Row between brokers and insurers could stymie reform
One in three transactions in the Lloyd’s market could be excluded from the new electronic accounting system unless a row between insurers and brokers is resolved, writes Ellen Bennett.
A significant minority – 28% – of premium is currently collected by insurers from brokers on a monthly or quarterly basis, under a system known as “deferred payment”.
Insurers support this system but brokers do not as they say insurers can automatically take money from them, whether or not they have been paid by their client.
At a meeting of the Market Reform Group last week, it was agreed that deferred payments would not be allowed in the new electronic accounting system. Instead, a trial period whereby brokers try to improve the payment of premiums in other ways has been extended until September.
If the trial fails, insurers will continue to demand deferred payments on certain risks – which means they will be processed outside the new electronic system. The system, a key plank of the Lloyd’s reforms, is due to be rolled out within the next year.
Chief executive of the London Insurance Intermediaries and Brokers Association David Hough said last week’s decision was important because it allowed work on the development of the system to go ahead, despite the lack of agreement on deferred payments.
“We have been trying to negotiate our way out of this for a long time. We believe it’s a system that should be discontinued – brokers should not be taking the credit risk.”
An spokesman for the Market Reform Group said that no decisions on the future of the deferred scheme would be made until the results of the trial had been properly assessed.
Brokers’ group looks set to reform
The London Market Brokers Committee (LMBC), which disbanded after some members broke off to form the London and International Insurance Brokers Association (Liiba) last year, is set to reform, writes Saxon East.
Biba is working on the functions, members and name of the new committee which will represent the interests of London-based brokers in the UK market.
No date has been set for the formation of the group, but Insurance Times understands Biba chief executive Eric Galbraith is working behind the scenes with potential members.
Liiba formed shortly after its split from the LMBC in December last year to represent London-based brokers on the international stage.