MRG Endorsements Initiatives Rob Campbell (for Stuart Dean), 23 January 2008

MRG Endorsements Initiatives

Rob Campbell (for Stuart Dean), 23 January 2008

Content

Background

Project Summary

Approach to delivering Endorsement initiatives• Market Reform Contract Endorsements (MRCE)

• Electronic Endorsements roll-out of (e-mail) revised process

Benefits/success/risks and issues – “business case”

Next steps

Background

• Endorsement is generic term for all mid-term contract changes from simple vessel name change to adding a construction project for Olympic development in London

• Endorsement is a binding agreement on insurers and policyholder and has to be evidenced in writing

• There are on average 3 endorsements for every contract, they can be administratively ‘heavy’ and in the London Market, many agreed by a face-to-face ‘broke’

• Clients can regard them as ‘hygiene’, ranking them below policy issuance and claims negotiation in importance/value

• Goal is therefore to reduce time and effort spent of agreeing endorsements and reduce turnaround time from the insured’s instructions to confirmation to the insured of agreement

Approach to delivering Endorsements initiatives

The work has been split into three main initiatives:

1. The introduction and implementation of Market Reform Contract – Endorsements (MRCEMRCE) standards to mandate the form and use of Endorsement documentation and agreement methodologies. This was published 3/12/07 for adoption as the Market Standard by 31 March 2008

2. The introduction and implementation of revised remote agreement process using email agreement and other messaging communications (e-MRCEe-MRCE). This will start in Q4 2007 and continue through 2008.

3. To co-ordinate endorsement activity with other Market forums with particular emphasis on input and adherence to ACORD standards for Endorsements and compliment the work of the MRG/LMA Electronic Placing Group. This will be accomplished via the Endorsements Steering Group as part of its general remit.

MRCE – Key elements

• Why Guidance• No prior definitive guide to Endorsements• Standardise the Endorsement format• Formal launch of new style documentation

• Benefits• Supports the principles of Contract Certainty by speeding up the

prompt provision to the insured of contract change documentation• Reduces the effort required to handle contract endorsements• Encourages the document format to be consistent with that used in the

original contract (MRC)• Provides an unambiguous Settlement Due Date default position

• Facilitation• Sets out that the revised documentation can streamline the submission

and agreement of non-complex contract changes• Can be used as part of an electronic process for submission and

agreement

‘Old’ Honeycomb style

Cover Note Addendum

Market Reform Contract Endorsement (MRCE)

CONTRACT ENDORSEMENT

UMR: B123412345678Endorsement Ref: 001 Type: All Risks of Physical Loss or DamageReinsured: ABC Insurance LtdOriginal Insured: XYZ Ltd

The contract is amended as follows:

Effective Date: 00.01 hours 1 August 2007 local standard time as the location of the property insured

Situation: Amended to include the insured’s location at:1 Lime StreetLondon EC3M 7HA

Sum Insured: GBP 100,000.00 any one loss in respect of the above location

Premium Additional Premium due in respect of these changes is GBP 100.00

Tax payable by insured 5% UK Insurance premium Taxand administered byInsurers

All other terms and conditions remain unchanged.

Risk Identification and Endorsement Details section- Additional details may be included

Contract Change(s) Section using MRC format and headings

Market Reform Contract Endorsement (MRCE)

CONTRACT ENDORSEMENT

UMR: B123412345678Endorsement Ref: 001 Type: All Risks of Physical Loss or DamageReinsured: ABC Insurance LtdOriginal Insured: XYZ Ltd

The contract is amended as follows:

Effective Date: 00.01 hours 1 August 2007 local standard time as the location of the property insured

Situation: Amended to include the insured’s location at:1 Lime StreetLondon EC3M 7HA

Sum Insured: GBP 100,000.00 any one loss in respect of the above location

Premium Additional Premium due in respect of these changes is GBP 100.00

Tax payable by insured 5% UK Insurance premium Taxand administered byInsurers

All other terms and conditions remain unchanged.

Contract Administration and Advisory Section (mandatory where applicable)

Settlement Due Date default position (always include on APs)

Agreement Section – GUA Example

Agreement Boxes – ensure date of agreement is captured

MRCE Structure

RISK AND ENDORSEMENT IDENTIFICATION DETAILS

CONTRACT CHANGES

INFORMATION (Where required)

AGREEMENT

CONTRACT ADMINISTRATION AND ADVISORY (Where required)

The order of these two sections is reversible

Mark

et

Refo

rmMRCE Summary

• Logical extension to MRC – consistent format, client documentation

• No prior definitive guide to Endorsements

• Supports the principles of Contract Certainty by speeding up the prompt provision to the insured of contract change documentation

• Reduces the effort required to handle contract endorsements

• Open Market, *Line Slips and *Binding Authorities* Forthcoming attraction!

Honeycom

b

Honeycom

b

+Cove

r Note

Addendum

Cover N

ote

AddendumM

RCEM

RCE

Endorsement process map – Open Market

Agreement

Agree, decline or request negotiation; determine

other agreement parties

If 'decline’ then counter-proposal

Reply with electronicSignature or signed Endorsement (scanned or postal)

If ‘negotiation' then request Box/ office visit or similar instruction

Broker notifies endorsement to all

Market (e-mail)

Assess requirements

Receive change advice

Create

endorsementNegotiation

Broker Create MRCE to ‘go to Market

Other Agreement Parties

InsuredRequest contract

amendment

Bureau

Slip Leader

Capture Agreement and send request to any other Agreement

Parties

Agree, decline or request negotiation

Ensure all agreements

captured, process any premium

changes

Confirm Agreement process complete,

handle any premium change

Send Insured the MRCE and any Debit

(or credit) Note

Receive copy of the MRCE that the ‘market’ agreed

Reply with electronicSignature or signed Endorsement (scanned or postal)

Deliver by e-mail or e-message (or ‘box’ visit)

Deliver by e-mail or e-message

Send Work Pack to IMR Using ‘direct load’, DRI.Delink if premium involved

Endorsement process map – Binding Authorities (SCHEDULE CHANGES)

Agreement

Assess requirements

Receive change advice

Create

endorsementNegotiation

BrokerCreate

Endorsement for Coverholder

sign-off

Other Agreement Parties

CoverholderRequest contract

amendment

Bureau

Slip Leader

Capture Agreement and send request to

Sip Leader


Ensure all agreements

captured

Confirm Agreement process complete

Send coverholder Endorsement and any Debit (or Credit) Note

Receive same Endorsement as the

‘market’ agreed


Capture agreement and send request to any other agreement

parties

Countersign Endorsement

If slip leader declines, revert to revised contract

amendment


Reply with electronicSignature or signed Endorsement (scanned)


Reply with electronic Signature or signed Endorsement (scanned)

Send Work Pack to IMR Using ‘direct load’, DRI.Delink if premium involved



Reply with electronicSignature or signed Endorsement (scanned)

This step is usually via the broker


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e-MRCE

Project Approach

● Primary target audience - the vast number of easy (non-complex) endorsements

● As many as possible as quickly as possible

● Attaching an MRCE to an e-mail or message for agreement and return to the broker

● Formal adoption criteria to join initiative

● Measurement

● E-mail being used as an interim stage (minimum entry requirement)

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Adoption

• Assign a Project Champion

• Actively promote the change in culture and behaviour

• Determine which technology (if in doubt start with e-mail)

• Start in an easy place

• Single agreement endorsements

• Contracts with ‘regular’ endorsements

• Know the process e.g., dealing with “Urgent’s” and slow responses

• Workflow considerations

• Changing roles and responsibilities in the organisation

• Simple measurement – collated by MRO

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Benefits

Clients

• Align the relative low value that clients place on brokers and insurers

handling easy (non-complex) Contract Endorsements with the actual

expense to the Market

• This means embedding a more cost effective and efficient

process for all

• Clients should benefit from quicker turnaround of agreement process

and therefore receive Contract documentation earlier – supports

achieving Contract Certainty

Regulator

• Code of practice states “Contract Changes need to be certain and

documented promptly”

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Benefits

Insurers

• Allows insurers to apply “triage” to incoming endorsements

• Free up box time for more important , significant, productive and

valuable business

• Free up “line” underwriters time by matching materiality and value with

appropriate level of insurer personnel and personnel location

• “Following” markets see full audit trail and could be much more easily

notified when not an Agreement Party

• Much easier to get “agreed” endorsements into insurer’s systems

• Use the consistency of presentation and data to integrate into insurer’s

systems

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Benefits

Brokers

• Reduce time spent on delivering endorsements to insurers

• Provides more control and clearer accountability

• Reduces hand-off between “Account Handlers” and “Market Brokers”

• Simplifies onward confirmation of agreement to the Contract

Change(s) to the client

• Allows for parallel insurer agreement process which will speed up

endorsement agreement

• Affords the technology opportunity from the use of consistent

presentation/data to integrate into broker’s systems

• Encourages confidence in electronic trading in the London Market

and its growth and development

e-mail template

From: Dean, Stuart Sent: 30 July 2007 10:48To: 123 underwriting

Subject: ABC Insurance Ltd / B123412345678 / End001/lead

Effective Date: 1 August 2007

Your Ref: ASDF1234

Please find attached an endorsement request from ABC Insurance Ltd. As Slip Leader you are being requested for a formal response to this endorsement. Response request:

Agree Decline Request negotiation

If your response is "Agree", please send us by e-mail your agreed response and Leader response to the GUA details below:

GUA Details: GUA present on slip: Yes Leader Response: Part One: Y/N Part Two: Y/N Part Three: Y/N

If you have any questions, please contact the undersigned.

ACORD Standards

Mark

et

Refo

rme-MRCE Summary

• Email : a quick win and a step towards ACORD messaging

• Benefits

– Improves efficiency, lowers the costs and speeds the processing

– Promotes early, contemporaneous visibility of endorsements for followers

• Non-complex – “endorsements suited to email”

• Existing technology, existing business practices

• Cultural + process change

– workflow, central email addresses

• Measurement

– Base line + Monthly / Broker + Insurer

• Commercial and legal issues

• Technology choices

– Email, print+scan

– Optional supporting technology

From: Dean, Stuart Sent: 30 July 2007 10:48To: 123 underwriting

Subject: ABC Insurance Ltd / B123412345678 / End001/lead

Effective Date: 1 August 2007

Your Ref: ASDF1234

Please find attached an endorsement request from ABC Insurance Ltd. As Slip Leader you are being requested for a formal response to this endorsement. Response request:

AgreeDeclineRequest negotiation

If your response is "Agree", please send us by e-mail your agreed response and Leader response to the GUA details below:

GUA Details: GUA present on slip: YesLeader Response:Part One: Y/NPart Two: Y/NPart Three: Y/N

If you have any questions, please contact the undersigned.

MRCE attached to a standardised emailMRCE attached to a standardised email

Benefits Matrix for MRCE and Remote Agreements

Benefits Accumulation

Face to Face

MRCE

E-mail delivery

E-mail agreement

Application/Platform

Data Integration

Implementation phase

Benefit increments not to scale!!

Benefits Accumulation

What are the risks and issues?

• Requires commitment from each organisation to adopt and adhere to new practices and procedures

• Introduce the MRCE

• Being mitigated by Implementation Pack guidance and the work of the Electronic Placing Steering Group

• Standards and common processes from usage scenarios. Service Providers are already building Endorsement solutions

• Simple measurement approach for now; count what is sent “remotely” and what is agreed “remotely”

• Requires commitment from each organisation to adopt and adhere to new practices and procedures

• Introduce the MRCE

• Being mitigated by Implementation Pack guidance and the work of the Electronic Placing Steering Group

• Standards and common processes from usage scenarios. Service Providers are already building Endorsement solutions

• Simple measurement approach for now; count what is sent “remotely” and what is agreed “remotely”

• Have to change the Culture and Behaviour

• No formal written guidance for Endorsements other than Contract Certainty code of Practice statement

• Varying views from Brokers/Insurers on method of deploying electronic endorsements can act as barrier to take-up

• No common infrastructure or (placing) systems platform that facilitates endorsement agreements

• Endorsement numbers are not currently officially monitored. For proper and accurate measurement of the penetration and success of the initiative, market-wide endorsement statistics will be required and centrally monitored

• Have to change the Culture and Behaviour

• No formal written guidance for Endorsements other than Contract Certainty code of Practice statement

• Varying views from Brokers/Insurers on method of deploying electronic endorsements can act as barrier to take-up

• No common infrastructure or (placing) systems platform that facilitates endorsement agreements

• Endorsement numbers are not currently officially monitored. For proper and accurate measurement of the penetration and success of the initiative, market-wide endorsement statistics will be required and centrally monitored

Key Risks and issues Resolution/mitigation

Next Steps

• December 2007, January and February 2008

• Finalise “starter” pack Definitive e-mail guidance Overview of remote agreement processes Adoption and implementation considerations Measurement

• Market guidance and presentations early 2008 Insurer Briefings Broker Briefings

• Build-up market endorsement framework via cross-market representation for:

Usage scenarios – Practitioners

Messaging standards – Associations/ACORD

Build systems around market framework – Technology providers

MRG Endorsements Initiatives

Rob Campbell (for Stuart Dean), 23 January 2008

MRG Endorsements Initiatives Rob Campbell (for Stuart Dean), 23 January 2008

Documents

Transcript of MRG Endorsements Initiatives Rob Campbell (for Stuart Dean), 23 January 2008