Software houses have caused consternation with underwriters by charging for access to the London market Exchange, but underwriters could avoid contracts instead by settling joint costs bilaterally
A controversial underwriter charge for access to the London market’s e-messaging hub could soon be a thing of the past, Insurance Times has learned.
One technology vendor had been planning to introduce so-called carrier charges for underwriters using their systems to access the Exchange for electronic endorsements, but a market agreement may reverse this decision.
The Exchange is the cornerstone of the ongoing London market electronic endorsements project. The message hub is jointly owned and operated by Lloyd’s, the Lloyd’s Market Association, the International Underwriting Association and the London & International Brokers’ Association.
Technology vendor The Insurance Workplace (TIW) was planning to charge underwriters a fee for receiving Exchange data from brokers licensing its software from September. Fellow vendor RI3K already charges carriers £10 per endorsement for paper-based risks.
Not all software houses operate such a model, however – some simply charge whoever licenses their software, be it broker or underwriter, a licence fee. One example is www.Lime-St.com.
TIW’s decision in particular upset underwriters, who objected to having a formal contract with the software house that had been engaged by their brokers. Some observers said the underwriters’ response to the charges could disrupt the endorsement project, and were shifting focus away from rolling out e-endorsements to other lines of business.
Covering costs together
But Insurance Times understands that the market is moving towards a solution that would see brokers and underwriters settle any joint costs relating to broker-licensed systems bilaterally, without the underwriter needing a contract with software houses. As a result, the carrier charge element to TIW’s tariffs could disappear.
Sources say that while a final agreement has yet to be struck, the bilateral approach has support from all sides and is a step forward. “I don’t think this is going to be as big a hurdle as we anticipated,” says one.
While some feared the consternation over carrier charges could disrupt the e-endorsements project, others have played this down. Lloyd’s market development director Sue Langley describes any talk of disruption as “a rather dramatic statement”.
She adds that a number of issues are likely to arise because the technology and the way of working are new to the market. “I’m sure this won’t be the last of the issues. I’m sure there will be other bumps in the way, but the whole point about working together as a market is that we persevere and keep going because we know the end goal is worth it,” she says.
Others agree, arguing the rewards on offer should override any problems. “The benefits from electronic processing of endorsements is a sufficient carrot to ensure that a solution is found in the market if there is an issue, although I’m not aware there is at the moment,” London Market Group secretariat head Christopher Croft says.
Adding lines as we go
E-endorsements are currently developing according to plan. Marine hull, cargo war and liability endorsements have been classified as ‘business as usual’ since the completion of the pilot at the end of last year, and three new classes – specie, property and professional indemnity – were rolled out at the beginning of July. The goal is to have all problems raised by the pilot fixed by October, and to have endorsements for all business lines live by March 2012.
“The volumes for July are higher than April, May and June,” London & International Insurance Brokers’ Association project manager Chris Buer says. Croft adds: “All the indications are that volumes in July are significantly up. And we’ve got a number of brokers looking to pursue partnerships with insurers in classes of business outside those announced.”