The Amazon paradox
It is a widely held belief that competition is good and monopoly is bad. So why, asks Liberty Specialty Markets’ president and managing director Matthew Moore, does Amazon, with its market dominance, set new standards for service?
“We must develop new ways to execute the delivery of the risk transfer with more speed and efficiency.”
Amazon has its detractors, yet its growth is remarkable. Rapidly approaching a 50 percent market share of the e-commerce sector in the US, Amazon’s market dominance has not prevented it providing an ever-superior customer experience. It continually reinvests in research and development. Its cloud provider services are a motor for a whole wave of emergent technology-driven companies.
In contrast, the specialty insurance market is subject to the highest degree of competition. No single business has as much as 4 percent share. Liberty is globally ranked number seven in this space, and we have around 2.2 percent.
The result of all this competition? Our combined ratios are too often north of 100 percent. Our customers consistently cite our lack of product innovation and the cost of getting the product to market. Innovation seems to depend less on competition and more on a laser-like focus on the customer.
Reasons to be cheerful
Insurtech is gaining traction. PwC’s 22nd Annual Global CEO Survey announced that initial trepidation over digital transformation is turning into optimism. Indeed, there are many signs that technology is being embraced in our industry: for example, on-demand insurance products, electronic placement and online quote and bind systems, to name a few.
Risk selection is at the heart of our market; once this selection has been made we must develop new ways to execute the delivery of the risk transfer with more speed and efficiency. There is a noticeable increase in e-placement, as we saw from the release of market-wide data for risks placed electronically during the first quarter of 2019.
Figures from the Lloyd’s Placing Platform (PPL) board showed a sharp increase in the number of brokers signing up and risks bound across all lines of business. We cannot be complacent. Better communication and finding ways to innovate between brokers, underwriters and insureds is the key to continued success.
Amazon is no longer the new kid on the block and is leading the way in delivering optimum customer service. The insurance market needs to widen the lens, embrace change and insurtech, and develop systems and services that match the changing demands of our customer base.
A new direction of travel
The response from the market towards paying claims from natural catastrophes in recent years has been widely praised. This is a huge advertisement for products, capabilities and the value of the London Market as a whole.
This is the customer experience that we have to promote to repair the vast global protection gap. Seventy percent of global economic loss is uninsured, with an even larger proportion in emerging markets. This gap presents a huge opportunity for our market if it can organise itself properly.
The solution lies in our ability to cooperate for the benefit of customers. It’s about using the unique position of the London Market and our natural preference for subscription and risk-sharing.
To this end I propose three pointers in a direction of travel: first, enabling Lloyd’s and London Market bodies to facilitate greater cooperation between our businesses to benefit clients—as dating agencies, if you like.
Such cooperation, if approached with appropriate considerations in mind, will allow for a more honest acknowledgement of leaders and followers and—equally important—how we resource these capabilities. This may lead to more facilitisation, more consortia and more innovation in structuring syndication.
We need better mechanisms for recognising genuine investments in customer value. We need an honest and impassioned conversation with our brokers as agents of our customers that delivery of value needs to be properly recognised.
To conclude, we are uniquely fortunate to be working in the London insurance market. The strengths of subscription, appropriate cooperation and deep resources of talent mean that we have much to shout about. But with syndication and competition must go a sense of reality—even humility—about how we organise ourselves for the good of our customers, our people and our shareholders.
Matthew Moore is president and managing director of Liberty Specialty Markets. He can be contacted at: marketingteam@libertyglobalgroup.com
