If historical success guaranteed future success we'd probably still be governed by the Romans. As many an empire has discovered, just because something worked yesterday doesn’t necessarily mean it will work tomorrow and the London Market ‘empire’ is no different. Since London first became an international powerhouse for (re)insurance some of the major factors behind its success – lack of competition and capital scarcity for example – have been eroded. And if we fail to cooperate more effectively as a market, put the consumer at the heart of what we do, and promote the value of the product we provide beyond simply trying to differentiate on price, the London Market will face a real battle to remain relevant.
No longer the only game in town
I think there are four key reasons why the London Market has been historically successful.
Firstly, we have been the only option for many risks with the appetite to write those that others couldn't or wouldn't, pretty much throughout the world. This is no longer the case.
Secondly, there's efficiency of resources. London used to be the most efficient place to deploy capital but with most carriers now operating multiple platforms around the world, the capital options have changed.
Thirdly, the symbiotic relationship between brokers and carriers in the London Market has started to break down.
And finally, capital used to be scarce and money that wanted to access the (re)insurance world had to clear a number of barriers. Changes in regulation coupled with a lack of investment opportunities elsewhere have turned this equation on its head.
The answer starts with the customer
Given the loss of these competitive advantages, what will arrest the slide and make sure that the London Market maintains or even regains its place at the top table?
Starting with the customer
London has been very insular when it comes to customer thinking. Most selling strategies have not been developed with the customer as the starting point.
Co-operating more effectively
As a market we compete with each other but we must recognise that some functions and activities demand a mutual solution as opposed to a competitive solution. Why compete on the transactional areas of our business?
Retreating from competing on price only
A consumer that is being encouraged to buy on price will, in the end, favour the low cost producers and none of us in this market are set up like a Ryanair to compete simply on price. It’s time to change the conversation with our customers to focus less on price and more on the value that the London Market can deliver whether on product innovation and/or service.
Time for collective action
We need to reinvent ourselves. The challenges we face are not underwriting ones – they are around innovation, organisation, and sales and marketing. All require a collective effort to deliver. If we fail to do this over the next ten years, the London Market could become just another footnote in history.
Chief Operating Officer – Hiscox London Market
*This blog is based on an article first published in Insurance Day on 31 October 2014. Click here (external link) for the original post.