An interesting news item on the Market Reform website caught my eye. The item informs us that Aon say they have made significant progress with their ambition to transact as much of their business as possible via an electronic platform and, as at the end of May 2008, had traded over 15,000 lines with over 160 markets via Ri3K. Aon made a commitment to review the experience after the 1 January renewal season and to that end asked Watertrace to conduct a full survey, both internally within Aon Re UK and externally with feedback from markets. The report is available from http://www.marketreform.co.uk/News_archive_2008.htm.

The executive summary set out the objectives as seeking answers to two key questions: 1) Where are the hearts and minds of individuals and firms who form part of this business? 2) What issues need to be addressed in improving it? Watertrace interviewed 85 people from 32 organisations, both within and without Aon. Watertrace discovered that there were definite pervasive themes that were common across all organisations. These were condensed into four key findings, which were:

1) Automation of London Market processes is inevitable and needed. The interesting thing here is that whilst reaction to Aon’s EP strategy is varied and sometimes passionate, there is a feeling of ‘fait accompli’ that the market will move towards an more streamlined, electronic process. That has got to be excellent news for anybody who has an interest in seeing the London Insurance Market still thriving in years to come. It seemed to me and others that one of the potential threats to the future success of the market was the ‘ostrich’ approach to market reform. The recommendation associated with this was that Aon needed to publish its EP roadmap and clearly pinpoint where RI3K, email and other forms of transaction processing lie along this roadmap.

2) The implementation approach needs to be carefully staged. According to Watertrace, the variety of responses received indicated that the implementation of the second wave needs to be carefully managed. More visibility is needed. Interestingly, Aon were seen as the key driving force for market change, and as such were looked to for leadership, but participants wanted greater input. Aon’s leadership goes some way to removing the negativity towards EP from earlier failed attempts. I think Aon are to be applauded. Sometimes it takes a ‘frontiersman’ to break from the pack and if this is a significant market player like Aon, then they are far more likely to drag the rest of the market into a better place.

3) The technology is key and needs to be continually improved. Watertrace observed that whilst most participants felt that RI3K as a stand alone system was OK, the biggest problem was integration. It was felt that the extra work arising due to no systems integration was damaging for brokers, underwriter and support staff acceptance of the new environment. This is certainly consistent with what Scyllogis has found too. The goal is straight through data processing. Assignments designed to achieve this are quickly becoming a staple part of our work. The trick here of course are standards in data format.

4) The next steps are critical. As the market reforms and a number of EP initiatives gain traction, the issue will be that the market will be presented with a number of EP options. Watertrace felt that Aon’s leadership here was important to ensure standards are set among producers to ensure costs are contained and and the value of automation is realised. A good case study to emphasise the validity of this point is SWIFT, the industry-owned co-operative supplying secure, standardised messaging services and connectivity to more than 7,650 financial institutions in over 200 countries. The Guiding principles for SWIFT are: a common platform of advanced technology and shared solutions through which each user can still build competitive edge.