At a packed event for Lloyd’s Hong Kong Day, the Lloyds global chief executive Inga Beale DBE, alerted the Hong Kong insurance market to the increasing technology threats both to the way insurers run their business and to the risks confronted by their customers.
“Technology is moving faster than we have ever known it. It is allowing risks to be commoditised. And it is enabling new capital to come in and challenging the distribution channels we have been used to,” said Dame Beale.
“At the same time it is providing threats to businesses. With all of this technology cyber attacks are on the rise. When we look at the analysis and we look at the threats to cities and trying to help them build resilience, cyber attack is way up there as really a potential impact on a city’s resilience,” she added.
Currently 41c in every US dollar of premium earned at Lloyd’s is going out either in operational costs or commissions through the distribution chain. Of that amount 26.6% of every dollar in premium is being lost to commissions through the distribution chain.
“This is something we really have to consider,” said Dame Beale. “Because if there is a potential disrupter out there in the InsureTech or FinTech space they are probably thinking they can do something that is more streamlined that will take cost out of the existing model.
“As we go through this year we are going to have an increased focus on the 41% cost and see if there are additional measures that we can do from the centre of Lloyds about the worrying trends we are seeing in those numbers.
“We are looking to reduce operational cost. We are modernising, embracing technology, streamlining our operations and aiming for on-touch data capture throughout the underwriting process. We are also piloting block chain technology in claims settlement,” she added.
Currently Asia accounts for 10% of Lloyd’s global revenues. Part of the reason being that insurance has achieved only half the penetration of that found in the US and European markets.
“Hong Kong Lloyds is licensed according to our traditional market model. Central regulatory oversight is provided by Lloyds Hong Kong so here we are treated as a single insurer. That isn’t the case necessarily when we go into certain markets but it certainly means that Lloyds can be very efficient here for all of our syndicates,” said Dame Beale.
“There are 26 Hong Kong cover holders, a mixture of brokers and agencies and nine syndicates on the ground here in Hong Kong,” she added.
The total business written by Lloyd’s Hong Kong last year was over US$250m, marine, energy and casualty being the main classes of business. In Singapore last year, Lloyd’s wrote US$600m of business.