On speaking terms: the Kinnect platform, which allows trading partners' existing systems to communicate with each other, made its first connection this year, and anticipates many more.

Kinnect expects 2004 to be a big year for its recently released electronic platform--an innovative commercial enterprise, managed by industry insiders and experts from other financial-services sectors, that enables existing systems of trading partners to talk to each other.

The year is already getting off to a big start with the recent announcement that global insurance broker Willis Group Holdings--one of six initial customers set to use Kinnect--is the first company to pass a risk through the Lloyd's-backed platform. And Kinnect anticipates other early adopters soon will follow suit.

In March 2003, the project formerly called Blue Mountain was officially rebranded as Kinnect. Begun in December 2001, the project was two years in the making: the first year to build the system and the second year to refine how it works.

Kinnect, which operates in both the United States and the United Kingdom, is sponsored by Lloyd's and partnered by some of the world's leading technology and implementation companies. During the first year, Lloyd's spent 20 [pounds sterling] million (about $36 million) on the project, with an additional 20 million [pounds sterling] in 2003. The platform was built by two technology-solutions providers--CGI, an independent information-technology services firm in North America, and HE a global provider of products, technologies, solutions and services to consumers and businesses.

In addition to Willis, five other initial customers signed letters of intent to use the platform, including Ace European Group, Amlin, Beazley, Marsh and Wellington. Together the four underwriters, excluding Marsh, which is a broker, represent 40% of the U.K. broker market share and 20% of Lloyd's managing agents' market.

Connecting Systems

Although there's been some skepticism by critics surrounding Kinnect, others believe it is a transforming force in the London marketplace and soon will have an integral place in the U.S. market.

The Kinnect platform works by allowing users to record risk data prior to any discussions, send and receive data as they negotiate of transact business over the platform, and assess and respond to submissions without re-entering data. Users send and receive data across the same Kinnect platform, which reconfigures the data for each new user so that it is in the format desired.

Kinnect strives to eliminate the time-consuming and often costly task of data re-entry by moving paper-intensive tasks into low-cost electronic transactions. Because it enables trading partners' existing--and often incompatible--systems to talk to each other, it collects and transfers risk placement data between the systems quickly and securely. Half of all commercial policies that are processed have errors in them, and 65% of those mistakes are "re-keying" errors, Ashok Gupta, former chief executive officer of Kinnect, told participants of A.M. Best's annual E-Fusion Insurance & Technology conference in 2002. One company found that its professional indemnity team spent 45% of its time on administrative tasks, he added.

"Kinnect allows one entity to key in data and pass it electronically to others' systems, so they don't have to re-key information, but rather it is populated into their systems automatically, which will reduce the cycle time to get back responses," said Jake Hampton, Kinnect's U.S. vice president.

Data is secure from the time it enters the platform, and Kinnect said it adheres to the same exceptionally high standards of security as international equity trading and online banking.

But time and cost savings aren't the only benefits users receive from the platform. "We anticipate that we'll be able to drive forward some progress on our existing systems," said Willis Director Ed Bishop. In addition, Bishop believes Kinnect differs from many of its competitors because it's a market-driven platform backed by Lloyd's. "Other platforms have been devised by individual companies and don't have full backing of the market," he said.

Kinnect also believes Lloyd's sponsorship is a driving force behind its success and said Lloyd's is the only organization with the independence to back a business proposition that benefits brokers, carriers and underwriters in the United States and the United Kingdom.

Collaboration is a major part of Kinnect's mission. In his presentation, Gupta cited a study that identified $39 billion of potential savings in the insurance industry through the intelligent use of technology. But of that amount, he said, only 30% can be achieved internally, while the remainder depends on collaboration across companies.

Reaching Standardization 

Craig Weber, an analyst with the insurance practice of Celent Communications, said Kinnect is a good step in the evolution of standardized data and system interoperability. "There's no question that the processing of commercial lines business is highly inefficient. Complex data comes from a lot of different places and has to eventually get him an underwriter's hands. That data is unstructured in many cases and comes from disparate systems, which makes it very difficult to transfer it directly," he said. "The industry has always relied on highly manual means of moving data around--via e-mail, fax, mail--so the value of Kinnect is providing an electronic exchange where systems can be set up to talk to each other directly, avoiding a lot of the manual intervention."

While Kinnect now focuses its platform at property insurers, it plans to expand into other markets as more U.K.- and U.S.-based brokers and insurers sign on to the system.

But in a time when many IT initiatives have been tried and failed, critics have voiced skepticism that Kinnect will be any different from prior attempts. "With the proliferation of Web sites that are forcing retailers to multiple sites, people are starting to sec this will become a bigger problem and that there's a need for such an initiative," said Hampton. "There was also a lot of skepticism around whether or not we can really work with a company's agency management partner. Once we began those discussions and facilitated that with their other systems' partners, it again made people more relaxed knowing we are talking

about a fully integrated solution and not just a separate icon on their desktop."

Gupta, who was succeeded by Toby Davies as Kinnect's chief executive in February, recently said in an issue of Post magazine, "We are not trying to build Rome in a day and there are plenty of examples of failed projects due to big promises and overambition. This project is steeped in careful research, with hundreds of different firms and organizations having been consulted: this embodies the philosophy of the venture--to ensure delivery according to our customers' needs."

Kinnect's characteristics differentiate it from competitors, according to its leaders. "Most solutions out there don't address multiple-party transactions, and there are very few solutions that address mid-market of large, complex risks," said Hampton. In addition, many platforms aren't interfaced into existing systems. Kinnect is building interfaces into different management systems, on both the retail and wholesale sides, and working with underwriters to drive all information directly into systems, he added. "That's a huge difference from many solutions attempted in the past, most of which were just stand-alone systems that forced customers to do additional work because accounting was often done by different systems rather than on a risk submission system." In addition, Kinnect is unique because it's an adaptive--not prescriptive--approach. "We don't say you have to change a process and do it a particular way. Instead we are trying to automate the process, so if existing customers say they want to go slow, they may elect to use only a small percentage of functionality available to them instead of us dictating how they have to do it," said Hampton. "Many organizations want people to learn to walk before they run."

So far, feedback from those involved with the platform has been extremely positive. "Unlike many prior failed initiatives, many proponents say the platform is well though-out and has the right ingredients necessary to connect trading partners," Hampton said. One of the difficult tasks, however, is that this is a network sale. Underwriters and brokers must be moved through the sale at the same speed, and people have to see there will be someone at the other end of the transaction, he said. "We know this all won't happen overnight but rather is a long-term play, but we've got some people we consider to be early adopters helping with the initial implementation," he added.

Something that Kinnect will continue to work on--which is also its slogan--is to achieve contract certainty at inception. "Buyers, brokers acting for buyers and the syndicate of underwriters all need to be clear what they have sold at the point when an insurance contract starts. That's quite a challenge for large complex risks that form so much of this marketplace," said Iain Saville, Lloyd's head of business process reform and Kinnect's new executive chairman. Contract certainty at the point of inception, he said, is a good device for reducing risk not only for underwriters who operate in Lloyd's and the London markets who participate in syndicated insurance, but also for brokers and customers. "If we get that right and clear at the start, then we can be much better at issuing policy documents on time, speed up premium processing and make a big difference to downstream processing such as claims. But it also means if you have a decent database and foundation for subsequent processing, you can speed that up too and achieve very significant additional value."

Saville said that reaching contract certainty at inception, however, can't be achieved without the help of an electronic environment that supports, monitors and audits the communication between brokers and underwriters. "That's the purpose of Kinnect, and it's fundamental for the future of the marketplace," he said.

Off and Running

In December 2003, Kinnect officially went live when Willis announced it was passing the first risk through the platform. The first transfer of data by Willis is what Kinnect calls its "mid-market product"--a specific Kinnect service for risks being placed through normal established facilities, under which general terms and conditions have already been established. The company is currently using the plat form for its middle market book of business, particularly for low and medium complexity business for North American properties in London, said Charles Stewart, executive director. Willis plans to expand Kinnect to other areas within those business sectors sometime this year.

"We've deliberately focused up until now on our lower complex end of the book because we believe we'll achieve the greatest efficiencies and immediate benefits from those transactions," said Willis' Bishop. The company's next step will be the transfer of data using Kinnect's "open market product," which has been created for complex or large risks that are also part of the London market. "We see that in the future and believe it will also prove beneficial, but the system has to develop to cater to a higher complex type of risk."

Lloyd's Saville said that the first transfer of data shows the industry's commitment to modernize its processes to reduce risk and improve speed and efficiency. "Electronic capture and secure storage of risk data is a major step to improving contract certainty, and reinforces the recent adoption of the LMP [London Market Principles--the market's joint reform program] slip in our drive to the goal of contract certainty at inception."

Although Willis faced some hurdles along the way, its team collaboration effort on the platform's launch helped overcome those difficulties. "The challenges were quite typical for this market or in the software development market: how to get the product to do exactly what the business wants it to do when the business model isn't absolutely clear, and getting business representation or visibility from other markets," said Stewart. He said last year Willis and several other organizations worked with Kinnect to get the "product absolutely right." Without that collective market input the product would be a shadow of its current self, he added.

"We believe this will be a connection between all our markets globally--not just restricted to Lloyd's but being driven from Lloyd's," said Bishop.

And while the electronic platform will bring about many efficiencies, Willis doesn't see it as a substitute for face-to-face business. "The good thing about Kinnect is that it allows you to do the things that make sense electronically. And it leaves more time for brokers and underwriters to do important and indispensable pieces that have to be done face-to-face," said Stewart.

Full Steam Ahead

Kinnect expects its platform will be widely adopted across the industry within the next three years, with critical mass in four or five major risk classes, provided by system-to-system interfaces to all significant clients' systems in the United States and the United Kingdom.

In addition, it plans to go live with its first U.S. customer sometime during the second half of this year. "That's what we're driving to, so it means delivering functionality that's appropriate and, just as importantly, having correct customers that trade with one another," said Hampton of Kinnect. And the company doesn't want to stop at just offering the platform on one to two lines of business. Instead, it hopes to make Kinnect a tool that organizations use to complete the risk submission process, regardless of the line of business.

"Lloyd's has no intention of dominating Kinnect or closing it off to the wider market. We're concentrating on Lloyd's initially because we have the toughest problems to solve because of the intrinsically complex nature of our syndicated market," said Lloyd's Saville. The commercial insurance world, he added, needs supporting infrastructure, and it needs an independent trusted party that stores this data, makes it available to the appropriate data owners, keeps reliable records, and makes data available to support downstream processing, such as claims.

"The question with anything new is that people have to be motivated to change their behavior, and it takes time. I think companies may wait and let the brokers already signed on to the platform take it for a shakedown cruise before they commit resources to it," said Weber. Given the industry's desire to be more efficient, however, Kinnect could build momentum quickly if it delivers on its promises, he said.