Collecting these payments can become ’convoluted for the broker’, she added

Slow claims payments endemic to subscription-based business must be addressed to increase trust in the market, according to Lloyd’s of London claims director Janine Powell.

Predominately written in the Lloyd’s and London markets, this type of business comprises risks sufficiently large or complex so as to be divided across several underwriters.

During a panel session entitled Flat white to go: stepping out of the coffee house into the digital era at Insurtech Insights earlier this month (1 March 2023), Powell explained: “The way the risk is placed itself can be quite complex.”

This is on top of the risk itself potentially occurring across many layers that could change the terms of the product, she added.

Claims payments for subscription-based risks can be drawn out because of the different insurers involved, meaning that brokers who pay claims often have to hold onto collected funds for “quite some time” before releasing them to the insured.

These delays generally cause complaints.

Powell explained: ”Collecting that claim payment becomes quite convoluted for the broker – when a claim of this nature is paid, all those different placements need to pay their contribution and that can take time.

Exchange rate fluctuations

Brokers holding on to claims payment funds for too long can also be negatively impacted by exchange rate fluctuations, added Powell. 

She said: “Suddenly, we might find that the claims payment is no longer sufficient – the agreement may no longer match expectations.

“That’s not good for us as insurers either – collecting monies on subscriptions can be an issue and it is a subject we have to tackle.

Rich Boyd, head of digital claims at Lloyd’s, added that there were certain advantages to placing subscription-based business within the Lloyd’s market. 

“This is the crux of [the Lloyd’s] proposition – we maintain a central fund that ensures, should any of our underwriters not be able to handle the loss that has come through, that they have available capacity to back them up.”