1 market reform forum 25 august 2005 andy brookes mike smith market reform programme office
TRANSCRIPT
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Objective: up to speed in twenty minutes……
Contract Certainty
Public letter on CC
CC guidance to be published end-September
Progress on LMP slip, checking, Kinnect
Back office electronic infrastructure
Accounting and Settlement
Electronic Claims Files – today’s special topic
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Contract certainty: Market Game Plan
Agree insuring clauses via a fully claused [1] LMP slip or LMP policy (which also meets LMP Standards) before inception
Define process measurements and quality standards
Understand standards and apply them
Raise standard through independent QA
Play back errors and publish league tables
[1] by reference or all wordings spelt out
MRG endorsed the following, for implementation by end 2006:
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Contract certainty: the programme Key projects
Achieve CC during bind: agree wordings; get checking done
- 30% of business end 2005; 85% end 2006
LMP slips CC attributes
- 95% June 2005; 97% December 2005; 99% March 2006
Evidence of cover – within 30 days
Supporting projects
Policy checking by Xchanging
Model wording
Legacy (not strictly CC, but close cousin)
Kinnect/placement systems
- Consistent with all this, but reduce compliance cost
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Contract certainty: MRG June letter Definition:
“Contract certainty is achieved by the complete and final agreement of all terms (including signed down lines) between the insured and insurers before inception.”
And
“Full wording must be agreed before any underwriter commits to the contract”
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CC: end-September publication “Clarification of practical implications of CC definition” for FSA Measurement and targets
- FSA agreed targets - 30%, 85% targets CC
- LMP slip: 26 attributes for targets (95%; 99%); more attributes to come
- Role of LMP slip audit and XIS checking: raising quality after the event to improve next time
Process diagrams with explanation Guidance on issues
How will wordings be presented to U/Ws?
- Either referenced or fully worded - brokers’ call
- Up to underwriters to ‘express preferences’
- Across all business lines ie not targeted – brokers’ call
Signed lines; stamp conditions; underwriter subjectivities; challenges to CC
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LMP Slips – wider and deeper
CC score for open market: June 94%, just below 95% target
- Rising, but slowly - 92% in March, 93% in April…..
- 97% target for December
CC score for binder LMP Slips: 95% June
- Down from 97% in May
Continue to check 25% of Lloyd’s slips in 2005. First IUA slips processed - companies getting first reports
LMP Slip 2005- published in April
Extending to lineslips - LMP standard for lineslips published in June
- 1 October mandate for Lloyd’s market
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LMP Slip Quality
Contract Certainty Attributes of LMP Slip
75%
80%
85%
90%
95%
100%
Jan-
Apr
200
4(n
=388
)
Sep
200
4(n
=494
)
Nov
200
4(n
=693
)
Jan
2005
(n=6
63)
Mar
200
5(n
=395
)
May
200
5(n
=521
)
Jul-2
005
Sep
-200
5
Nov
-200
5
Jan-
2006
Mar
-200
6
May
-200
6
Jul-2
006
Sep
-200
6
Nov
-200
6
Open market score Binders score Target
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Contract certainty: checking Policy checking Xchanging: Lloyd’s Prudential
Practice Requirements
Binders
- Two binder rejection reports for Q1 ‘05 issued to poorer performing firms (12 Lloyd’s; 12 brokers)
- Q2 report in this month
Open market – similar approach to binders
- Rejection reports for Q2 2004- Q1 2005
- Q2 report end this month
- Better stats in Q4 2005
QA tool for both binders and open market
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Quality Assurance Tool
Provides details of checks for market use that will ensure contracts reach the standard required by Lloyd’s
Aims to minimise or eliminate queries raised by XIS during the signing process
Aims to eliminate second submissions and achieve a “right first time approach” to contract certainty
QA tool now caters for both Binding Authority Contracts and Open Market Business
Do use and feedback
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QA Tool – Currently Available Bahamas Binding Authority Contract Checks
New, Amende
d or Deleted
Level 5 - Foreign Legislation Checks
Level 5 Ref.
Category
Description of Check - Level 5 Owner Ultimate Responsibilit
y
New Bahamas BA Contract
5.001 A Ensure that the contract contains provision for certificates to include a service of suit clause nominating a person resident in the Bahamas. Please check the Bahamas page of lloyds.com for the recommended service of suit nominee.
WWM Underwriter
New Bahamas BA Contract
5.002 Not checked by XIS
Ensure that the contract contains provision for certificates to include a law and jurisdiction clause allowing the insured to enforce his rights against insurers under Bahamian law and in any competent court in Bahamas.
WWM Underwriter
New, Amended or Deleted
Market Level 4 - Class of business
Level 4 Ref.
Direct
R/I Cat. Description of check - level 4 Owner Ultimate Responsibility
New Non-Marine
Personal Accident
4.001 Y Y A Check that where the policy exceeds 4 years 364 days that underwriters have agreed the use of a cancellation clause and that this is contained in the policy.
FPD Underwriter
Non-Marine Personal Accident Open Market Checks
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XIS policy rejections
Rejection rate
0%10%20%30%40%50%60%70%
Q1-04b Q2-04 Q3-04 Q4-04 Q1-05 Q2-05
Binders
Open market
b – excludes Jan-04The volume of binders is about 15% of the open market contracts
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XIS binder rejection data - QA checks
BA QA Tool reference
Percentage of QA checks
failed
General 1.002 21%
Contract 2.022 4%
Endorsement 2.009 4%
General 1.019 3%
General 1.007 3%
General 1.017 3%
Contract 2.005 3%
Contract 2.021 3%
Endorsement 2.008 2%
Contract 2.030 2%
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BA QA Tool check
General 1.002
Ensure that the LMP slip schedule details have been completed clearly and completely, eg there are no missing details, incomplete or unclear statements, vague expressions or ambiguities between terms and conditions.
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Legacy
MRG agreed cross-market priority rules Rules on the LMP website Road testing new Unsigned Policy List
- in accord with new rules
New stats using priority rules Reports on legacy numbers for big firms Should there be market focussed effort in particular
cob?- Is it worth it? Is it doable? Working Group suggest not
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Legacy policy data
Stage I signing Stage II signing
Year account
Number of legacy policies as at Per cent increase / decease
Autumn 2004 Spring 2005
1993 - 1999 94,600 98,331 4%
2000 19,637 20,046 2%
2001 20,720 20,631 0%
2002 24,052 22,890 -5%
2003 28,105 24,516 -13%
2004 25,702 29,379 14%
Total 212,816 215,773 1%
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Legacy policy data by priority Stage I signing Stage II signing
Year of account
Priority 1 Priority 2 Priority 3 Total
1993 1 2,172 9,756 11,929
1994 2 2,167 7,702 9,871
1995 3 3,158 11,178 14,339
1996 8 2,605 10,080 12,693
1997 12 2,936 11,792 14,740
1998 11 3,208 13,047 16,266
1999 29 4,055 14,389 18,473
2000 73 3,952 16,021 20,046
2001 109 4,480 16,042 20,631
2002 192 5,676 17,022 22,890
2003 516 5,734 18,266 24,516
2004 11,639 17,740 29,379
Total 12,595 57,883 145,295 215,773
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Kinnect Take up of 1 June release functionality for August incepting risks
continues North American Property going well
- Slips now being created
- Signing down and completions taking place
Terrorism starting in August 17 customers live on platform and three in implementation Next release due in two drops Q1 and Q2 06
Improved risk class delivery, including generic (data light) template
Two way data transfer with underwriter response International Property delayed to Q1 (from Q4) to fit with this
ITT for future supplier and review of platform development requirements
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Contract certainty: each firm Don’t wait for end-Sept guidance LMP slip CC attributes score
- June result? Will you hit 97% in December? And 99% in March ’06? Process to improve?
CC on risks- How will your firm achieve 30% of risks by end year?
- Full wording or references?
- For brokers – focus on particular lines of business?
- But quality matters, not just volume - build in QA checks
Sponsorship, project manager done. What’s the project look like? Training? Incentives?
Management information and measuring CC- How will you know you have done it?
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Accounting & Settlement
MRG and Project Board review. Result:
Measurement of process
- Like other checks
Looking at a ‘light’ step 1
- Scanned LPAN and slips into repository
Reviewing how to achieve end vision
- more efficient and flexible accounting and settlement processes achieved through the use of standard electronic messages in place of both paper and bespoke London messages
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Market Reform Training
LMP Training Group (LMPTG) established
Cross market group - CII and other providers
Ensure sufficient, relevant and accredited training Progress to date
Contract certainty training plan being developed
- Senior management, compliance, technical levels
- “These are the courses, you should have been on” e.g. Placing broker – how to complete an LMP slip
Claims and A&S plans to follow
Review / Accreditation of current training providers – LMP stamp