According to a recent Association of British Insurers (ABI) report, the UK insurance market is the biggest in Europe and the third largest in the world, accounting for 8% of total worldwide premium income. The industry seems to have been struck by a sudden realisation that in order to maintain, or even build on, this position, it must “modernise, modernise and modernise”.
Since the turn of the millennium, the urge to update has produced a plethora of new proposals, new organisations and new technologies with more to come. We have seen the establishment of the General Insurance Standards Council (GISC), the Lloyd's Market board report Priorities for Growth and the launch of lloyds.com.
In addition, there's also been the agreement to unify the Lloyd's Policy Signing Office (LPSO) and the London Processing Centre (LPC), plus the market's flagship vision for the conduct of business in the London Market in the 21st century with the implementation of the London Market Principles (LMP2001).
There appears to be a lot to digest. Many insurers have already invested considerable time and expense in developing and adapting internet and web-based technologies for their own products. Now they are being asked to review their systems further and ensure that they are compatible with the rest of the London Market.
While most of the new technologies and organisations affect the writing of business with London-based insurers, there have been developments in claims handling procedures that will also have a profound effect.
A prime example of this is the proposed extension, under the LMP2001, of the LPC's Claims Loss Advice and Settlement System (CLASS) to the entire London Market, and the expansion of the role of the slip leader in the claims handling process.
The idea is that the entire market on a risk will have instant electronic access to claims information, but the slip leader will have key responsibility for administration of the claim.
The LMP2001 claims vision provides four alternatives for agreement of claims. In each case, the process to be adopted should be stated on the slip.
Agreement can be:
However, in the push to simplify procedures, there will undoubtedly be a drive towards slip leader-only agreement of claims.
Whichever claims agreement method is chosen, the slip leader will, in any event, be the focal point of contact for the insured or his broker and the following market. The insured or his broker will raise queries with the slip leader, and following underwriters can raise queries with, and make representations to, the slip leader at the “advice stage” of the claims process.
Many broker hours will be saved by eliminating the need for them to walk from syndicate to company to Lloyd's Claims Office (LCO) to physically present claims files and collect comments and requests for information. However, the following market will have to trust the slip leader, and the slip leader will have to be in a position to significantly increase its claims handling capacity.
Unfortunately, CLASS cannot be put in place immediately. It went live at Lloyd's on April 2 this year, but will not be available to all underwriters and LCO until the beginning of 2002, or perhaps later.
In the meantime, the LMP2001 procedures should be introduced for all risks incepting, or renewed on or after August 1 this year. Clearly, actual business practice will take some time to catch up with the LMP2001 “vision” and, as far as claims are concerned, we must assume that it is business as usual until it does. The extent of the duties that the slip leader will owe to the following market once the procedures and systems are fully in place has yet to be clarified.
If you aim to lead risks under LMP2001, can your claims department cope? If you follow, is your leader's claims service good enough?
For some, LMP2001 will simply be a further push in the direction in which they were already travelling. At Markel syndicate 702, for example, we've spent many years building up our claims expertise. Our claims department includes seven lawyers, with specialists in all the areas of business we underwrite.
Steep learning curve
We completely underwrite most of our business and, as a result, members of our claims team are used to directly guiding and assisting insurers facing claims.
Some insurers who are not in this position will be facing a steep learning curve when it comes to claims. Alternatively, we could see increasing reliance by slip leaders upon outsourcing of claims. It is not unusual in recent years to see insurers place their entire claims portfolio below a specified level, in the hands of designated solicitors or loss adjusters.
There is much still to be done both collectively and individually. The achievement of change is rarely swift and painless. Despite its deliberately inoffensive presentation, LMP2001 has already attracted its critics, with some companies and Lloyd's syndicates stalling or refusing to sign up.
Nevertheless, in many ways it has already done its job. It has told the world, in a blaze of publicity, that the London Market is open for business in the 21st century, and will do everything within its power to facilitate it.