Operating & Financial Review

How we appeal to our clients

The way we source business and the nature of the subscription market means that we need to meet the expectations of both our broker intermediaries and the end customer. We maintain a close watch on how brokers rate our performance and aim to excel in areas which are important to them and the end client.

In 2006, independent consultants Gracechurch conducted a biennial survey of the attitudes of 350 UK based placing brokers towards insurers in Lloyd’s and the wider London market.

We were ranked first for brand awareness among Lloyd’s managing agents, up from second equal in the previous survey, and with the highest margin over second since Gracechurch commenced their London market survey in 2002. We were sixth for brand awareness among all insurers, which is a positive performance against the large global brands including Lloyd’s itself which was in first place.

Traditionally important factors in the selection of insurers remained stable in comparison with 2004. These include financial strength, where Amlin again ranks first in this study, claims performance and speedy decision making.

With the increased transparency demanded by insured customers, brokers are focussed on where and how both they and their recommended insurers can deliver added value to policyholders. In the 2006 survey, brokers added a new requirement for insurers to understand the needs of the insured, ranking this factor as second only in importance to financial strength and equally important as paying claims efficiently. The experience of our underwriting teams, as outlined in the People section, means we are well equipped to meet this need.

Policy issuance

Amlin has outperformed the market for both the quality of its policy wordings and the speed of their issue – components of our service which are relevant not only to the broker but more importantly to the end client. The historic standardsof performance in this area across the London market have been poor which resulted in the FSA demanding rapid and meaningful improvement.

We continued to make excellent progress towards our goal of agreeing a full contract wording on all London market risks before their inception, reaching 91% compliance in 2006. In January 2007, for the first time we reached 100%.

With end clients becoming more demanding, increased transparency over market processes and the FSA’s focus in this area, we would not be surprised to see policy issuance increase in the scale of importance to brokers in the future.

Claims service

We were disappointed with our average rating on claims payment efficiency in 2006. We failed to meet our target that for at least 75% of claims files the turnaround time is four days or less. While the average overall turnaround time was 4 days, compared to 4.2 days in 2005, and claims volumes were up 11.6% in 2006 with 37,833 claims being adjusted, only 71% of the claims portfolio was adjusted within 4 days or less.

Claims service is an area where we expect to compare favourably, especially as we have invested in process improvement and technology over the last two years, and in 2005 we were ranked first for overall claims service in a survey of London market claims brokers.

During 2006, we adopted Electronic Claims File (ECF) technology, linking it with our bespoke claims workflow system implemented in 2005. By moving from paper-based to electronic processing, the total time taken from initial advice to final settlement can be reduced and brokers will be able to remove costs. It is also much easier to share information with following underwriters where Amlin is the lead underwriter on the risk. In October 2006 Amlin and Guy Carpenter announced that for the first time a Lloyd’s market claim had been transacted entirely electronically. Since then until the end of January 2007, 15% of our lead London market claims have been transacted using ECF technology. Amlin is ahead of its peers in the market in this regard.

Changing distribution dynamics

A number of forces are combining which are having an effect on the shape of the distribution chain and the way that we trade with insurance brokers. Among these are increased demands for transparency by clients and regulators, the emergence of larger local markets around the world, an increasing momentum to remove inefficiencies while increasing the focus on added value and technology providing solutions.

For some classes of business, particularly for business sourced from overseas, the distribution chain can be long and complex. In 2006 we saw moves to integrate the chain with three London market brokers being acquired by US retail and wholesale brokers.

While together these London market brokers represent only a small amount of Amlin’s business, these acquisitions are indicative of a trend which may affect the flows of business to London in two potential ways. First, it may increase the extent to which the parent acquirer seeks to place business in London, and second it may reduce the extent to which the London market broker continues to access business from some other US based intermediaries. In either case, these dynamics reinforce the relevance of our strategies of expanding recognition of our expertise and service capabilities through our distribution chain. We are investing in technology to provide flexibility in the way our underwriters can trade with brokers, and seeking to lead positive change in the London market to increase its attractiveness to brokers and clients.

Leading change in the London market

While we have every intention of continuing to differentiate positively Amlin, we recognise that it is in our interests that the London market overall increases its attractiveness to brokers and clients internationally and that change, in order to gain traction, requires leadership with a critical mass of support. Frustrated by the pace of change in the market, Amlin, together with five other Lloyd’s managing agencies, formed a Group, now known as “G6”, to design and promote improvements in market processes for the benefit of all market participants and our global client base.

Significant progress was made in two areas in 2006. First, the design and commissioning of a new electronic market wordings repository which is intended to aid the efficient production of policies and the delivery of contract certainty. Once scoped to a sufficient standard, this was passed on to the Lloyd’s Market Association so that it could be available for all Lloyd’s market participants. Second, the design, agreement of data standards and testing of a new “peer to peer” means of transmitting data electronically so that the risk placement process can be streamlined. Benefits of this will include savings in time and expense for brokers and underwriters and a clearer audit trail of information exchanged pre-placement of a risk. Amlin is already using this technology with a small number of leading brokers. We will be encouraging brokers to adopt it more widely during 2007.

See Infrastructure – enhancing capability and delivery for further details of both of these developments.

© Copyright Amlin 2006