The prize of true straight-through processing comes into view
With projects delivered above specification and under budget, and take-up of key initiatives exceeding expectations, the London market reform process is gaining momentum and becoming more ambitious.
A canvassing of senior market executives directly involved in the reform process reveals that buy-in and belief in the process from industry leaders has now been achieved.
This means the ultimate goal of a fully integrated electronic marketplace – where risk placement, accounting and settlement and claims are integrated – has come into view and may even be achievable within two years.
The original London market Target Operating Model reforms envisaged a three-phase approach to achieving the goal of straight-through processing (STP). However, strong performance on delivery and adoption in phase one have given leaders the confidence to raise their sights and try to accelerate the process and complete the work in two phases.
Of phase one, the carrier side of the accounting and settlement work known as the Central Services Refresh Programme (CSRP) is the only stream that still requires major work. While premium processing and claims are live for most classes including binder business, a solution for proportional treaty is unlikely to be ready until the end of 2019.
The ultimate goal of the CSRP is to remove the ‘Londonisms’ that make the London market a harder place to do business than rival hubs.
Londonisms that fall onto brokers include onerous splits of premium by territory and tax jurisdiction that can turn the seemingly simple process of paying a premium into a nightmare.
Brokers still complain bitterly of having to second-guess the esoteric process, with premium advice notes or requests to collect claims rejected multiple times with very little assistance or explanation of what is wrong. Having much more detailed Acord-compliant electronic placing and claims messaging and better back-office systems for carriers will remove the need for these onerous processes.
It is understood that 80-90 percent of transaction types can be covered by the functionality currently available in CSRP. While the figure seems impressive, broader broker engagement is unlikely until far nearer 100 percent is achievable.
“If you are a broker placing a lot of proportional treaty you are not going to adopt the new way of working until that functionality becomes available, otherwise you will incur the cost and inconvenience of running multiple systems in parallel,” explained one senior executive.
Originally just dubbed Accounting and Settlement, CSRP has changed forms over the past decade and been subject to the most project delays over that time. As such it has had the biggest credibility problem, particularly with brokers.
However, the crucial credibility factor has now been gained. Once complete, and brokers fully engage and integrate the new system, the big picture of a full STP market will come into view. This, along with a full refresh of claims processing, will form the two major parts of phase two of the Tom.
Electronic placing figures via PPL and other platforms released today already show the market has far exceeded its Q3 adoption rate target of 20 percent of in-scope risks, with only a limited number of laggards.
With the Q4 target of 30 percent almost exceeded months early, there is a consensus among executives that critical momentum has been achieved. Speaking at The Insurance Insider London Market Conference earlier in the month, PPL chairman Bronek Masojada strongly hinted that mandatory targets for PPL adoption would rise by 10 percentage points quarter on quarter until the job was done.
“I know we say that in insurance we are all a little thick, but even we can work out that after one, two and three come four, five and six,” he said.
Once policies are placed, settled, endorsed and claimed upon 100 percent electronically, what remains is the major task to bring the three main pillars of broking, accounts and claims together in a single integration.
For instance, despite the existence of unique reference numbers for all risks, at present a claims broker will have to manually draw key underwriting submissions and wordings over from a placing system so that they can be used in the claims process. The same goes for placing brokers preparing renewal submissions having to populate claims data from other systems.
Under proposals, such information, along with accounting summaries, should be available across the pillars, and efficiency and quality of service to customers will be enhanced.
“This ultimate integration is the final prize and it could be in reach within a couple of years,” said a senior market executive.