Lloyd’s of London plans to shift a large chunk of its business online as part of a radical plan by chief executive John Neal to overhaul the 330-year-old insurance market and cut costs.

Mr Neal has laid out reforms including splitting the market into two, with more standard contracts arranged on a new online system that would allow risks to be placed “in minutes at a fraction of today’s costs”.

The plan was revealed in a prospectus published on Wednesday that outlines far-reaching reforms designed to turn round the market’s performance and pull in more business.

Lloyd’s has been under pressure from expensive natural disasters, stubbornly high expenses and competition from overseas. It has also faced allegations in recent months that sexual harassment is rife.

“Insurance as a sector has got to speed up in a tech-driven world,” Mr Neal, who took over from Dame Inga Beale last year, told the Financial Times. “This is our opportunity to show some leadership.”

Central to his plans is a proposal to split the main business of selling insurance into two. Complex, bespoke policies would still be arranged face to face in Lloyd’s famous underwriting room, much as they are now, albeit with more efficient back-office systems.

But more standard insurance contracts, such as marine cargo coverage for small and medium sized businesses, would move to an online system called Lloyd’s Risk Exchange.

Lloyd’s has also put forward proposals to allow more alternative sources of capital into the market, and to make it easier for new underwriters to sell policies.

Mr Neal said the plans should allow the market to do business more cheaply. Today, costs can eat up 40 per cent of the premium paid at Lloyd’s. 

“Potentially, this could halve the cost of doing business,” said Mr Neal. “The customer has got to feel there’s a value proposition — 40p in the £ is not good. It should be 20p or 25p.”

Lloyd’s has come under fire from insurers about the costs of the market. This week Stephen Catlin, one of the biggest names in commercial insurance, said while he was committed to the market, the cost of doing business in Lloyd’s was “too high”.

The market is also having to address cultural challenges, said Mr Neal, including changing behaviour. Last month Lloyd’s outlined a new code of conduct, which included barring people under the influence of alcohol or drugs, after allegations of sexual harassment.

Mr Neal hoped his plans would enable the market to win more business in emerging areas such as cyber attacks and reputational risks. “As the world changes, there is no reason why our market should not be significantly bigger than it is today.” 

However, he admitted that pushing the changes through Lloyd’s could be difficult. The market is notoriously resistant to reform — an online system to improve some aspects of administration was only widely adopted last year after Lloyd’s forced the underwriters to use it. 

“Each idea will be a challenge to a different constituent of the marketplace,” he said. “The good news is that this isn’t a set of ideas that grey people in a darkened room have dreamed up. We are playing back to people what they have said to us.” 

However, he added: “It is all cultural. The design principles and technology are easy. The challenges are cultural, in people embracing a vision of the future.”

The proposals in the prospectus form the basis for a consultation that will last 10 weeks. Lloyd’s said it would start building its new systems in October this year, with some of them ready to use in 2020. Mr Neal did not give an estimate of how much the changes would cost. 

Sheila Cameron, chief executive of the Lloyd’s Market Association, which represents insurers in the market, said the prospectus was “an exciting view into how our shared marketplace can evolve”. She added that the association would “work together with Lloyd’s on building out this braver future for the ultimate benefit of our customers.”

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