Examining the Potential of CDO-as-a-Service for the Lloyd’s and London Market

According to the recently released World Economic Outlook for 2023 by the International Monetary Fund, the global economy is experiencing a slowdown, with projected growth dropping from 3.4 percent in 2022 to 2.8 percent in 2023.¹ This deceleration can be attributed to a combination of factors, including turmoil in the financial sector, high inflation and the ongoing war in Ukraine. In the face of these challenges, it becomes increasingly crucial for CXOs to optimise costs while pursuing business growth.

In the insurance sector, the high inflation rate is a significant concern. This is validated by a poll of insurers who identify inflation as the biggest challenge for the industry in 2023.² Heightened inflationary pressures amplify the financial burden on insurance providers, resulting in escalated costs for consumers. Organisations must establish distinctive value propositions through an extensive range of personalised options. Meanwhile, businesses have witnessed an unprecedented surge in technological advancements, exemplified by the launch of Generative Artificial Intelligence (AI), which has unveiled new and disruptive possibilities.

Never before has data held such immense power, presenting CXOs with an opportunity to leverage it effectively to unlock business value. A recent global data and analytics survey report by WNS and Forrester Consulting, involving C-suite leaders and senior decision-makers, sheds light on the importance of data and analytics for business performance .

Source: Data & Analytics Survey Report by Forrester Consulting, Commissioned by WNS

However, while 66 percent of insurers recognise that data and analytics are critical for business performance, 41 percent identify investing in data and analytics as one of the top three business initiatives, with 67 percent needing more maturity in data management technology.

This raises an intriguing question: Can a Chief Data Officer (CDO) fulfil their responsibilities more effectively within a collaborative “CDO-as-a-Service” ecosystem? Organisations must adopt a dedicated and committed approach to harness data as the business differentiator. The CDO-as-a-Service model brings into play domain-led contextualisation, underpinned by frameworks, best practices and accelerators, to significantly shorten the data-to-insights journey.

The adoption of CDO-as-a-Service holds significant value for insurers facing the complexities of the modern business landscape. Engaging with expert service providers grants access to specialised skills, cutting-edge technologies and industry knowledge, enabling insurers to efficiently harness the power of data. This approach offers cost-effectiveness, scalability and rapid implementation, allowing insurance companies to focus on core competencies and gain a competitive advantage.

The Lloyd’s of London insurance market serves as a compelling case for adopting the CDO-as-a-Service model, primarily due to the volume and complexity of transactions that make it challenging to define and execute a robust data strategy. Various aspects, such as placements, claims, financials and partner organisations, require a comprehensive understanding of the organisational data lineage within this market.

Fundamental Expectations a CDO Must Fulfil

This is an excellent starting point for examining the impact of CDO-as-a-Service. The fundamental functional requirements encompass a broad spectrum of responsibilities, including:

Data Ownership: Defining the strategy for data acquisition and data management, establishing an effective data advisory and lineage across the organisation, implementing the right data quality and stewardship framework for efficient data curation and governance, and adopting an adaptable data augmentation process to address additional data needs of the organisation (such as tax and foreign exchange, geospatial data and meteorological data) through the integration of appropriate third-party data assets and Application Programming Interface (API) services.

Intelligence: Providing descriptive and predictive analytics for market outlook across different classes of business, evaluating partner networks to define incentivisation strategies (for Managing General Agents (MGA), brokers and carriers), future-proofing the organisation’s business through Environmental, Social and Governance (ESG) analysis, ensuring visibility into key metrics for insights-driven decisions, and driving profitable and sustainable operations through predictive models (such as risk selection and claims triaging models).

Efficiency: Implementing transformational solutions and cost-effective operating models, including interventions for unstructured data management (extracting data from slips, submission documents, flood and fire checks, Statement of Values (SOV) evaluation and claims peril coding), efficient bordereaux processing, and automation of data validation checks and intelligent query management.

Collaboration: Embedding the right platforms, products, skills and services to drive the overall data vision for the organisation. Specific needs of exposure, actuarial, underwriting, broking, reinsurance and finance operations must be assessed before forging such alliances.

Additional Expectations from Individual Business Functions

Additionally, CDO responsibilities in the London Market also encompass important expectations at a business function level, including:

Underwriting: Relying on the data function to provide portfolio insights and actuarial data feeds for steering underwriting decisions, such as risk selection and risk triaging.

Claims: Depending on data services to monitor loss portfolios by integrating market messages, internal First Notice of Loss (FNOL) systems, vendor / handler triaging and loss predictions.

Finance: Expecting the CDO’s office to ensure data quality from core systems to reconcile cash positions and facilitate credit control.

Risk and Compliance: Managing regulatory reporting and compliance tracking necessitates the CDO’s office to be well-informed about existing and evolving compliance requirements and provide a centralised means to track data accurately.

Account Management: Managing partnerships through Terms of Business Agreement (TOBA) and relying on data (leveraging third-party data assets such as S&P or DUNS) to maintain a clean record of partner and client organisations.

Actuarial and Pricing: Depending on the CDO’s office for data required to drive analysis, such as triangulations and case pricing, in addition to the supply of underwriting and claims data feed into actuarial decision-making.

Supplier Management: Establishing a central framework for tracking operational Service-level Agreements (SLA) and supplier performance.

Great Expectations, Greater Challenges

With high expectations come significant challenges. This is particularly true for the CDO’s office in the London Market. The challenges encompass various dimensions, including:

• Inherent Complexity: The intricacies of a complex domain necessitate a deep understanding of the London Market business model to define the right data strategy.
• Legacy Systems: The inertia of legacy systems and practices entrenched in most of Lloyd’s entities slows the organisational transformation journey.
• Change Management: Complex change management involves working backward from client money calculations to reconcile financial positions while implementing new platforms / systems.
• Alignment with CTO and Change Practice: The interlinking of critical CDO decisions with the goals of the Chief Technology Officer (CTO) and change practice requires a delicate balance between departmental and business objectives.
• Regulatory Adherence: This involves adhering to evolving regulatory and compliance requirements.
• Transformational Interventions: The risk of transformational interventions, such as Blueprint Two, renders data-related investments irrelevant for future use
• Operating Geographies and Entity Types: Different operating geographies and entity types within a group would further amplify the diversity of the knowledge the CDO is expected to operate with.
• Data Sharing: The chief data officer’s role is essential in eliminating organisational silos by enabling seamless data sharing and facilitating data flow into downstream processes.
• Data Monetisation: The CDO’s office has evolved into a revenue-generating function, necessitating the active pursuit of opportunities to monetise data platforms and assets through servicing or white-label propositions.

Enter CDO-as-a-Service

The immense expectations placed on a CDO for the London Market cannot be fulfilled by a single individual and their office alone. It calls for diverse expertise in data, technology, business domain and soft skills. Hence, the concept of CDO-as-a-Service becomes more relevant. London Market entities can adopt this concept from different purviews, depending on organisational maturity and the existence of a functioning CDO’s office.

Organisations can choose to onboard the services they need from market-leading service organisations equipped with resources and skills to supplement their requirements. These services can be segmented as advisory, enablement and augmentation services.

Relevant to organisations with a fully established CDO’s office and data practices. Advisory consultations can address ad hoc requirements (data migration for policy administration or claims administration, broking and exposure management) and the workbench implementation of underwriting services with unstructured data management capabilities.

Required for organisations with a CDO’s role already fulfilled but with low-to-medium maturity in their data practices. The CDO needs help setting up functions and practices around services such as data engineering / data mining, reporting and governance, and quality / predictive analytics.

Relevant to London Market organisations, which are currently at a start-up or growth stage and have no CDO to define and drive overall data strategy and execution. In such a model, the CDO’s role and responsibilities will be serviced by a partner capable of fulfilling the organisation’s expectations till the ideal candidate is found.

Choosing the Right Partner

Finding the ideal partner to provide CDO services to London Market entities can be tricky, as it calls for multi-layered expertise and experience. Such a partner organisation must be able to fulfil the following requirements:

• Proven market credentials of working with all London Market entity types.
• Best-in-class talent to fulfil services individually or as a team.
• Strong experience in London Market-specific business services that integrates data services expertise with comprehensive knowledge of business functions and operations.
• Robust data practice to evaluate and implement modern data services and applications. This can be fulfilled only by organisations that offer such services as part of their core capabilities and competencies.
• Cultural sensitivity to the Lloyd’s and London Market ecosystem. The ability to comprehend the needs of underwriters and claims handlers in a complex class of business or the finesse to reconcile bordereaux statements back to cash positions is an outcome of the time spent in the market, meeting different needs consistently.

In the dynamic landscape of the modern world, CXOs face immense pressure to drive growth while effectively managing costs. To thrive in this environment, adopting a proactive and innovative mindset is crucial when integrating (with enterprise systems) and harnessing data. By embracing the concept of CDO-as-a-Service, which offers compelling advantages, organisations can unlock the potential for creating continuous business value. This approach acts as a catalyst for designing groundbreaking business models, enabling insurers to gain powerful insights that have the potential to revolutionise customer experiences. Ultimately, such transformative initiatives pave the way for a sustainable future and empower organisations to stay ahead of the curve.

To know more about how WNS can align data ecosystems for the Lloyd’s and London Market entities, visit WNS Triange | AI, Analytics, Data & Research

References:

1. World Economic Outlook 2023

2. GlobalData