I am writing this column while stuck at home due to the latest round of rail strikes. While most of the media tend to characterise these as a “pay dispute”, there is a whole set of issues around working practices and productivity that are also part of the mix. Without slipping into the murky mire of trade union politics, can I just say that I have some sympathy with them on some of this.
My first job after university was as an economist at the Department for Transport working on railway privatisation (see me afterwards for a full explanation of how my main task in the year I stuck it out has been the root cause of every subsequent points failure and, probably, rail disaster). At that time, in the grand civil service tradition, there was only one man in the department who actually understood how the rail industry worked – an advantage he exploited by rarely turning up before 2pm, although he was said to “work late after everyone has gone home”.
He was adamant that, at every stage over the preceding 50 years, whenever there was an investment to be made in the rolling stock or the railways themselves, the then-British Rail had always put together a well-researched proposal that analysed the costs and benefits of the various possible courses of action and put forward the best-value course of action. And, routinely, government would review said proposal and tell them to just go with the cheapest. And, to a large part, that is why we are where we are with our railways.
Before this gets too contentious, let us swerve away to the general point I take from this. Too often in any sort of modernisation or process improvement programme there is a tendency to take the words “efficient”; “effective”; and “lowest cost” and treat them as synonyms. Often, they are very far from it. Take, for instance, the number of call centres that have been brought back to UK after the race to offshore them all about 20 years ago. There are times when the lowest cost does not deliver the right customer outcome and thus lacks true efficiency or effectiveness. It is a lesson we need to keep at front-of-mind as we continue to pursue our own modernisation efforts in London.
We have made outstanding progress in defining and agreeing the Core Data Record (CDR) that should underpin all contracts placed in the market. And we have taken that and devised MRC version 3 as a stepping stone towards a fully digitalised world. Now we are dealing with the thornier question: whose job is it to collect each bit of data and when should they do it? To an insurer, the answer might seem obvious: let the broker do it. But this runs the risk of two very real possibilities coming to pass.
First, ask brokers to collect any bit of data that they don’t care about – like information solely required for insurers to be able to fill in their regulatory returns – and they will tend to do it badly. Our accounting process still runs an error rate of around 25%. At the core of many of these mistakes is exactly this issue. It is the one lesson from our failing current approach that we must learn if we are to deliver a better result in the future.
The second consideration not to lose sight of is this: if you ask brokers to do stuff in London that your international competitors do not, then guess where people will be looking to take their client’s business.
Two strong reasons why the cheapest and most effective solutions may not be mutually inclusive. And this highlights a wider point. We have been doing some work recently with younger brokers discussing how they want to trade – watch this space for the full results coming to you shortly. What this has emphasised is that this is a generation that very much sees relationships as being the bedrock of their future. And here is the danger. If firms in London manage their businesses solely with the intent of minimising the operational cost of each individual transaction, they will manage the market out of existence.
Relationships take time to build. They can be formed by chance encounters while waiting to see an underwriter. They can be consolidated by bumping into people in the street. And they are forged over coffee, lunch and in other social settings. All of which activity might be viewed by an operations person as “waste” but is in fact the development of the foundations that allow our marketplace to deliver client outcomes no other insurance hub can match.
So, next time you are sat on the 3:10 to Yuma only to discover it has been delayed by 27 minutes due to points failure in the Hither Green area; or when you are filling in yet another Delay-Repay form, remember: this is what you get if you conflate efficiency and effectiveness with lowest possible cost. It is the impact on the customer that we must always hold paramount. And, sometimes, that is something worth paying for.
