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Compliance and Management Information

Compliance and Management Information

It is the blog that has to be written. You have probably read the topic and switched off already – compliance tends to have that impact on people. And we understand! Compliance isn’t our favourite concept. But you have to get on the compliance bus as it has well and truly left the station. If you want to be a serious company in the international insurance industry – comply!

We just had 2014 – The year of the Sanctions. 2015 looks like being the year when Management Information requirements come into sharp focus. The traditional bordereaux may be a dawdle next to the new MI requirements.

Last year most of our Lloyd’s clients had one new thing on their compliance wishlist – sanction checking of claims payments. At Proclaim we invested in software that enabled us to check payees against a list of internationally sanctioned companies or individuals. The idea being that we don’t want to be responsible for any money laundering or payments to terrorist or other sanctioned organisations. I think we all agree that is worth the extra step – but it is a bit like the screening process at the airport – while we understand that we may not catch anyone( and that is the desired outcome), checking to make sure that we aren’t making payments to sanctioned people is still necessary.

Sanction checking is one of the examples of how insurance markets are regulating claims providers to ensure a threshold minimum level of compliance. Claims providers need a robust business these days, with good infrastructure, processes and procedures to meet the increasing demands of underwriters. In theory, this is a good thing, as the higher the barrier to entry to the claims market, the better the protection for policyholders and consumers who are on the end of the claims service.

So what is the 2015 equivalent of sanctions? Of late we have seen Lloyd’s ramp up the demands for Management Information. Part of this is directly related to their sensitivity to the impact that service by claims providers can have on the Lloyd’s brand. So while there will remain heavy demands for financial and transaction reporting (mostly on a monthly basis), there will also be demands (probably quarterly) for information on service level standards. Are claim managers meeting minimum service standards? What we call quantitative data. Details of service standard breaches will be required, meaning claims managers who handle any volume of claims will likely need an automated solution to meet these requirements. Many claim managers – and underwriting agents or brokers who manage their own claims – won’t be able to reach these levels of compliance without significant changes that require investment of time and money. We expect a global rationalisation of claim managers providing outsourced solutions to Lloyd’s and other insurance markets in the coming years as demands for compliance continue to increase. Meeting the minimum standards will be one thing; reporting on meeting them will be an added challenge.

Proclaim has been involved in dialogue with Lloyd’s on the increasing MI demands in the future. While we support the provision of some key MI indicators on a quarterly basis, we also believe that there is incredible value in data, and that as well as comparing and scrutinising service levels, there should be some focus on data informing quality of outcomes. Measurements like average claim costs, proportion of legal and adjusting spend relative to total incurred, proportion of litigated claims and duration of claims are all measures that can focus on performance. What we call qualitative data. We understand that service standards, and service, is a critical part of what we do. And that a good outcome isn’t about refusing to pay claims that ought to be paid. What we hope doesn’t get lost in all this compliance talk is that it is still our role to try and provide a quality claim management service that is cost effective – accurate early reserving, sound strategy and good outcomes that minimise claims costs. So while we support some of these new quantitative measures, we think it is equally important to balance them with qualitative measures. At the end of the day it remains possible to provide responses within set time frames and get a tick – but if those responses aren’t effective, they could be as useful as no response at all.

In an environment where the market is soft and margins are tight, getting superior outcomes should be a focus – along with getting the service levels right. Hence we believe that as the demand and need for MI increases, that there needs to remains a focus on data that provides evidence of the quality of the outcomes.

So is compliance good or bad for business? An interesting question, but the reality is that if you think is it bad, you probably won’t be doing a lot of work in this space in future.

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