MRG Endorsements Initiatives

S. Dean, 22 November 2007

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

LON

Revised endorsement process map

Assess requirements

Receive change advice

Create

endorsementNegotiation Agreement

Broker Create Endorsement to ‘go to Market’

(Re)Insurers

Policy Holder

Request contract

amendment

Bureau

‘Slip Leader’ Agree, decline or request negotiation; determine

other agreement parties

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

If 'decline’ then counter-proposal

Capture Agreement and send request to any other Agreement

Parties

Reply with electronicSignature or signed Endorsement (scanned or postal)

If ‘negotiation' then request

Box/office visit or similar instruction

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

Agree, decline or request negotiation

Ensure all agreements captured, process any

premium changes

Reply with electronic

Signature or signed Endorsement (scanned or postal)

Confirm Agreement process complete, handle

any premium change

Send Work Pack to IMR

Using ‘direct load’, DRI (or ‘Van’), Delink if premium involved

Send Policyholder Endorsement and any Debit (or credit) Note

Receive same Endorsement as

the ‘market’ agreed

Broker notifies endorsement to all

Market (e-mail)

Pilot – Lessons learnt

• Received enough feedback and interaction to recommend continuation of project

• Requires cultural/behaviour change, internal organisation changes, decision on how brokers and insurers will agree ‘electronically’

• Removing Honeycomb and replacing with Endorsement document enabled use as Insurer Authorised Document – this proved popular

• E-mail distribution (not surprisingly) is easy – businesses already doing this to and from international destinations

• Should have focussed more heavily on one class of business and got regular volumes to insurers

• More complex Endorsements will still require elements of negotiation and face-to-face contact

Approach to delivering Endorsements initiatives

The work has been split into three main initiatives:

1. The introduction and implementation of Market Reform Contract – Endorsements (MRCE) standards to mandate the form and use of Endorsement documentation and agreement methodologies. This will be rolled-out to all market participants during Q4 2007.

2. The introduction and implementation of revised remote agreement process using e-mail agreement and other messaging communications. 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)

• 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.

Electronic Agreement Process

The MRCE is designed for use with different types of agreement methodologies including today’s face to face process:

Electronic processes:•The MRCE can be attached to an e-mail and the insurer responds by e-

mail, attaching a scanned, signed, stamped MRCE. Alternatively, rather than scanning the MRCE, the Insurer may respond by email confirming their agreement within the body of the return email

•The MRCE is attached to an e-mail or e-message, where the e-mail or e-message forms part of an application. The insurer is likely to be able to respond either with an electronic signature or with a scanned signed MRCE

•The MRCE is used as part of an ACORD standards based messaging process. This may either be via direct peer-2-peer connection, via a hub for routing or via a trading service

•The remote processes shown are not definitive. However, the most important facet of remote agreements is to be able to produce final contract documentation

Project focus

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

Benefits Matrix for MRCE and Remote Agreements

Endorsements Documentation Negotiation Agreement

Party / Activity Honeycomb replaced with MRCE

Essential data built into MRCE “Header”

E-mail distribution as the preferred delivery methodology(In the absence of electronic platform, peer to peer etc.)

Use Broker e-mail or message template to attach and deliver endorsement

Use Insurer e-mail or message template to respond to Endorsement

Use different agreement methodologies:1)Message response;2)‘Seal’ MRCE3)Scan MRCE4)‘Broke’ MRCE

Send confirmation of change to Client / Policyholder using MRCE as an IAD or as part of a BID

Brokers Adopt new style Endorsement – the MRCE. Enables document streamlining further down the process

Ensure a minimum data standard is used which will assist ACORD standards objectives

Can focus on taking complex endorsements to Markets and ‘mailing’ others. Reduces number of box visits and endorsement distribution time and effort

Allows brokers to adopt uniform data and layout. Reduces broking time through the negotiation and agreement process. Assists ACORD standards objectives

Allows broker to receive insurer agreement and/or instruction quickly, reducing broking time and elapsed time. Assists ACORD standards objectives

Allows flexibility with regulatory and internal compliance and technology capabilities. Allows informed choice, dependent on complexity / number of agreement parties resulting in optimal turnaround time

Avoid creating Addenda from MRCE by using MRCE as basis of the document that is sent to the client. Reduces errors due to incorrect transfer of information. Reinforces Contract Certainty

(Re)Insurers Sees the document that is intended to be sent to clients / policyholders

Data and information required will be on the MRCE. Will experience a common Market presentation

Reduces box visits and frees up underwriting time. Can allocate work easier by agreeing endorsements remotely and seeing brokers on more complex matters

Recognise e-message as an Endorsement request. Will allow better internal work allocation by using Market standard – easier to understand basis of request

Can agree endorsements without discussion or can issue an instruction to brokers. Allows following market to see audit trail of ‘Leader’ Agreement

Allows choice of what the Insurer sees as the most efficient process for their business. Remote handling reduces time and effort to agree and record Endorsement agreements

Stronger audit trail from Insurer agreement to Client / Policyholder. Reinforces Contract Certainty

Clients /Policyholders

Sees the document that has been sent to the Market for agreement

Can expect a more uniform Market approach to documentation received

Should expect quicker turnaround on agreement process

Should expect quicker turnaround on agreement process

Can easily have sight of agreement correspondence

Will benefit from efficient Market process with quicker turnaround times

Sees the document in its original form agreed by Insurers. Speeds up confirmation

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

Technology phase

These may be interlinked

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

Summary and next steps

Pilot completed, lessons learnt, revised recommendations

MRCE being issued once formally agreed by MRG

Ramp-up of e-MRCE (electronic endorsements)

Key decision: • What technology/method will I use to send

endorsements remotely – broker

• What ‘electronic’ process will I use to bind Endorsement agreements - Insurer

Technology has a part to play now

MRG Endorsements Implementation

S. Dean, 22nd 2007