How Lloyd's is Embracing Digital Change in Insurance: Blueprint Two and Core Data Standards | Bob James, Lloyd’s

by Juan de Castro, COO Cytora

In this milestone 50th episode of Making Risk Flow, host Juan de Castro is joined by Bob James, the Chief Operating Officer of Lloyds. Bob is a seasoned senior insurance executive who has left an indelible mark on the insurance industry. He’s held C-suite positions in leading U.S. and International insurers, and is member of the Board of Trustees for The Institutes, a leading provider of insurance education.

During the course of their conversation, Juan and Bob delve into the evolving nature of the London insurance market. Bob shares how Lloyd's is driving transformation through initiatives like Blueprint Two, an ambitious strategy to deliver profound change through digitalisation. They also discuss reasons why insurers don’t always evolve at the same speed, why the mortgage market has undergone radical digital transformation over the past 20 years whilst the commercial insurance market has not, and why core data standards might be the missing key for further transformation in the insurance industry.

Listen to the full episode here

Juan de Castro: Hello, my name is Juan de Castro and you're listening to Making Risk Flow. Today we're going to focus on the world of specialty, more complex risks. And as we know, the London market is the global hub for those types of risks. And I think it's fair to say it's got a reputation of being old-fashioned in the way it works, but in reality, it is evolving. It's pushing a really strong transformation agenda with a very strong focus on data. And to discuss it today, I'm joined by Bob James, who's the Chief Operating Officer at Lloyd's of London. So Bob, thank you so much for joining me today.


Bob James: Thank you. It's nice to be here.

Juan de Castro: So you've got a great background in leading transformation and operations in insurers, brokers, as well as banking. So let's start with a brief overview of what you've done in the past and your current role.


Bob James: I've been in the property and casualty insurance sector my whole adult life, which is getting to be a long time, as you can tell by looking at the grey hair. I've done pretty much every operating job within the property and casualty sector, with the exception of finance, setting prices, and adjusting claims. Pretty much everything else I've done because I've had opportunities to do so. If I think back on my whole career, and if I think about things that were called formal transformation programs, this would be the third time I've been involved in one. If you think about just large change projects, because there was a point in time, particularly in America, where there were, the word transformation didn't come up. They were just big, large complex projects, maybe four times. So I have a bit of a combination of operating experience, actually managing P&Ls, either as divisions of larger companies or in two cases, companies themselves. And then I've had change efforts along the course of my career.


Juan de Castro: One of the things I know from your background is, I guess, years ago, when you were in banking, you were involved in mortgage application operations. And at some point, not now, but later in the episode, I might ask you about, some similarities or differences on that. And that's often quite an exciting topic. So let's start with your current role as COO of Lloyd's. Let's start with what is the role of Lloyd's in the marketplace, especially in the context of innovation and transformation. What do you see the role of Lloyd's to be?


Bob James: Well, I think everybody has heard of Lloyd's of London. Probably most people that will be on this podcast listening to it will be aware of the history, but it's an old institution. I think it's 350 years old, I'm probably getting the numbers off by a few years. Ironically, it started in a coffeehouse. And it was people in a coffee house trying to figure out how they were going to share risk on shipments of goods that were in boats going across the ocean. And where if the boat went down and it was a big loss, if they shared that loss with others, it was obviously mitigated. It's grown now. So if you take a look at the London insurance marketplace, which includes both people that trade on the Lloyd's platform and people that trade on their own platform and happen to do business in London. And the reason I say it that way is that all that business flows through the processing arm that we call Velonetic. And if you look at the statistics that that business processed in 2023, that's over 100 billion pounds revenue flow. So it's quite a big marketplace. It's about 300 brokers that trade in the London market, not including those that trade in other parts of the world and about 100 insurers. So it is a big market. And just to go back to the coffee house for a minute, I think it has retained a lot of what made Lloyd's successful in the beginning, which is not exclusively, but it's still largely a face-to-face trading market. And depending on what kind of statistics you want to believe, there's between 30 and 50,000 people that work in the London insurance market in that sort of epicentre of which Lloyd's sits in the middle of postal code EC3.


Juan de Castro: And within that scope, when you think about Lloyd's and as you think about how that market is evolving from being a coffee shop 300 years ago. So how is it evolving now? What is the role of Lloyd's as an institution in driving innovation in that marketplace?


Bob James: Well, the Lloyd's Corporation, which is the corporation that I work for, whether you want to use the term manage, oversees, coordinates, the marketplace is responsible for three things. One is to make sure that the marketplace has the infrastructure to trade. Some of that is face-to-face. Some of that's obviously electronic. It has the responsibility from the UK government to regulate that marketplace, to make sure that the marketplace is doing business properly, that it's solvent, that it's making an appropriate amount of money so that it can survive into the future. And I think the third thing it does, which is hard to put a bottom line to in a spreadsheet, but it has a convening power. So it has the ability to bring people together, both in the marketplace itself, as well as outside the marketplace, to try to solve problems. And specifically, as it relates to innovation, there is this, I think, delineation between market participants, underwriters and brokers, who are trying to facilitate risk, for their end customers and their place in innovation versus the central infrastructure of Lloyd's, which needs to be able to facilitate those connectivities. So sometimes we do a lot on the innovation side. Sometimes we do a lot of the infrastructure side, but I see it first and foremost as providing, and I use the word infrastructure because it's not all digital, but providing the infrastructure so that the marketplace can efficiently trade and innovate.


Juan de Castro: A couple of the things you've mentioned, which is deploying that infrastructure to trade and connectivity, obviously a large part of that is the flow of data across different participants. And there are a number of initiatives like CDR. So, what are the major initiatives Lloyd's is pushing at the moment from a data connectivity innovation perspective?

Bob James: I talk about Blueprint 2 so much, and probably some of your listeners are probably saying, I can't believe he's going to go down that road again on Blueprint 2. But if we wrap up the core components of Blueprint 2. First and foremost, it's about data, which I don't think surprises anybody. I mean, you can't really talk to any sort of information business. And the subject of data isn't sort of fundamental to how people think about how they're going to trade. But it starts with data. And I'll come back to that. It starts with having an electronic infrastructure that that data can be sent digitally party to party. And it needs to have an infrastructure that can move that data over time, less and less human hands at keyboards reentering the information. Whereas today, that's not the case. So what is Blueprint 2 at its core? And where are we with it? It's three things. We could develop a common data standard that people could use to exchange the information they needed to trade. And you've mentioned the CDR. So we call it the CDR or data record. But it has since moved on from being the core data records now in a core standard. So many of your listeners will know that ACORD is the international data standards body for the P&C and life insurance industry, actually. So we've turned that CDR into a set of ACORD standards so they can be used globally. I call it the plumbing to move the data. But the technical infrastructure that the market runs on today is quite old. Depending upon how you look back in history, it's somewhere between 30 and 40 years old. It's a mainframe based system. It's batch oriented. It's green screens. It's people entering information into the system via keyboard. It's a lot of error correction. And It works, it works, every day it works. So that's how it works every day. But it doesn't facilitate quick transaction times and it doesn't facilitate the digital ability to send all that data around. So the second component of Blueprint 2 is replacing that ageing tech stack with a cloud based real time processing system for both premium and claims and ultimately then retiring the mainframe batch system. I think in Blueprint 2, we probably don't talk about it as much as maybe we should, but the lion share of the money and much of the effort has been to get that tech stack ready to be turned on and to have all these market, participants be able to safely connect and trade with that tech stack. The third piece, which we have not yet built. Although it's in the process of being architected and constructed, it is a digital way to get that data in and out of the system. So we've been calling it the digital gateway, but if you have standard data and you're sending it to me to trade, ultimately it needs to get processed, it would be nice to be able to do that electronically, which is the way we do it today. And I'm criticised because it is what it is, but we create documents, we turn them into PDF files, you and I trade to negotiate a deal. And then someone takes that PDF file and actually sits down in front of a green screen system and enters it into the system. So Blueprint 2 at the core is trying to do those three things, which I think then gives the marketplace a digital infrastructure to trade. And because of that, and because of the standard data, I believe that we'll see a lot of innovation in the marketplace because people will start to ask themselves, what can I do now that I can trade digitally? And what can I do? Because we both agree that we're going to speak the common language of core data standards.


Juan de Castro: Yeah, it made me smile when you mentioned the PDF, right? Because on one hand, PDFs are a magical invention where it's a document that almost anybody with any mobile or laptop can read. And on the other side, it's almost like a tool of evil. So it is how organisations take digital data and then create a document and then somebody else needs to completely rekey into other systems for that data to flow. So it's preventing that flow of data that you were explaining.


Bob James: But I think it just goes to show how quickly technology changes. Because if you think about it, not just PDFs, but this, what was in that for a minute. If we were having this conversation 10 years ago, first of all, people would think we're in a TV studio, some with big cameras recording this, not doing this digitally on two, probably tablets, without any latency, real-time communication. Well, 10 years ago, a PDF would have been a magical thing. Someone's going to be able to take a document that would have either been created on some PC somewhere and turn it into a semi-secure document instead of just some Microsoft Word file. But technology has moved on. And I think the trick is always, if you can't stay one step ahead of it, can you at least stay even with the evolution of technology? And I think this core data record slash core data standards and trying to be able to send that data digitally is an attempt to do that.


Juan de Castro: So recapping what you just said, so focusing on three things, the actual data standard, the cloud infrastructure and the gateway to get the data in and out. So all of that is in place and used by all participants. So almost like let's fast forward, whatever, three, five years. What will the process of transacting business look like? And I guess one is conceptually like, what would it look like? And the second one is, do you see all participants evolving at the same pace or not?


Bob James: I think three or five years from now, if you look, you're going to see three things. You're going to see much improved cycle times. The cycle time to place a business in the London marketplace is not instantaneous. It's far from it. You're going to see a much lower cost of producing business because of the way we do it today. It's error prone, the information is incomplete. There's a lot of back and forth to actually get a transaction processed. And so cycle times and the elimination of that will lower cost. I think both those things are important, by the way, because they improve the customer experience. But I think from an underwriter's perspective or a broker's perspective, if you have that and you also have a standard data set that you've built up over time, the question of what you're going to do with that data around product innovation, profitability management, insights for the customer, how you distribute products going forward is really going to be where the fundamental change is. And I think that's where innovation is going to come from. And I think that innovation will largely come from market participants. And many already have, by the way, their own transformation journeys that contemplate data. But I think those that latch onto that sooner rather than later say they'll have long-term competitive advantage, but they'll have first mover advantage. And if all else being equal, I'm placing business with one set of trading partners and it takes me a month's policy. And I place with another set of trading partners as the customer and it takes me two or three days to get a policy. Customer preferences, all else being equal, start to take over. But I do think fundamentally, though, underneath all of that is having a common data standard will allow people to use data for insights that they cannot as easily do today. And what I can't answer is I don't know how people are going to innovate. Just like if you had asked me three or four years ago about ChatGPT, I would have, that was just another acronym that I'm not aware of. To answer your question about adoption, I think it's like everything. Not everybody will adopt at the same pace. And some for very valid reasons. You can't transform your own internal tech estate overnight if you have a lot of technical debt, if you have a lot of legacy, if you've got budgetary constraints, people will have to factor that in. On the other hand, I do think the competitive forces of winners and losers in the marketplace, nobody wants to be a loser, will force some of that. And then I do think just anything else like taking ATM cards or buying things on Amazon or using your phone to pay bills, whatever it might be, it becomes a tipping point where that becomes the way to do business. Nobody even remembers what it was like to do business before. When I moved to the UK, there was Apple Pay in the US. It wasn't being used very much. And now when I go to the US, even today when I go out of business, I have to remember to take my wallet to dinner because if I don't, I can't pay the bill. Whereas in the UK, I can't remember the last time I pulled out my wallet to pay for anything because I pay for it all on the phone. So that's what I mean by tipping point.


Juan de Castro: That's quite funny. I actually just flew back this morning from New York and yesterday evening, it was the first time that I paid with Apple Pay in the U.S. And actually, it surprised me because they brought the machine so that I could pay. I mean, in the U.S., typically, you have to give your card, they take it away, they bring back the check, etc. And it did surprise me when they brought the machine so I could pay with Apple Pay. So, yeah, May 2024 is the first time I've seen it.


Bob James : I'm not trying to pick on my home country because the U.S. Is my home country, although I live in England now. But it is interesting. I was talking to somebody who did this directly, but it's an interesting statistic with a company that did the UK.gov website and all the stuff underneath it. And one statistic was they went from 132,000 URLs for the UK government down to one. So I do think in some ways the UK, with all of our issues and every country has them, is a bit more technologically ahead. And that's what I mean by tipping point.


Juan de Castro: Yeah. So quickly going back, because I find it quite interesting, the distinction you made about innovation because you talk about almost the core infrastructure of Lloyd's and the marketplace, which is about, as you said, the standards, the infrastructure, the gateways. And then what that really enables is the innovation of the different participants. So getting on board with the CDR, et cetera, it's almost like a hygienic step. But then you see that the real differentiator is how will each participant start using better, more standard data to drive that product innovation that you were talking about, right?


Bob James: To be fair to your question, I've been in the London insurance market for three years. I've been in the insurance business for a long time. So my understanding of the London insurance market is coming up on a steep learning curve. And so it depends upon who you talk to. I mean, everybody has an opinion about this. But if you're trying to drive innovation and entrepreneurship and risk sharing, remember, 50% of the business that trades in the London marketplace has more than one insurance company taking the risk. So if you're trying to drive that kind of syndication of risk, collaboration amongst, people that are also competitors to solve a problem for the customer and do it in an entrepreneurial way, my belief is there has to be a balance between what you do centrally and what you leave to the market participants for three reasons. One is people want to build their own secret sauce. They don't want some central utility telling them how they have to do business. So there's that. Secondly, there are 300, 400 participants just in the London marketplace. And so when you try to do things centrally to get everybody to agree that that's the right thing to do for them, as well as the marketplace can be complex. And the third thing is, is that someone's got to pay for all this stuff. And so in addition to doing things centrally, if I come to you and say, well, I'm going to ask you to do this and you also to pay for it, you may have your own point of view as a CEO about how you want to do business. So I do think there is a balance. And I think the balance has to do with where commonality and scale help entrepreneurship and innovation. And where does it stifle? And that is a huge judgement call. And I could not give you an answer on a piece of paper. But when I think about things we should do centrally versus things the market should do for themselves, that's what runs through my head.


Juan de Castro: And deep diving for a second on those areas that you see that are the responsibility of the different carriers rather than the Lloyd's of London as institutions. I've heard you talk in the past about things like risk triage. So how this infrastructure that the marketplace is providing now is going to allow the different syndicates to operate. More efficiently and effectively, right? Can you talk a little bit more about what you mean by a risk triage, the benefits of that, etc.?


Bob James: So a long time ago, we were trying to build a real-time processing website for retail agents to transact small business insurance on the web. A long time ago. And one of the things we were trying to figure out is, was there a way to have the system score the profitability of the business so we wouldn't have to have an underwriter look at it? And this was in the U.S., obviously. And we looked at, well, where were the examples that that was working? And those examples were primarily in the consumer, personal lines insurance world, primarily auto insurance. And a consulting firm came to us and said, well, we'll build a black box that will take every submission that comes in and put it in deciles from best to worst. So 10 deciles. And you can decide where you want to draw the line, but we'll be able to tell you factually that decile one will perform a lot better than decile 10. And we had a lot of data on small business insurance. And so we said, well, we'll give you the data and we want you to see what you can do with it. And they came back three weeks later and said, well, we would like to take your data and we'd like to combine it with other companies' data on an anonymized basis because you'll get a better result. Our first reaction was, no way are you going to take our data and anonymize it and give it to somebody else because they're going to get the benefit of our data. And so the comment was, and these numbers are about right. That's a long time ago. We had about an $800 million book of small business insurance. I don't know how many billions of dollars existed in the small business insurance marketplace in the US but it was a lot more than we had. And so they said, well, if you want to do that, fine, you'll get a certain result. If you want it to expand the dataset, we'll give you the same decile reporting, but you'll have a better result because you have a broader dataset. It took us about nine months to get out of our own way and realise that maybe that wasn't a bad thing. So I think the issue is going to be for the marketplace. And this gets back to your comment about central utility versus market participants doing their own thing: what will they do with their data combined with other data? And that could be all sorts of things to try to have a more robust dataset to do triage. Because I do think that the more robust the dataset is and the more current it is, the more accurate, obviously the triage is because you're always trying to make a decision for today based upon what happened yesterday. Obviously, things changed between yesterday and today, but we're already seeing a lot of companies, particularly small innovation companies doing this kind of triage where they're looking at data and trying to put it either in the hands of a claims adjuster or in the hands of an underwriter. If you had 10 things to do today, here's the first one you should work on. And there's some scoring behind that. I think we'll see more and more of that. And I think the more data happens, and this is probably a bit far to the future, but that will begin to apply to types of distributors, where the distributors are geographies, all sorts of things that will not for all specialty commercial business, that happens at Lloyd's, because a lot of our businesses, you said at the front of this is quite complex, but not all of it's quite complex. And some of it, you could do what I would call portfolio underwriting of a book of business versus risk by risk underwriting of a particular risk that comes across your desk. And I think it is going to be the data and the power to analyse that in new ways that will drive that kind of innovation.


Juan de Castro: And just building on that kind of triage of if you're a syndicate or an insurer doing the triage and get most like telling underwriters, if you can only do one thing today, this is the highest impact one of the best quality risk. Are we as an industry slightly myopic? And let me explain what I mean by that, if you look at it from an insurer perspective, it makes complete sense. But if you look at it from a value chain perspective, it's a lot of inefficiency, right? It goes to a broker who then has to do their own triage and then goes to another broker and then it goes to an insurance company. Each of those is doing triage. So isn't there an opportunity to look at it? From the whole value chain and saying, if we're going to triage it across the whole value chain. This is the right broker to intermediate this risk. These are the right carriers to underwrite the risk. So isn't there a concept of triage across the whole value chain, which requires coordination across different players?


Bob James: I remember the last time I was in an underwriting job. One of the conundrums we were trying to figure out was we would get 100 submissions in. We would bind 15 of them. But we would spend time working on a 100 to get 15. I mean, it was just the way things were. So you just priced it into the product. But we always said if we could get it from 15 to 20, our results would be better. If we get it from 20, 25 would be fabulous. But whether it was 15 or 25 out of 100. Then the next question was, of the 25 we bound, did we bind the right ones? And so some of that, to your point, around this triage was, if I got 10 submissions in from 10 brokers, which broker do I deal with first? And then which class of business? And a lot of this stuff is in the underwriters' heads, which is where it should be, because particularly in these complex risks where that information is based on years and years of experience, and because it's a relationship business. So some of that should be in people's heads. But the question of how you could make what's in my head more productive and more fact-based, I think, is helpful. To your question about, can you build a triage mechanism across the whole value chain? I think, of course, you could probably do it from a technology standpoint. Whether you could make it work based on how the customer buys insurance, I'm not personally not sure you can. And I have been a broker, but to be fair, I have never written the very large, complex risks that get written at Lloyd's. But I have written a lot about commercial risks, mostly in what I would call the mid-market commercial space in the United States. And this is a bit of a generalisation, but I think it has the merit of being true. What the customer wanted to know from me was, whether were they making the right decision. And first and foremost, it was, did they trust me? Did they think I had their best interest at heart? Secondly, did I have a technical understanding of what their own risk position was and what was going to get transferred and what wasn't? And could I explain it to them in a way that they understood? And then thirdly, when you would... Put perhaps three and four proposals on the front of them, invariably most of them would say, what do you think I should do? Because at least in the small and mid-market size, I can't speak for the large market, I was effectively their outsourced risk manager as their agent. So when you take that and say, will you get the customer, the end customer who's paying the premium to go through some sort of triage process that matches all that up without the relationship factor, which is why I said that earlier, I think that's a bit harder. Now. With that said, that means that the broker and the underwriter who has the best understanding of the data and can make the best recommendation and do it in a way that the customer understands is probably the broker or the underwriter that wins.


Juan de Castro: And I think that this goes back, this is why I mentioned at the beginning that I wanted to hear your thoughts on mortgage applications. And the reason is, I'll explain the relationship between what you just said and mortgage applications. So I was actually doing another episode with James Platt. I'm not sure if you know him. He was a former COO at Aon. And he was making an analogy with a comparison of why has the mortgage application process evolved so much in the last 20 years. He was saying 20 years ago, if you wanted a mortgage application, you would go to a branch, fill out paper. The person there would take it to the branch manager, review the paper, make a decision on the branch, etc. And nowadays, it's a completely digital process. There are central risk management teams. It's mostly automated, etc. Right? So that process has evolved radically in the last 20 years. And in the same period, insurance or commercial insurance has not. And part of what I was thinking is like, hey, there must be a reason, right? There's many smart people in the insurance industry. And I think the biggest difference is that it's a much more intermediate insurance industry when you compare it to the mortgage. So I guess two questions again. And apologies for throwing two questions at once. But one is, do you think that the fact that it's more fragmented and intermediate, it actually slows down progress, which is not bad by itself. But if we acknowledge that, then we can think about how we work around it.


Bob James: That's a great question. And I have to go way back in time to think about what that was like back when I was doing the mortgage operations piece. I think there are a couple of differences. And this experience I'm about to talk about is just a US-based experience. I don't know if it applies in other parts of the world. First of all, I think the mortgage pools, you can bundle them up into similar risks maybe easier than you can collect commercial risks. So if I'm writing about marine freighters that go around the world, there are certainly some similarities, one freighter to the next, but there are a lot of differences. Where are they travelling? What kind of cargo are they carrying? What kind of maintenance has happened on the boat, the quality of the crew, all that kind of stuff. Mortgages, I think, particularly, and we're talking about home mortgages here, this is my experience. You do have a house, you know exactly where the house is. You know what the economic experience in that postal code is. You know a lot about the consumer and you have huge amounts of data. So the way I would think about it, and I think this is probably proven out in historical reality. Where you have homogeneous risk groups and a lot of data and the transaction is more transactional versus complex in its nature, it is easier to do that because you can build data sets that predict whether you should write the mortgage or not, at what interest rate. You can judge the payment ability of the buyer or the borrower, all that kind of stuff. In the US anyway, we first saw it with, I think, in the property casualty space with auto insurance. Then we saw it with some small business insurance products. In some cases now, we see it with homeowner's insurance, although that's complicated by climate change and wildfires and floods and all those kinds of things. And in the mortgage space, that's exactly what you have. I mean, I worked for Countrywide Financial, which doesn't exist anymore now, owned by Bank of America. We had 9,000 people processing all this digital data. So you can kind of get a sense of how much data we had just coming in the door. I think at the height of Countrywide's experience, we were closing 20 billion dollars of mortgage per month. So the good news is you can do that. The bad news is, and this is what we found during the financial crisis, is all those data sets are based upon models. All those models are based upon assumptions. If anything in the real world changes and you don't change the assumption, you're in trouble. And what happened, I think, it's not the only thing that happened, but there was an assumption both in the model and in people's minds prior to the financial crisis in the US, which ultimately came to the UK as well, that house prices would continue to go up. Rising prices cover a lot of sins. We know that in the insurance market. As soon as house prices didn't go up anymore, the models didn't work. And yet you were making all these decisions based upon models. So I think if I take that logic, at least in my own opinion, you'll see that it applies to classes of business that are simpler and have a lot of data sets that can be more transactional or niche products. So it might be a product that's part of a larger risk management portfolio. And I'll give you an example of that in just a moment. I don't know if you'll see it for the whole risk. So let me give you an example. In my last job in New York, we had a business that wrote property and cash to cover for apartment buildings. Not a great class of business, not very profitable, tough class of business to underwrite. And it was in a catastrophe prone area, making it even tougher for the underwriters. So if I sold you a policy at $20 million of limit, you say, well, gee, can I get a million dollar deductible because I don't want to have to pay all that down the low end. I can fund that myself. So he says, sure, we'll sell you a million dollar deductible. But then you went to your bank and said, here's my insurance product. And they said, well, we don't like you having a million dollar deductible because we think that's too high. So you've got to get a smaller deductible. So we sold the product. That was called the deductible buyback product. So instead, you had a million dollar deductible, but your real deductible was 100,000 because we sold you a $900,000 product. It's a very simple product. A lot of data, easy to underwrite, easy to price. But the risk itself was much more complex. So I either think you're going to see it on some of the simpler risks to price where you get a lot of data sets and transactions or on niches of a larger, more complex risk. I don't know that you can do it for everything and commercial specialty.


Juan de Castro: That's fascinating. One last question that really almost combines a number of the answers that you've been talking about, which is, you've talked about how Lloyd's is pushing the industry in terms of standards, platforms, gateways, et cetera. The need for individual players to then drive their own innovation and leverage that data to reduce cycle times and product innovation and better risk selection. And you've also mentioned that there will somehow be winners or losers, right? Not everybody will be able to move at the same speed. So with that in mind, and in the context of a hard market. Where you see people saying, well, in a hard market, the combined ratio, you guys published a combined ratio of the market a few weeks ago and it's 84 point something, right? So obviously in the current environment, it's a phenomenal combined ratio. Everybody's making money. Where is the urgency to evolve going to come from? And do you think players are taking action now to be prepared for the next soft market or is history going to repeat itself and everybody's going to wait until they start seeing the losses to think about evolving?


Bob James: I don't know, because there's a lot of people in the marketplace. Everybody has a different point of view. It's a great question, and not to be trite about it. If you asked me to give advice, it would be, well, you want to make, hey, well, the sun is shining, not when it's raining. And if you are making a lot of money and you've got a lot of technical debt. And I'll give you examples in a minute. The question is, if you ultimately think the technical debt going to prevent you from leveraging data and digital when's the best time to try to get rid of it? Is it now when your combined ratio is not 85 anymore? I would suggest it might be now. But it is a problem because the insurance business sort of grows at the rate of population growth and generally inflation. It's not like it's not growing, if you have CPI, consumer price index, going up by 5 percentage points, it's rare that the insurance business is growing at 30 percentage points. Might be some people that are doing that, but not the whole marketplace. So I personally think you have to deal with it. And I'll give you a pragmatic example. I won't mention the company because I used to work for them. We had 56 legacy systems. We had almost 20 claim systems. We had two general ledgers and we had six billing systems because of acquisition and because of different things that happened over 20 years. And every year it was like, we should do something about this. And sometimes you'd look at the complexity of it and you'd say, you just lose the will to live. And you say, I can't do it. And some years you'd look at it and say, am I ever going to get a cost benefit from doing this? Because it costs a lot of money to rationalise it. I think the hardest decision is - do you believe that having a more simplified tech estate that is digital, where you can actually move data quickly and analyse it, is important? And then there's a lot of solutions. You don't necessarily have to collapse all the systems. There are a lot of ways to deal with it. But my advice would be, if you think you need to do something as a participant in the marketplace to be more data and digital driven, I would personally do it when you're making money, not when you're losing money or when you're having a hard time making money. My personal advice.


Juan de Castro: I'm not a journalist, obviously, but I'm going to play the journalist card and almost like summarise what you just said with there are going to be winners and losers. And if you want to be one of the winners, invest when the sun is still shining.


Bob James: I think so. Look at the comment about PDFs. Are PDFs still a good thing? Absolutely. Nothing wrong with PDFs. Five years ago, you and I were having this conversation. We might not be having it on the screen because it may not have worked like it works today. But if we said someday you're going to be able to take your PDFs, all of them, thousands of them, have a computer system, read them in a conversational way, a.k.a. ChatGPT, give you some insights. People would have said, well, that's crazy. That's never going to happen. Well, technology is changing so quickly. I think the thing that is not changing is the ability to use data to make fact based decisions. Technology is going to empower it. But if you don't leverage your current estate, to build for a new estate. As technology changes faster than you can change. My own belief is at some point you become further and further behind the eight ball. If you're dealing with very complex risks that only trade face-to-face, probably not as much of an issue. If you're dealing with risks that could be traded in other ways, it probably becomes a problem over time.


Juan de Castro: Bob, I think that is just a fantastic way of wrapping up the whole episode. It's been fascinating to hear your perspective. As I said, I think you bring such a relevant background from banking, insurance, and brokers. It's a real pleasure catching up with you, as always. So, thank you so much for joining me today, Bob.


Bob James: Thank you. Have a nice day and thanks for letting me be part of it.