On 4 September 1998, an unknown company based around a computer algorithm started trading. The company, Google, is now ubiquitous and synonymous with online searches. It is still powered however by algorithms, sets of rules and instructions which generate the desired outcomes.
The algorithms that drive the insurance industry are the policy wordings. Policy wordings are by definition the technical legal documents which outline the contract terms and set out how any claims should be paid. More precisely, policy wordings are the actual products that insurers sell.
Despite not being considered as exciting as other areas of insurance, such as underwriting, they are a crucial part of it. Wordings need to be precise to avoid unexpected coverage gaps or breaches, competitive disadvantage and loss of reputation or – worse – clients.
One misconception is that most sets of wordings are produced by lawyers, who ensure that all the policies are watertight. While lawyers are often involved, so are wordings experts. Having a broader knowledge of how insurance and insurers work typically gives a better perspective on how to draft and implement wordings to their best effect. One of the reasons many wordings experts are very passionate about their role is the breadth of access and understanding they typically have about their firm and the broader market as a whole.
There is an oncoming concern however, something that could prove to be a real issue if not fully addressed. There are currently fewer and fewer people seeking to have a career in insurance wordings. Within the next 10 years, most of the senior wordings specialists currently practising in the market will have retired. Unless this matter is addressed now, the market will be suffering from a knowledge deficit further down the line.
Former Lloyd’s performance management director Tom Bolt acknowledged in his time at Lloyd’s that wording expertise needed to be addressed. As a result of this, he set out a 10-year plan aiming to improve all wordings standards across the market.
It is true that all market members directly benefit from the excellent Lloyd’s Wordings Repository. This is a facility that allows insurers to see a wide range of illustrative wordings, that could be incorporated within, or used as a basis for, their own policies. Businesses still need to have the in-house wording skills however to ensure that their wordings are fully appropriate for their cover and their clients.
Responding to this potential issue, the Lloyd’s Market Association Academy is launching a new training course this year, along with the LMA’s Wordings Specialists’ Forum and Hill Dickinson. The new educational wordings programme is aimed particularly at Lloyd’s managing agents.
Participants will be guided through the essentials of policy wordings and will learn about: the fundamentals of contract law; the ingredients of an insurance contract; classification of terms and remedies for breach; different wordings across different classes of business; choice of law and jurisdiction; regulation and stress testing policy wordings.
Training across all areas of insurance expertise is particularly popular with younger people in the market. This is not just because they want to further their knowledge and understanding, but also, and often more importantly, to develop the scope of their insight about the market. A junior in marine risk management for example may not wish to remain in marine risk management for their entire career.
The future global competitiveness of the Lloyd’s market depends on its ability to attract and retain the best talent across a range of equally important roles. For example, Lloyd’s prides itself on paying valid claims, and this in turn means that you need to attract good claims people to ensure that those claims are correctly handled in the future. Wordings, claims, compliance and IT are all going to require further employees in the years to come. If we fail to respond to these challenges, we risk losing the best talent to other industries.