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Contract Certainty. End the “deal now, detail later” culture Iain Saville. Contract Certainty Governance. Influences. Reports to. Contract Certainty Steering Group (CCSG). London subscription, retail/personal lines & AIRMIC. Market & FSA. Market Reform Group (MRG). STRATEGY & DECISIONS. - PowerPoint PPT Presentation

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  • Contract CertaintyEnd the deal now, detail later culture Iain Saville

  • Contract Certainty GovernanceMarket Reform Group Executive (MRGE)STRATEGY & DECISIONSDesignBuy-in across mktManage resourcesDefine projectsFeasibilityLMA CEO, Lloyds COO, IUA CEO, LMBC CEO, franchisorContract Certainty Impn Group (CCIG)Oversight of implementations & issuesMajor brokers, managing agents, companies, Xchanging, Project teamIMPLEMENTATION & MONITORINGDESIGN & CONTROLLondon Market Standards Committee (LMSC)Oversight of benchmarking activityMajor brokers, managing agents, Project teamMarket Reform Group (MRG)Approving strategyCommitmentSetting prioritiesChairmen andreform champions LMA, LMBC,IUA,Lloyds

    Contract Certainty Steering Group (CCSG)InfluencesReports toMarket & FSALondon subscription, retail/personal lines & AIRMIC

    Recently strengthened by wider market involvement.

  • IntroductionMRG agreed at last meetingA London market wide projectProject disciplinesDelivering measured improvementsAgainst stretch targetsUsing LMP slip as basisDeveloped through the CCI process (or equivalent in electronic systems)

  • SummaryFirms are individually responsible to FSAAndTheir efforts need to be closely co-ordinated, in the subscription environment, through LMP and MRG One definition of contract certaintyOne set of measures (which we need to develop) but starting with the slipOne set of market wide targetsCommon philosophy for quality assurance (publish standards)One approach, through CCI, to wordings completeness Common umbrella for approach to FSA

  • Fully-claused placing document (using LMP Slip and policy)

    Use of model wordings and clauses, wherever possible (will increase over time)

    Wording/technical staff involved during placing process

    Early agreement and checking of the slip/draft policy by all parties and the bureau

    Early delivery by broker of an evidence of coverage for the client ideally before inception but within 30 days of inception

    Binders will achieve contract certainty by issuance of an approved certificate

    Thus achieving documented Contract Certainty

  • Objectives: Step 1 good slips

    KEY ACTIONS FOR YOU Drive up slip quality and coverage; and Prove and implement CCI in order to Agree full wordings by bindDo QA during placing

    To achieve contract certainty pre-inception a fully claused, high quality slip

  • Objectives: Step 2 evidence of cover

    Sustained high slip quality is the essential prerequisite for efficient and quick supply of evidence of cover to the client. So we have some time in hand but not much.Agree end game for how evidence of cover is produced and transmitted - by JuneImplement thereafter .. Timing to be agreed by MRG

  • Definition - summaryContract certainty is achieved by the complete and final agreement of all terms[1] between the insured and insurers before inception. [1] Including signed down lines

    Note that this fits Step 1 it does not yet extend to evidence of cover

  • Definition - detailNine attributesWordingLaw, Jurisdiction and arbitrationCommercial termsRisk disclosuresOne versionComplianceSound legal basisDuties clearly allocatedOther

    Need to be disaggregated to be made measurable - please see grid for detailsNB Adopted by the other CC group

  • Definition low priority items We have put aside some important issues where measurement is hard, pro tem. E.g.Wording Complete and consistent Risk disclosures except as seen on slipSound legal basis fully agreed by clientComprehensibility

  • Tools, Barriers and LeversTools are resources which help firms to improve certainty, or reduce the cost of achieving it for present purposes, those which might require some central co-ordinationBarriers are the obstacles to be overcomeLevers are the mechanisms available to the market to overcome the barriers

  • Tools LMP slip development * (line slip standards)CCI process - see below *Training* Partnership with CII train the trainer, and proactive design to anticipate needsPPRs * Enables Lloyds to drive standards and timeliness What is the non-bureau equivalent? Kinnect*, ri3kGUA* Threatened by outsourcing principles?

    Model wordings(*) Only exist for binders?Repositories(*) Brokers and underwriters proprietary repositories interoperabilityXIS repository(*)? LMA exploration underwayMWD

    Default wordings May not be credible except as unsatisfactory backstopEarlier submissions Hard to achieve, commerciallyLegal advice Especially important for law and jurisdiction but better to spend up front, than on litigation Model subscription agreement Credible??PPS XIS policy preparation Note: Needs to be subject to same QA as other suppliers

    * means a CC project (*) means a potential project

  • Barriers and leversMain barrier is attitudes on the floorLevers:Enforcement by FSA (threat..)Lloyds mandate and Byelaws Slip Measurement/benchmarkingError data from Checking Enforcement through systems

    Top management can use the above levers

  • Measurement

    We have measures for 26 of about 50 sub-attributes, through the slip audit programme. So we are doing the GCSE foundation level, not the A level.

  • Measured performance

  • Setting slip targetsThis is the easy bit familiar territory, good achievement in last year. Now at 91% - 9% shortfall5% shortfall in June3% by year end1% shortfall on current basis in March 2006

    We must get these basics right, quickly, to be have a chance of completing the job

  • Completing the job - developing the slipAdding items to the checks from gridLineslip (and declaration) standardsAuditing slips led outside Lloyds

    Issues:EndorsementsRisks placed under binders evidence of cover

  • Completing the job - Bureau checking(For Lloyds but should raise standards everywhere)In principle, picks up all slip checks and applies them to fully placed slip and policy but after inceptionBeing codified and published (end June completion)And measured, to improve standards and timelinessThis QA needs to be focused during placing, to get it right first time one of the CCI deliverablesAnd we need to converge the LMP and XIS measures Issue: equivalent standards and QA for non-bureau business?

  • Contract certainty newsFebruary LMP Slip BSA headline 91% (from 93%)Continue to check 25% of Lloyds slips in 2005; and IUA company slipsUpdated LMP slip guidelines publishedLMP Lineslip to be issued shortlyRevised PPRs for Binding Authorities issued

  • Completing the job - CCIto agree wordings during placing; andto incorporate XIS checking into the placing process, rather than leaving quality audit till after inception; and to ensure the client receives evidence of coverage for the client within a prompt [1]timescale (as required by the FSA) [1] As a working definition of prompt we have adopted within 30 days of inception.

    Issue: Market resources

  • CCI timelines

  • Major next stepsWrite to major firms for project structures (due by 7/5)Co-ordinate their plans (especially for CCI) (31/5)CCI proof of concept assessment (31/5)CCI roll out (30/6 onwards)Adopt line slips (by 31/5) Proposal on converging measurement (31/5)Paper on evidence of cover (31/5)

  • CCI detailsInitial Implementations Q1-Q2 2005; 300 risks across all classes.

    Classes identified: Aviation; PI; D&O; FI; NA Property Fac R/I; Treaty; Binders; Marine

    Performance Monitoring in parallel (broker spreadsheet returns) to monitor key dates achieved.

    Brokers committed to participate within initial implementations: Aon, Benfield, Heath Lambert, JLT, Marsh, Miller, NCG, Willis

    Now engaging with markets (43 IUA, LMA & non-IUA companies proposed)11/43 carriers signed up (and 45 risks are in the market)9/43 carriers pondering .

    More is needed!

  • Contract Certainty

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