Commercial insurers need to follow the rest of the financial sector and make better use of electronic trading for improved transparency and lower costs, according to Dennis Mahoney, CEO of the UK arm of insurance broking giant Aon.
Speaking to an audience of industry CIOs and other top insurance executives at the Acord Forum in London, Mahoney said parts of the insurance industry were stuck with antiquated practices that needed to be replaced by more efficient processes.
“I was in a cab going past Lloyd’s on the way here, and I saw one agent carrying a huge pile of paperwork,” he said. “It seems some things will never change ... I wish we as brokers had done more to accept positive advances.”
He continued: “Our protectionism and resistance to change will not pay. It’s better we set independent, professional, reliable, secure, and industry supported standards for systems and platforms. Then we can have greater transparency on trading, lower trading costs and a clearer definition of value-added functions.”
Electronic insurance indices, claims processing and improved messaging would mean better business, Mahoney said.
Across the industry, a lack of change had resulted in high transaction costs, market process inefficiencies and client dissatisfaction, said Mahoney. “It is time we started to think about adding value – who can add it, how they can add it, and who is paying for it.”
Poor practices had led to more corporate customers than ever complaining about commercial insurers, up from about 14,300 in 2006 to 15,700 and counting this year, said Mahoney.
In contrast, the banking industry and stockmarkets had embraced change, he said. The electronic trading platform SETS, which was first introduced in 1997 by the London Stock Exchange, had pushed up share trading volumes by a multiple of 15, and foreign exchange by 24 times in the past 10 years.
Mahoney's comments chime with voices elsewhere in the industry calling for change, most notably from the directors of Lloyd’s, who say they want market participants to embrace new technology.