructure to correct issues which blighted the programme throughout 2021.

2022 at least ends with clear sight over how fundamental data processes will change, and the mechanisms that will deliver them.

As the build phase continues, and with the Data Council set to further explore the distinctions between the roles of brokers and carriers in data capture and managing data quality, Neal has previously warned that Lloyd’s will get into “difficult conversations” in H1 next year.

Throughout 2023, when Lloyd’s will engage with the market on API specs and the finer details of integrating with the digital solutions being developed, the technical, political, potentially combustible dynamics of taking the market on a modernisation journey will come to the fore.

Neal told Insurance Insider in September that sequences three and four of a joint solution plan to deliver Blueprint Two will be particularly challenging. These involve work on London premium and claims services for sequence three, and developments on DA premium and claims services for sequence four.

As he said on Monday, the importance of Blueprint Two “cannot be overstated”. If they're to modernise the marketplace to ensure its competitiveness, “we simply have to get this right”.

 

 

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