Cost increase of hundreds of thousands of pounds imposed by software house provokes anger in the market.
Open International is facing strong resistance from insurers over its plans to increase its transaction fees by as much as 300%.
The Towergate-owned software house is attempting to increase insurers’ fees for personal lines EDI transactions on its Open GI system. It has written to all insurers notifying them of the plans to change its pricing model.
It is understood that it has sought increases of between 100% and 300%, depending on the type of transactions. This could see costs increase by hundreds of thousands of pounds for some insurers.
One source at a major UK insurer described the increases as unfair and said that the company had yet to accept the proposals. The source said: “We haven’t had significant increases in the past. IT costs are pegged to inflation or just above it. Four or five point increases would be acceptable, but not increases of this magnitude.
“The increases move Open GI from the most cost efficient provider to the most expensive.”
The insurer source added: “I get the impression that there is a lot of consternation in the market about this and that a lot of insurers are not comfortable with it. I am not aware of any insurer that has agreed to them.”
He said that legal action was a potential course of action for insurers, adding: “It depends on the appetite for it and each insurers’ contractual relationship with Open International.”
The fact that Open International is owned by Towergate complicated matters, the source said. “Where previously it would have been a discussion with a software house, it is now a discussion with a software house owned by a distributor,” he said.
Towergate acquired Open International last year for £276m.
Another market source said: “There is a lot of bad blood [from insurers] over this [the increases].”
Open International was unavailable for comment as Insurance Times went to press..
What the new charges mean
Insurers pay a fee for each electronic data interchange (EDI) transactions.
The size of the fee varies depending on the type of message sent. For Open GIâ€™s insurers, the fees are understood to range from between 50p to 1.75 pounds.
Open GI is looking to raise the fees by as much as 300 per cent, once again depending on the type of message.
While this increase in absolute terms is small, for insurers that transact a lot of business electronically, the total will be high.
One source said that high-using insurers could see their annual transaction charges increase by over 250,000 pounds. For cost-conscious insurers this will be less than pleasing. What also angers insurers is the fact that Open GI fees have increased little over recent years. Phillip Bell [Open GIs former chief executive] had resisted this, said one senior executive at an insurance company.
Bell stepped down as chief executive last month. He was replaced by Chris Guillaume as managing director of Open GI.