We like to have a big idea each year at LIIBA. Something that goes above our day-to-day role of lobbying, training and market support and expands on a relevant theme of the time. Over the years we have looked at such things as how our members were developing solutions to the climate crisis; what would be the future of face-to-face negotiation in a post COVID world; and the contribution of insurance distribution to the global economy. This year we decided to try and define what people really mean by “digital trading” – a phrase much used but seldom with a concrete concept of what it might actually entail.
In Trust Imperative – How Digital Trading Can Revolutionise Client Outcomes But Why Humans Must Stay in Control we accept that the rapid technological advances we are seeing do have the potential to completely overhaul how we service client needs. But it will only work if it is managed in a way that understands what the relationship between client and broker really is. We don’t sell products, we provide an experience. Clients look to our members’ risk management expertise to provide the peace of mind that allows them to take bolder, innovative decisions that drive economic growth. So, whilst technology has a huge role to play in providing a more efficient and personalised solution, it will need humans to remain in control to provide reassurance that the solution is the right one. Trust will continue to be the foundation upon which our market is built. I commend the work to you, and all episodes can be downloaded now on our website.
But it is all fine and dandy having big ideas. What really matters is how we build on this to provide a suite of support for members trying to negotiate this new epoch – particularly the 80% of LIIBA members that are small businesses with fewer than 50 staff. So, what comes next?
A challenge for small firms, without dedicated in house technical resource, is how do you go from AI (I use the term loosely) doing something clever to doing something useful. And this is especially true in the heavily regulated industry in which we work. Operationalising the new technology so that it delivers tangible, consistent efficiencies is not straightforward. This is an area where a trade association can help. We will start with a webinar (working title: how to go from ******* about on ChatGPT to becoming an AI driven business) to look at the basics. And we might explore a partnership with a suitable technology firm to provide an AI audit service for members who want to build on this.
One of the interesting findings from our research was that many members faced a common problem. They have employed brilliant data scientists, but they tend not to know a lot about risk. And they have brilliant risk analysts who might not be well versed in spotting patterns in data. So, it is sometimes only a serendipitous accident if these two professional groups converge on a practical proposal. We will explore the extent to which this is a result of a gap in the academic system in UK. Is there scope for sponsoring a combined data and risk course somewhere? How can our schools and universities develop the rounded recruits we need?
The report looks at how the ability to process real time data will see a move away from a static annual renewal process to a continuous analysis of client risk. And that this will require the development of new financial instruments to be able to trade risk day-to-day. That will have regulatory implications in that our members will need to be active in markets that may well sit beyond their current permissions. If this is to work, particularly for smaller firms, it will need a streamlined authorisation and supervision model to support it. Smaller firms will not be able to cope with the regulatory burden of being separately regulated as an insurance intermediary and a derivative trader for instance. We need to find a way to recognise their hybrid role – especially as this new way of approaching client risk will enhance London’s international competitiveness – something our regulators are now duty bound to encourage. So we will begin discussions with FCA on how we flesh out this idea and work together to find the right outcome.
Technology is already speeding up processes in our market – especially around the execution of the trade with the growth of automated follow facilities. This is going to create time for traders and we believe that will allow a renewed focus on growing the market by addressing the protection gaps that exist around the world. In our Innovation Imperative report launched last year, we estimated this at $2.5 trillion globally. This is a huge opportunity for London but it will require our members to have the right access to international markets to allow their magic to come to bear. So we will renew our work – through our global partnerships such as BIPAR (the European federation of insurance intermediaries) and World Federation of Insurance Intermediaries – to lobby for sensible, proportionate approaches to licencing that recognise the need of all economies to manage their risk by accessing global capital. Indeed, I am writing this article in Colorado Springs where I am attending the annual conference of Council of Insurance Agents and Brokers – our sister organisation in Washington DC with whom we work hand in glove. These relationships are going to be more and more important.
With that, we have a plan to turn our big idea into ways in which we can grow and expand the impact of our membership across the world. A big idea can become a big concept. We better get on with it.
