Duncan Boyle says the industry must work together to achieve its goal

' Contract certainty is essentially a very simple concept, and the insured, their broker and the insurer should all be clear and agreed about what is, and is not, covered at the point the policy begins. This should be backed up by appropriate paperwork and process .

Like all simple concepts, its application proves much more complex in reality. Hence the FSA's challenge to the industry to sort out contract certainty by the end of next year - or face having a solution foist upon us.

Contract certainty matters not because the regulator is insisting on it, but because it is basic business sense. Effective contract certainty improves our customer service and avoids potentially costly disputes. It reduces costs for insurers and brokers, as well as underwriting and claims leakage.

The regulator wants to see real progress by the end of 2005, so proposals on the approach and timetable for adoption need to be drawn up and implemented as soon as possible.

The good news is that work is already under way. An overall contract certainty steering committee, chaired by Nick Prettejohn chief executive of Lloyd's, oversees two groups: the London Market Reform Group (also chaired by Prettejohn), for subscription-based business, and the Non-Subscription Contract Certainty Group, which I chair. The latter includes representatives from brokers, insurance providers, the ABI and Biba.

In the spring the non-subscription group sent questionnaires to ABI and Biba members to establish the exact situation as regards contract certainty - and the results were revealing.

For the small and/or retail market, achieving contract certainty did not seem a major issue, but at the larger end of the market, where business is usually much more bespoke, a mixed picture of certainty emerged.

Using the research as a starting point we are working to produce a draft code of practice, as a consistent approach to contract certainty across the insurance spectrum is clearly the best outcome for all involved.

One area of active debate is the agreed definition of contract certainty. It will be important not to overcomplicate both the definition and the detail of how we implement certainty. The committee also needs to assess how the differences between the needs of the subscription and non-subscription markets can be accommodated.

The code is likely to establish a requirement for cover agreement at, or before, policy inception and suggest a best practice time-line for contract agreement between all parties, policy issuance and delivery to the client.

The committee also needs to debate what is actually covered in bespoke policies.

We also expect the code to include quality assurance standards on error avoidance and rework for minor drafting caused by the insurer, broker or client. Standards may need to be variable to reflect differing complexities of risk, but it is vital to address this issue because it costs us all money.

Achieving contract certainty will require changes on all our parts, but we have it in our power to work collectively as an industry to address this important issue. IT

' Duncan Boyle is chief executive of Royal & SunAlliance UK and chair of the Non-Subscription Contract Certainty Group