Launched by Brit, Ki is the first fully digital, algorithmically driven Lloyd’s syndicate. Allan discusses what this new approach means for Lloyd’s, underwriting and brokers.
Ki has been several years in the making. About two years ago we, as an executive team, had an offsite, and we were thinking about innovation, which is a core strand in our strategy. We had a moment of realization that we had reached the point where Lloyd’s was definitely on a path to becoming a more digital, more data-led marketplace. We therefore felt that it had become imperative for Brit to have a digital, data-led proposition.
Having realized that we needed to digitize to succeed in this evolving marketplace at Lloyd’s, we decided we wanted to continue with our lead model, which is the Brit underwriter-driven, high-capability model, but also to start on this digital journey with a new follow-only business, which would be digital-led and algorithmically underwritten. We very much thought about it as a startup—a digital challenger within Brit and within the marketplace—rather than trying to pull off a wholesale digital transformation of Brit as the lead business.
We had already built a follow-only syndicate (Brit’s Syndicate 2988). The benefit of a follow-only platform in the case of Ki is that it allows us to streamline a number of processes and makes it much easier for us to take a data-led, digital, algorithmically driven approach to underwriting. That’s an absolutely critical component to the business model.
We work wholly with brokers and intermediaries who represent the end client. The digital platform that we have built provides a completely different experience for the Lloyd’s broker. The broker only has to log in to our platform, and they can then instantaneously generate a follow line, subject to a limited number of questions. This either has to be a risk that Brit has participated on or a risk that a select group of nominated leaders have already quoted on and are in a lead position on. On the Brit follow business, we already have the data we need to do our underwriting, so it is truly a seamless, frictionless, instantaneous response.
Where Brit or Ki hasn’t seen the business before, there is a small amount of information you have to enter as a broker. Think of your typical car insurance quote—you might have to enter 20 or 30 pieces of data. It’s a fairly short form for which the broker would have to input information into the Ki platform, and then we would offer a quote on the basis of that information.
The advantages are time saved for the broker and ease of use for the broker. Typically, today it might take a broker three weeks once they’ve got the lead line in Lloyd’s to complete the follow placement. That’s typical on a standard insurance policy in Lloyd’s. Essentially, what we’re saying is rather than taking three weeks to go down a traditional follow route, we’ll be happy to offer you, through Ki, the equivalent capacity through our platform instantaneously. We think that’s pretty compelling for the brokers.
Essentially, the Lloyd’s Blueprint was the inspiration for Ki. It’s quite a significant and challenging exercise for Lloyd’s to digitize a whole marketplace whilst continuing to trade on a daily basis in the current environment. I think Lloyd’s is definitely on the path to achieve that over time. PPL, the digital placement platform in Lloyd’s, was already mandated and seeing good usage in 2019. As we came into 2020 and lockdown, the usage stats have spiked significantly on it.
We think we’ve passed the tipping point in Lloyd’s, where digital placement will become the norm. At the moment, it’s not at the point of offering quotes through the platform; it’s essentially documenting what has been agreed after the event. The next big step Lloyd’s is looking to take is to bring that process forward and allow quotes to be requested and offered through a platform.
We have seen how some digital businesses have worked first-hand. In the past, I was involved in Simply Business—Brit had a stake in Simply Business, which is a U.K. digital broker—and more recently I have been on the Compare the Market Limited board. We had the inspiration from Lloyd’s, but the impetus was really from the fact that, unless you’re ready for a market when it digitizes, you can quite quickly fall behind the competition. Whilst there’s an opportunity if you’re ready early, there is a real threat if you’re not.
The fact that it is fully committed and Blackstone has backed the business model is a real coup and hopefully gives people a lot of confidence in what we are doing. The size of the raise is also important. When we’ve drawn down on that capital, we would be at a scale which is certainly very significant in the context of Lloyd’s. We’ll be certainly in the top half, probably in the top 20 markets in Lloyd’s at that stage.
We felt that raising a larger sum that we could grow into over a longer period of time was important so we could show certainty to brokers and clients and, frankly, so that we could grow into that capital base. Our year-one business plan is very significant. We’re aiming to write $385 million of gross written premium next year. Year one, that would be the largest startup in the history of Lloyd’s.
We think there are huge opportunities. There are many process efficiencies that we are developing as part of Ki, and we absolutely think they could be applied in a wider way across Brit in its lead business. Ki is a follow-only business, so we must have a leader on the risk when we write it. Brit’s main business, which is $2.5 billion of premium, is largely lead business. We believe in the lead underwriting and the high-quality and high-touch model. What we want to do is use the technological enhancements that we are building to improve that business over time.
That doesn’t mean replacing underwriters. Almost the opposite. It means building a platform that the underwriters work with to allow them to focus more on the underwriting, client servicing and risk management fundamentals of their role. To me, the fully automated model works very well on the follow side. On the lead side of the business, you think of it maybe more as “bionic underwriting” where you keep the best of today’s underwriting process and add in the digital components that we can develop over time.
The talent we’ve brought in is something I’m keen to emphasize. We’ve partnered with Google Cloud and University College London. We’ve really benefited from that because we’ve expanded the knowledge set and the skill set to move the business forward.
We will write business from 1 January 2021. We are launching our platform into our core partner brokers in the market, and we’ve announced our first partnership with Howden and HX, which is a significant long-term agreement to cooperate on Ki and the digital business model and try to build an end-to-end digital journey so that risk can get placed seamlessly in the market.
The focus this year has very much been on launching the platform and working with brokers to plan out how that will work. Next year we will be working very closely with our trading partners to make sure that we deliver on the promise. But alongside that, we are going to continue to develop at pace both the platform and the algorithm. Assuming that we hit our targets for next year, we are also planning to grow substantially into 2022. Whilst we’ve got pretty ambitious plans for next year, we are hopeful that, once people have experienced the platform, demand will be quite high for the following year. We’ll be planning out our further expansion, and we have the capital already secured to allow us to do that.